November 21, 2024

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Vendors troubled by delayed payments from cash-crunched Tmon and WeMakePrice stage a rally in front of the Financial Services Commission headquarters in central Seoul on Sunday. (Yonhap)

The South Korean government is ramping up financial aid to address the rapidly growing unpaid bills from Qoo10 Group’s e-commerce subsidiaries, which have now exceeded 800 billion won ($600 million).

On Wednesday, the Finance Ministry announced that overdue payments to vendors on Tmon and WeMakePrice, the two struggling online marketplaces owned by Singapore-based Qoo10, have reached 818.8 billion won as of Monday.

The unpaid bills have tripled in less than a month due to transaction delays that began in May, with payments for the subsequent two months accumulating as the settlement dates approach. At this rate, overdue settlements are projected to surpass the government's initial forecast of 1 trillion won.

Of the confirmed delayed amount, 60 percent is owed for general goods, 36 percent for gift cards, and 4 percent for travel-related products.

Tmon and WeMakePrice are undergoing court-mediated Autonomous Restructuring Support programs to negotiate debt repayment with vendors before entering court rehabilitation. The companies have submitted self-rescue plans that include an initial payment of 2 million won to all creditors, with the remaining debt to be repaid in installments over 10 years or partially converted into equity.

To bolster support for the affected merchants, the government announced an additional 400 billion won in financial aid Wednesday, bringing the total support package to 1.6 trillion won. This package includes loan programs run by public financial institutions for small businesses and a 1 trillion won emergency stabilization fund raised by 16 municipal governments.

Tax and employment assistance are also progressing as planned. As of Aug. 14, early refunds of value-added tax totaling 61.1 billion won to vendors have been completed, and the National Tax Service will offer additional support by extending payment deadlines and deferring tax audits. The Ministry of Employment and Labor has established a task force to mitigate large-scale job losses resulting from the crisis.

Refunds to affected consumers have reached approximately 35.9 billion won as of Aug. 13, including 24.8 billion won for general products and 11.1 billion won for gift cards.

Financial regulators are also overseeing collective dispute resolution for complex refund cases. A resolution process for travel packages will begin soon, with approximately 9,000 applications submitted. After opening the application window for gift card refunds on Monday, over 1,700 cases were submitted to the Korea Consumer Agency in just one day.

While most of the support measures have so far focused on Tmon and WeMakePrice, the government also pledged to address the situation at Interpark Commerce, another Qoo10 subsidiary that recently filed for court receivership due to its parent company’s liquidity crisis, following the path of Tmon and WeMakePrice.

Reports indicate that overdue payments by Interpark Commerce total 55 billion won, affecting approximately 50,000 vendors.

In response to the crisis, regulators are reviewing their oversight of the e-commerce sector to prevent similar incidents. Key measures under consideration include establishing a dedicated government control tower to manage the rapidly expanding e-commerce industry and tightening settlement procedures. The final plan is expected to be announced by the end of the month.

Meanwhile, local prosecutors are investigating Tmon and WeMakePrice on suspicions that the platforms continued to uphold contracts with sellers despite being aware of their financial issues and the potential impact on settlements. Additionally, the Singaporean parent company and its CEO, Ku Young-bae, are being probed for alleged misappropriation of funds from the Korean subsidiaries.

By Choi Ji-won (jwc@heraldcorp.com)