By Jihoon Lee and Joyce Lee
SEOUL (Reuters) - South Korea will provide $400 million in financial support to small businesses hit by payment delays on two Qoo10 e-commerce platforms and the Singapore-based firm's founder pledged to use his own assets to help compensate customers and vendors.
Seoul-based TMON and WeMakePrice on Monday filed for corporate rehabilitation in the Seoul Bankruptcy Court, Yonhap news agency reported, after failing to make payments to merchants using their platforms since early July, with Qoo10 saying the problem was triggered by a glitch in its payment system.
The payment delays have prompted South Korean financial authorities to launch an investigation, some vendors to cut ties and long lines of customers at offices of both platforms last week demanding refunds.
Missed payments by the e-commerce platforms have grown to around 210 billion won ($152 million), the government estimates.
South Korean financial authorities said they will provide low-interest loans for affected small businesses as well as extensions on repayments of existing loans and on tax payments.
"The government will utilise all available resources to minimise the damage," Vice Finance Minister Kim Beom-seok told reporters.
Later on Monday, South Korea's prosecutor general ordered that a designated team investigate the case, Yonhap reported.
Spokespeople for Qoo10, TMON, WeMakePrice and the Supreme Prosecutors' Office could not be reached for immediate comment.
Ku Young-bae, the South Korean founder and CEO of Qoo10, apologised on Monday and said Qoo10 would secure emergency liquidity by drawing on overseas funds or by disposing of assets and stakes or using them as collateral.
"I will sell or use my entire stake in Qoo10, which is most of my assets, as collateral and use it to resolve this situation," he said in a statement.
Qoo10 said it estimated damages to customers at around 50 billion won but it was difficult to give a figure for vendors.
The company has told authorities it aims to secure $50 million to remedy the situation but no detailed plan has been submitted, according to South Korea's Financial Services Commission.
Affected vendors told reporters on Monday more than two months of revenue are tied up due to South Korean e-commerce firms' practice of settling payments months afterward, and for small vendors facing layoffs and even bankruptcy, Qoo10's announced remedy - shouldering delayed interest payments and reduction of sales fees - were sorely inadequate.
"We have hundreds of millions of won tied up in this situation," BoYoung Jung, executive at healthcare product firm ANL, said at a press conference of affected stakeholders.
"Why should we shoulder the loans? Why doesn't the government lend to TMON, and they pay us?... As for the remedy, it looks to us like they're just trying to buy time."
Qoo10 also has operations in Japan, North America, China, Hong Kong, Malaysia and Indonesia, according to its website, and owns two other South Korean e-commerce firms.
Qoo10's Japanese business, however, was acquired by U.S. e-commerce firm eBay (NASDAQ:EBAY) in 2018 and Qoo10.jp currently had no ties or capital relationship with Qoo10, eBay Japan said.
Qoo10 has not responded to Reuters requests for comment about the health of its other operations.
($1 = 1,380.39 won)