South Korea creates $445M bailout fund after payment glitch trips up e-commerce giant

The South Korean government on Monday created a ₩560 billion ($445 million) rescue package to bail out merchants who used two major e-commerce marketplaces that have failed to pass on payments for several weeks.

The e-commerce services are called WeMakePrice and TMON – both owned by an entity called Qoo10 Group. Launched in South Korea in 2000 as GMarket, Qoo10 is now headquartered in Singapore and also operates in Malaysia, Indonesia, and South Korea. It is considered one of the region's e-commerce pioneers, but has largely been eclipsed by the likes of Lazada and Shopee.

Trouble emerged at WeMakePrice and TMON in early July, when merchants who use the platforms noticed payments weren't being made. Qoo10 reportedly blamed that on a glitch in its payment system. The glitch appears to have persisted, though – leaving sellers with empty warehouses and empty pockets.

"The government urges WeMakePrice and TMON to take responsibility for this situation and come up with a solution as they are fundamentally at fault and liable for it," declared Korea's Financial Services Commission (FSC). "At the same time, the government has decided to actively support them by mobilizing all available resources to the maximum extent possible to protect honest consumers and sellers as a top priority."

FSC will additionally provide low-interest loans and payment extensions on existing loans for affected small businesses. It will also begin preparing for collective dispute mediation, and actively support civil lawsuits – depending on each case – while beefing up future protections.

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The Commission last week conducted an on-site inspection of TMON and WeMakePrice, to check for violations of the Electronic Commerce Act, and has urged the pair to come up with a plan to settle payments.

Last Monday, the two marketplaces filed for corporate rehabilitation in the Seoul Bankruptcy Court, according to local media.

The government believes the e-commerce platforms amassed 210 billion won ($152 million) worth of unpaid transactions. Up to 60,000 vendors are believed affected, in addition to credit card companies and online payment platforms. Qoo10 has told FSC it plans to scramble together $50 million to apply to the debt.

The Register has reached out to Qoo10 and will update should a substantial reply materialize.

Qoo10 founder Ku Young Bae reportedly issued a statement offering to sell off his shares in the business to raise money and solve the matter. He added that his stake in Qoo10 was "most of [his] assets."

He also reportedly predicted users are ₩50 billion ($36 million) out of pocket – mostly to those who purchased travel packages – although he found it difficult to estimate damages to vendors. TMON in particular is a popular website for travel booking. Major travel agents have halted selling on the platform and advised customers to seek refunds.

The CEO and founder is now reportedly subject to an emergency travel ban, courtesy of the Korean justice ministry. Police are also involved after receiving a complaint from a group of consumers who allege Ku and four others, including the heads of TMON and WeMakePrice, may have committed acts of fraud or even made off with funds.

Qoo10 has copped criticism for aggressively pursuing low quality acquisitions. The e-commerce entity was on a shopping spree when it acquired WeMakePrice in April 2023 and TMON in August 2022. Around that time it also acquired Korchina Logistics, e-commerce company AK Mall, InterPark Commerce and, more recently, the very meme-able tat bazaar Wish.

"Qoo10 has taken a roll-up strategy combining different entities in different countries that it has acquired to present a better story to the capital market. The challenge is that this strategy is risky and might lead to a misalignment of interest between the holding company and career managers leading individual companies," WeiHan Chen at Singapore-based consultancy Momentum Works told The Reg.

Chen expressed optimism that the ongoing involvement of Qoo10 CEO Ku Young Bae means the outfit can "fight back" and resolve the matter.

According to Momentum Works, the monthly turnover of the two affected platforms is more than ₩1 trillion ($722 million). ®