Executives of Carver Korea, famous for the brand “AHC”, took hundreds of millions of rebates from distributors, but when retailers who resisted this practice tried to report the corruption to the head office, they were met with cancelled contracts.
According to the news desk on MBC on the evening of July 13th, a distribution agency responsible for AHC sales in China had close to 30 billion won in annual sales but closed just 1 year after AHC notified them about the contract cancellation.
The distributors claim that AHC executives demanded to be paid a “top to the line” price in order to receive the cosmetics on time, thus asking for part of the withdrawal amount as a rebate.
AHC’s former executive Mr.Park said in a conversation with a distributor, “I talked with my superiors and they told me to take 5%. They told me stop all sales…and demand a rebate.” Rebates paid in this manner amounted to 650 million won just during one year.
Furthermore, they demanded cash directly from the bank or money from their families and friends. According to other distributors and the media, AHC executives visited their company directly to collect the money.
An employee of the victim’s company said, “I took 2% of the sales because my superiors demanded that money.” He continued, “I arranged bundles of 50,000 won and during lunch time I took them with me,” revealed the employee.
The head of the distribution company reported this to AHC and even reported it to the police. AHC fired the executives and two managers after an internal investigation, but the losses were all brought back to the distributors. Contrary to expectations that the rebates would disappear, AHC notified the distributors who reported the corruption with a contract cancellation.
The management has “no comments regarding the payment made to the Chief Executive Officer.”
This was a one-sided measure by the company; therefore, the Korea Fair Trade Mediation Agency (KOFAIR) ordered the company to pay 400 million won in damages caused by the cancellation of the contract. However, AHC has refused to hold the company liable for civilian and criminal affairs and is demanding silence from the press regardingdamages and further refusing to make any adjustments.
Upon hearing that the distributor raised suspicions that rebates were paid to the CEO, AHC stated that, “We will make no further comments, as it is a private matter and the company is not to blame.”
AHC responded, “the contract with our distributor became terminated as a result of the expiration of the contract period. The company signed a one year supply and sales agreement with the said company on March 7th, 2016. At this time, it was decided that a written agreement should be made to renew this contract. The distributor was also aware that the contract would go into effect after a year.”
AHC added, “The distributor worked with all of the company’s executives and employees and received the goods on credit, causing a great deal of of damage to the company. Even after the court’s decision to proceed with the lawsuit, the distributor has not made good on its debts, thereby increasing damages with each day. It is not possible to maintain a long-lasting trading relationship with a distributor who has sustained losses without fulfilling the contract.”
Regarding the arbitration with the Korea Fair Trade Mediation Agency (KOFAIR), AHC stated that “the arbitration proposal is a recommendation for the reconciliation between the parties,” further adding, “the company has neither the obligation or the binding power to comply with the arbitration proposal nor did it unfairly reject the arbitration.”