Caffe Bene handed record fine

South Korea’s largest coffee chain has been handed a record fine from the Fair Trade Commission after it was found guilty of abusing its power.

Caffe Bene has been making some headlines recently due to their understated expansion into Western markets, but the firm’s bosses will be hoping that this ruling does not impact their attempts to further secure their foothold in and around New York City.

The fine, just over $1,400,000 (₩1.9bn), is the largest single amount levied against a franchise operator according to the country’s anti-trust regulators.

It appears, as the FTC says, that Caffe Bene knowingly launched a joint promotion campaign with the mobile network carrier KT and offered a 10% discount on coffee and other products for customers of those under contract with KT. Apparently, the coffee firm was supposed to cover half of cost of the promotion, with KT footing the other half of the bill.

Instead, as it transpires, Caffe Bene transferred this financial outlay onto the cost of its franchise owners instead.

Alongside pushing the costs elsewhere, the company was found guilty of forcing shop owners to use equipment and certain materials provided by them when doing interior decoration and store renovations. By enforcing this policy, the central company picked up over half of its total sales in a three-and-a-half year period.

To make matters worse, around 40% of shop proprietors asked about this marketing tie up were against it.

“It is against its contract with the shop owners,” said one FTC official to the local Korean press. “[The contract] states that the Caffe Bene franchise and the shop owners will share the cost related to advertisements or promotions.”