[Takryucheongron] Need to Correct Reverse Discrimination Targeting Only Large Mart Chains

The large offline retail sector, a 'major artery' of our economy, is facing an unprecedented crisis. Although the rapid growth of the online shopping market and the COVID-19 pandemic dealt a direct blow, the greater cause is the distribution regulations introduced since 2010. Large mart sales decreased by 14%, from 37.7 trillion won in 2012 to 32.4 trillion won last year, marking the only negative growth among retail formats during the same period.

The large mart industry is responding by restructuring unprofitable stores and implementing unpaid leave to survive. However, this directly leads to regional economic contraction and job losses, creating another problem. Despite some large mart stores being forced to close and jobs disappearing, the political sphere, regardless of party, only calls for more regulations. As soon as the 21st National Assembly convened, bills to strengthen regulations on large retail corporations were rapidly introduced, and the government began revising laws to extend the expiration date of restrictions on large retail store openings and business regulations until November 2023. The ruling party has also pledged to tighten regulations on complex shopping malls.

It is worth considering whether large retail should bear the 'original sin' and be subjected to indefinite discriminatory regulations simply because they are 'large.'

The first point to highlight is that there is no specific policy goal set for what the large mart regulations aim to achieve. Abstract slogans like protecting traditional markets are insufficient; the protection goals must be concrete and presented with measurable figures. Only then can the achievement of policy goals be evaluated annually, and if the goals are met, the regulations on large marts can be promptly lifted. The extension of large mart regulations should not be discussed without clear policy objectives and evaluation of goal attainment.

Second, there is the issue of causality between regulation and protection. Since the leadership of the distribution industry has already shifted from offline to online, the causal relationship that large mart regulations protect traditional markets has been lost. Some argue that having regulations is better than none for protecting traditional markets, even if only slightly. However, distribution regulations have only psychological effects and minimal practical impact. According to a study by the Korean Society for Small Business Studies, after the introduction of regulations, the sales share of large marts decreased from 59.7% in 2013 to 51.2% in 2018, but the sales share of small business owners with annual sales under 500 million won also declined from 5.7% to 5.3%.

Third, the degree of regulation that large marts must endure is in question. Even if the difficulties of traditional markets are not resolved, should regulations continue even if large marts face store closures or bankruptcy risks? In the current crisis facing large marts, regulatory relaxation should be considered to ensure their survival and at least minimal growth. Positive consideration should be given to measures such as changing mandatory closure days from public holidays to weekdays or allowing delivery services during late-night business hours. Flexibility in regulation is necessary. Distribution regulations introduced over a decade ago cannot remain valid under the current changed industrial conditions. Even as the center of distribution shifts from offline to online and large marts worry about survival, the discriminatory regulations still targeting only large marts must be corrected. To restore fair competition in the distribution industry and foster an innovative ecosystem, the paradigm of distribution regulation must be transformed. Let us remember the principle that regulations should be implemented only when necessary, and in the minimum amount and degree required.

Lim Jae-guk, Research Fellow, Korea Chamber of Commerce and Industry

This content was produced with the assistance of AI translation services.