'Malicious Laws' Disappeared Abroad... Will Distribution Regulations Be Further Strengthened?

Large-scale Store Regulations to Protect Small Businesses
Disappeared in Japan 20 Years Ago
France and Germany Have Operating Hour Restrictions
But These Are Labor Law Regulations, Not Limited to Large Stores
Supermarket Sales Sometimes Decline After Mart Closures
"Effective Support Needed"

[Asia Economy Reporters Hye-seon Lim, Seung-jin Lee] Offline retailers, standing at a crossroads for survival due to the growth of online shopping and the resurgence of COVID-19, are anxiously worried about the possibility of even stricter distribution regulations.

Regulating the operations of large corporations to protect small business owners is a law that has already been implemented decades ago in various countries overseas. However, it was regarded as a "bad law that disrupts the market economy" and was abolished. Moreover, although research results in Korea show that small business owners are actually harmed by regulations on large corporations, the political sphere is recklessly pushing for stronger regulations, intensifying the controversy.

Laws Abolished Overseas 20 Years Ago

According to the Korea Chamber of Commerce and Industry's data on "Regulations on Large-scale Stores in Developed Countries" released on the 1st, among major developed countries, only Japan and France have laws regulating large retailers to protect small business owners. Even Japan abolished such laws 20 years ago, citing that they had a negative impact on retail stores, and France maintains operating hour regulations only as labor law provisions related to working hours.

In Japan, the history of regulating large retailers to protect small and medium-sized distribution businesses began with the Large-scale Retail Store Law (Daiten Law), but it was abolished in 2000. After research showed that the Daiten Law, which restricted operating hours, store size, and days off, negatively affected nearby retail stores, the Japanese government replaced it with the Large-scale Retail Store Location Law (Daiten Ichiji Law), focusing on urban environment protection. This law restricts operations only when large marts cause issues such as traffic congestion, noise, or parking problems.

Professor Hyung-seop Kim of Busan University of Science and Technology explained, "Since the introduction of the Large-scale Retail Store Location Law, Tokyo's complex shopping mall 'Ginza Six' has become a tourist attraction visited by 20 million people annually, and nearby retail stores have also seen increased sales."

France enacted the Royer Law in 1973 to regulate large retailers and protect small and medium-sized retail stores, but shifted its policy focus to enhancing competitiveness in 2008. While France has laws regulating retail operating hours, they differ from Korea’s approach, which enforces mandatory closure only on large corporations to protect small business owners. In France, operating hours are regulated for "all" stores to protect workers, with Sunday closures mandated under labor law.

Closing Large Marts Causes Chain Damage to Surrounding Commercial Areas

According to a recent research report by the Korea Distribution Science Association titled "The Impact of Large Retail Facilities on Surrounding Commercial Areas," after the closure of large marts, sales at nearby supermarkets and other stores decreased as external customers left. Professor Chun-han Jo’s team at Gyeonggi Science and Technology University studied the commercial area changes over two years using credit card transaction data and surveys focused on the Emart Bupyeong branch, which closed in 2018.

The results showed that large supermarkets within a 3 km radius of Emart Bupyeong slightly increased sales over two years after closure, but sales at small supermarkets declined. Supermarkets with annual sales between 2 billion and 5 billion KRW saw a 26% drop in sales after the Bupyeong branch closed. It was found that 6 out of 10 large mart customers also used nearby stores. The most pronounced spillover effect of large marts was on "restaurants," with a usage rate of 62.19%.

A senior official from a distribution company said, "This year, we recorded the worst performance ever due to the COVID-19 crisis and are on the brink of collapse. If regulations are further tightened, survival itself will become difficult." He added, "Regulations on large corporations have been strengthened since 2012, but I don’t know how much help it has actually been to small business owners and local markets." He lamented, "Even in developed countries, restrictions on specific economic groups are being abolished as bad laws that violate the principle of market freedom, but Korea is going in the opposite direction."

The Problem Lies in the Dichotomy of Large Corporations vs. Small Business Owners

Professor Ik-seong Kim of Dongduk Women’s University (Honorary President of the Korea Distribution Science Association) explained, "Some countries like Europe and Japan regulate Sunday operations, but this is not to protect small business owners; it is for religious reasons or labor rights protection." He added, "Nowhere thinks dichotomously that regulating large corporations will revive small business owners." He further advised, "Currently, talking about offline regulations is a very outdated idea. Support measures are needed to help small business owners establish distinctive services such as delivery or special discounts compared to large stores and online."

There were also opinions emphasizing the need for effective support for small business owners instead of regulating large corporations. Professor Eun-hee Lee of Inha University’s Department of Consumer Studies said, "The current regulatory proposals do not reflect consumer behavior or psychology at all." She added, "If large stores close, many small and medium suppliers will also have to close. It is time to develop policies to support small business owners facing difficulties."

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