Company demanded additional personal guarantees even after dealers provided collateral; Fair Trade Commission issues corrective order for abuse of superior bargaining position

Doosan Bobcat Korea, a forklift manufacturer and distributor, has been sanctioned by the Korea Fair Trade Commission for imposing excessive collateral requirements and joint-and-several guarantees on its dealers while shifting the risk of uncollected consumer payments onto them.

The Fair Trade Commission said Sunday it would issue a corrective order — including a prohibition on the conduct and a notification order — against Doosan Bobcat Korea for setting unfair trading terms that exploited its superior bargaining position over dealers.

The Korea Fair Trade Commission at the Government Complex Sejong in Eojin-dong, Sejong [Yonhap]
The Korea Fair Trade Commission at the Government Complex Sejong in Eojin-dong, Sejong [Yonhap]

According to the Fair Trade Commission, from January 2015 to December 2022, Doosan Bobcat Korea required dealers to provide physical collateral based on their annual product sales to secure debt obligations. Despite already holding that collateral, the company demanded that dealers also enlist third parties — including employees and their family members — as additional collateral providers and joint-and-several guarantors, citing insufficient security.

The company collected physical collateral of between 300 million won and 600 million won ($394,000) per year depending on each dealer's sales volume, yet still required additional joint guarantors. No cases were found in which the company actually exercised its security rights.

The Fair Trade Commission determined that, although the sales contracts were between consumers and Doosan Bobcat Korea, the company had transferred the risk of uncollected receivables onto its dealers.

The commission found the arrangement particularly unfair given that dealer commissions amounted to only about 8.5 percent of the product price, yet collateral was set based on the full annual product sales value — representing the consumers' debt obligations — with additional guarantees required on top of that.

The company also operated contract terms from January 2015 to December 2021 that required dealers to cover product payments on behalf of consumers who failed to pay, and allowed the company to offset any uncollected amounts against commissions owed to dealers.

The commission said the risk of uncollected payments should in principle be borne by Doosan Bobcat Korea as the seller, and that holding dealers liable for those payments while allowing offsets against their commissions constituted an excessive transfer of responsibility. Dealers could be made to absorb the full amount of any unpaid product price, while their commissions represented only about 8.5 percent of that price — making the burden disproportionately heavy.

However, the commission said no cases were confirmed in which Doosan Bobcat Korea had withheld commission payments or applied offsets against uncollected amounts due to consumer default.

Following the investigation, Doosan Bobcat Korea stopped requiring dealers to provide joint guarantors and additional personal guarantees, and removed the clauses on dealer liability for uncollected payments and commission offsets from its contracts.

The commission said the action represented "a case of detecting and sanctioning a forklift manufacturer and distributor that used its superior bargaining position to impose unfair trading terms requiring dealers to bear consumers' debt obligations," adding that it would "continue to monitor and strictly enforce the law against suppliers that unfairly exploit their trading position to the detriment of dealers."


y2k@heraldcorp.com