Namyang Dairy Products Incident

2013-05-10

Namyang Dairy Products issued an apology to the nation on Thursday, May 9th, along with a series of measures to mend fences with its distributors and correct wrongful business practices. Korea’s premier dairy product company has been embroiled in a controversy after a voice file containing the recordings of Namyang sales representatives cursing at a much older distributor and forcing products on him was released on the internet. This incident has compelled politicians to revise the related laws and table the so-called “Namyang Dairy Products Prevention Act,” which aims to protect distributors.

Namyang Dairy Products Incident

The incident involving a Namyang Dairy Products sales representative and a distributor came under criticism after the online release of a voice file containing the Namyang sales person’s expletive-filled abuse directed at the distributor, forcing products on him. A business practice called “push-thru,” which refers to sending more products to a distributor than ordered and forcing the distributor to assume all leftovers, came to be known among the general public through the recording. The audio file brought to light “push-thrus” and other unfair business practices between conglomerates and their distributors, verbal abuse and improper behavior of sales reps, and employees of large corporations inappropriately demanding money and gifts from their contractors and distributors. The incident also focused people’s attention on the so-called “tyranny of A.” In contractual terms, “A” refers to a party with superior power and position, usually a business or an employer, over “B,” which usually is on the receiving end of the contracted transaction. In the matter involving Namyang Dairy Products, the “A” was Namyang and the “B” was its distributor. “B” contends that the exchanges recorded in the voice file were not confined to just one Namyang product distributor, but all of them, and the reprehensible practice was not carried out by just Namyang, but by most of the wholesale industry. Ever since the incident has been made public, consumers have been boycotting Namyang products and the stock prices of Namyang Dairy Products have plummeted. The “tyranny of A” has been met with the “resistance of B.”

Namyang’s Apology to the People

Namyang Dairy Products announced that the sales rep in question has already resigned since the incident took place three years ago and the company had already apologized to the parties involved. However, consumer criticism continued to mount, compelling the Namyang management to issue an apology to the Korean people on Thursday, announcing a series of measures mutually benefiting the company and its distributors. Namyang executives pledged that the company will overhaul its character training course for its employees and sales techniques so as to prevent a recurrence of such regretful incident. The dairy product maker also admitted to having problematic business practices and vowed to cooperate fully with the investigations by the prosecution and the Fair Trade Commission. Namyang also said it would set up a mechanism to prohibit such behaviors from taking root in the first place. A joint target system in which the distributor and the company set a sales target together will be adopted and distributors will be allowed to return the products they did not order.

“Namyang Dairy Products Prevention Act”

In a related move, lawmakers have begun to work on the “Namyang Dairy Products Prevention Act.” The ruling Saenuri Party has decided to legislate it at its meeting of incumbent and retired members. The Saenuri Party plans to hold a meeting to discuss ways to root out unfair business practices by incorporating the opinions of businessmen and to have its member Lee Jong-hun table the motion. The bill will have revised Article 23 of the Fair Transaction Act, with a set of comprehensive restrictions placed on the dairy, alcohol, and food ingredient industries to prevent “push-thru” and other unfair transactions from thriving. Taking this even further is the opposition Democratic United Party reportedly looking into legislating a special law on this issue, which bars large corporations from demanding bribes or cancelling contracts arbitrarily and aims to bring fairness to their dealings with contractors and distributors.

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