'Big Three' Luxury Brands Preventing Local Sale of Duty-Free Items
International luxury brands Hermes, Chanel, and Louis Vuitton, could be violating South Korea's Fair Trade Act by not allowing duty-free firms in the country to sell their products locally.
Duty-free firms buy luxury items from the brands to sell them at duty-free stores here, and they have the right to re-sell the products they purchased, according to the Korea Fair Trade Commission (KFTC).
However, before a complaint could be filed to start an investigation on an alleged breach of the Fair Trade Act, the Korea Fair Trade Commission (KFTC) needs evidence, such as a "written contract" between the brands and the duty-free company.
The KFTC said that other than a local firm, a third party like the Korea Duty-Free Shops Association (KDFSA) could also request an investigation as long as it can provide evidence.
However, the KDFSA said that it would do so on behalf of the local firms, but no duty-free companies have filed complaints.
In late April, the Korea Customs Service loosened regulations on duty-free firms like Shinsegae, Lotte, and Shilla to allow them to sell their luxury goods locally due to a plunge in sales with the pandemic causing countries to ban international travel.
But the three favorite luxury brands refused to allow the sale of their products here.
Furthermore, based on KFTC's resale policy, suppliers cannot intervene in how a retailer prices its items.
However, if duty-free firms complain about not being able to sell in the local market openly, luxury brands suppliers could retaliate.
Starting today, Shinsegae said it is unlikely that their customers will find Hermes, Chanel, and Louis Vuitton products.
Hotel Lotte, which operates Lotte Duty-Free, said it is unlikely to sell the three luxury brands' products in its department store or online mall.
The luxury brands refused to sell their duty- free items in the local market and have never allowed discounts because of their image and reputation.
A Lotte Duty-Free official noted that they might accept refunds from the luxury brands than let the items rot in the warehouse.
The luxury brands would bring back refunded items to Europe and sell them at their outlets there.
However, Hermes, Chanel, and Louis Vuitton are not the ones giving refunds to local duty-free stores.