[Alpha Biz= Kim Jisun] South Korean prosecutors have raided the country’s two largest online lodging platforms, Yanolja and Yeogi Eottae, over allegations that the companies arbitrarily canceled discount coupons funded by partner businesses.

According to legal sources on March 10, the Fair Trade Investigation Division of the Seoul Central District Prosecutors’ Office, led by Chief Prosecutor Na Hee-seok, conducted search and seizure operations at Yeogi Eottae Company’s headquarters in Gangnam, Seoul, and Yanolja (Nol Universe) in Seongnam, Gyeonggi Province.

Yeogi Eottae is suspected of arbitrarily expiring about KRW 35.9 billion ($27 million) worth of unused coupons funded by partner merchants between 2018 and 2024, while Yanolja allegedly canceled around KRW 1.2 billion worth of coupons between 2017 and 2024. The companies are accused of abusing their superior bargaining position under the Fair Trade Act.

Both companies sold premium advertising products to small lodging businesses, such as motels, linking the packages to discount coupons offered on their platforms. When a partner merchant purchased the advertising product, discount coupons were issued to customers.

The cost of issuing those coupons was paid in advance by the partner businesses. However, the coupons automatically expired after a certain period even if they were unused, without compensation, leaving the participating businesses to bear the financial burden.

More than 2,500 businesses are believed to have been affected.

In August last year, the Fair Trade Commission (FTC) imposed administrative fines of KRW 1 billion on Yeogi Eottae and KRW 540 million on Yanolja over the practice.

The case was referred for criminal investigation after the Ministry of SMEs and Startups exercised its authority to request a formal complaint to the FTC.

Prosecutors are also expected to examine possible fraud, embezzlement, or breach of trust charges. Fraud charges could apply if the companies sold the advertising products without properly informing partner businesses about the expiration conditions of the coupons.

If investigators determine that the platforms failed to properly settle coupon issuance costs that were initially paid by partner businesses, the case could also involve embezzlement or breach of fiduciary duty, legal experts said.

Some observers in the legal community interpret the investigation as part of the prosecution’s effort to strengthen its presence in economic and consumer protection cases, as the government is pushing forward plans to abolish the prosecution’s investigative authority and establish separate investigative and prosecution agencies.

 

 

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