By MASAYUKI TAKADA/ Staff Writer
March 13, 2024 at 17:36 JST
The Moriyama store of Costco Wholesale Japan Ltd. in Nagoya (Asahi Shimbun file photo)
The Fair Trade Commission issued a warning to the Japanese arm of Costco Wholesale Corp. for forcing subcontractors to lower prices for special sales events and failing to properly pay them for the discounts.
The antitrust watchdog on March 12 ordered Costco Wholesale Japan Ltd., based in Kisarazu, Chiba Prefecture, to end the practice, saying it violates the subcontractor law.
According to the FTC investigation, the company ordered 20 subcontractors to provide discounts on their products for new store openings or offer markdowns at existing stores between November 2021 and December 2023.
Costco Wholesale Japan reduced its payments to the subcontractors for these events, resulting in a total loss of 33.5 million yen ($227,000) for the suppliers, according to the FTC.
The company also sent back unsold products worth around 2 million yen to 11 subcontractors, citing discoloration and other faults, without checking their quality, the FTC said.
The subcontractors manufacture food products sold under Costco’s private label, Kirkland Signature.
Some suppliers reportedly bore the full cost of the discounted products when a new store was opened.
Following the FTC investigation, the company refunded a total of 35.5 million yen to the subcontractors.
The FTC believes that Costco Wholesale Japan had little awareness of the illegality of the practices, which appeared to have become the norm before 2021.
The company said in a statement on March 12, “We will work to improve our business operations in compliance with the order.”
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