Fallout from Namyang's abusive tactics much more serious than spilled milk

Namyang Dairy Products has been in trouble ever since a recorded telephone conversation between a Namyang employee and a storeowner was leaked to the public. In the conversation, the Namyang employee uses a rude form of Korean speech and profane language in an attempt to threaten the storeowner into purchasing more milk than his branch needed. There is now an ongoing controversy over Namyang's alleged harsh sales tactics, demands for bribes and using its larger size to bully the owners of small stores. To make matters worse, recordings of at least 5 or 6 more telephone conversations are rumored to exist.

Chung (not his real name) and two other former owners of stores supplied by Namyang sued the company this past April. Their complaint contains a detailed explanation of a case where Namyang's sales team demanded bribes and used forcible sales tactics such as pressuring store owners to buy more milk than they needed, then telling them to throw away what they couldn't sell.

Chung and other owners claimed in a statement, "The employees of the sales team requested money for retiring Namyang employees, as farewell gifts for employees who were changing positions, and compensation and bribes for holidays and family events. When the storeowners refused the requests, the employees said 'Do you want to keep operating your store?' 'If you refuse our requests, just close down your store.' Both threats imply termination of contract. They also threatened the owners with harsher sales-methods".

Regarding the complaint, "Employee Kim Gwang-won (not his real name), called Nam Il-soo (not his real name), owner of a retail store on September 27, 2012 and demanded bribe for an upcoming holiday. When the owner refused, Kim Gwang-won retaliated by forcing the owner to purchase more products than he needed and alluded to canceling the store's contract. The owner begrudgingly sent 100,000 won (US$91.30) Kim's bank account."

The complaint also contains information about storeowners giving Namyang workers bribes, stating, "Sales team leader Ha Young-shik (not his real name), visited a retail store on December, 2011, and told Min Moo-sung (not his real name), owner of a retail store, 'I'm retiring as team leader, so you need to give me a farewell gift. If you give me some money I'll give you a discount on the products you purchased. The owner sent 6.5 million won (US$5,941) to Ha Young-shik's bank account".

Lee Chang-sup, chairman of the Namyang Retailers Association said, "We have 5 or 6 recorded conversations that we haven't transcribed or released. They have information on Namyang employees forcing purchases and using abusive language, and proof that the sales team collected bribes and passed them on to the executives". He added that the storeowners on the tapes haven't decided whether or not to release them because the case is still under investigation by prosecutors.

The storeowners who cannot endure Namyang's forced purchasing tactics have all said they are suffering from the fear of 'ripping'. Ripping is a slang term for a tactic used by the supplier where they provide products to some stores while excluding stores that do not obey their wishes. This results in some stores falling behind.

Stores owners have claimed that "Namyang sales team employees have fabricated documents to make it look like store owners ordered more products when they had plenty of stock remaining. By sending these falsified documents to the distribution center, the supplier sends its leftover inventory to the individual stores to forcibly pass the burden off on storeowners". Storeowners who are in fear of going out of business are forced to take on unneeded supply. The products that can't be sold are eventually sent to a black market where the owners sell them off for cheap to raise money to pay back the supplier. Most of the products that are sent to this market are sent to retail stores and sold in special 'buy one get one free' deals.

Chung and his associates made allegations of threats and blackmail at the Seoul Central District Prosecutor's Office against nine people, including President Hong Won-shik of Namyang Dairy Product Co, CEO Kim Woong, branch managers and sales team manager.

On May 2 the prosecutors' office started investigating the case through search and seizure. They have acquired computer data, emails and internal reports from three places, including Namyang headquarters in Seoul and their Seobu branch office.

Namyang has released a statement saying, "The abusive language used by our employees and other recent incidents have caused many problems, as we admitted in our written apology. We will provide no further comment on the case that the store owners have filed against us".

By Jung Hwan-bong, Heo Jae-hyun and Kim Jeong-pil, staff reporters