[E-Daily Reporter Han Jeon-jin ] The supply structure involving a vendor linked to former executives and employees of GS Retail(007070)came under scrutiny during a National Assembly audit. There are allegations that intermediaries, which do not play a substantive role in distribution, are participating in transactions, thereby reducing the profits of convenience store franchisees and manufacturers. The Fair Trade Commission has decided to investigate potential violations of the Large-Scale Retail Business Act.

Fair Trade Commission

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Han Min-soo, a lawmaker from the Democratic Party of Korea, questioned Oh Jin-seok, Vice President of GS Retail, about the product supply structure involving vendor companies and the status of internal controls.

Rep. Han stated, “I pointed out this morning that the unnecessary involvement of vendors is driving up consumer prices and reducing the margins for convenience store franchisees as well as the profits of small and medium-sized manufacturers,” and asked about the progress of the internal investigation. He also noted that the official document GS Retail submitted to his office on the 29th of last month did not contain specific details of the investigation or the results of the fact-finding process.

The questioning then turned to transactions involving vendors established with the involvement of former GS Retail executives. According to one lawmaker, cases were confirmed where numerous products previously supplied by existing vendors were being shifted to other vendors associated with former executives and employees. Citing the fact that a specific company had been supplying processed foods and convenience foods in large quantities for several years, the lawmaker also questioned whether mechanisms to prevent conflicts of interest were functioning properly.

Vice President Oh responded that a related review was underway. In response, one lawmaker questioned the effectiveness of internal controls, stating, “This is happening even while a review is being conducted.”

The company cited as an example by one lawmaker is the vendor Hanbyeol. According to data from the lawmaker’s office, Hanbyeol began negotiations with GS Retail regarding store placement as early as January 2021—before the company was even incorporated—and its total supply value over the past five years amounts to approximately 17 billion won. The company reportedly has three employees and posted sales of 7.4 billion won last year.

The key issue is the role Hanbyeol played in the supply process. The lawmaker pointed out that the company participated in transactions without directly purchasing products from manufacturers or holding inventory, and questioned whether it actually performed distribution functions by comparing its inventory status with that of other vendors.

Rep. Han said, “How can a company like this act as a vendor?” adding, “This raises the question of whether GS Retail set the stage for a specific company to reap profits in the middle.” He also presented data comparing the supply prices of the same product across different convenience store chains, raising the possibility that intermediary distribution margins may have reduced franchisees’ profits.

Vice President Oh replied, “I fully agree with the point the committee member raised,” adding, “We are closely examining what internal issues may exist.”

The Fair Trade Commission also expressed the view that it needs to examine the transaction structure. Fair Trade Commission Chairman Joo Byung-ki said, “It seems we need to examine whether this case involves potential obstruction of business activities under the Large-Scale Retail Business Act.”

One lawmaker requested that GS Retail submit a separate report on the results of its internal investigation to the lawmaker’s office. Vice President Oh replied, “We will do so.”