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Korea Federation of SMEs Holds Policy Forum to Resolve New Economy's Three No's
Key Legislative and Policy Officials from Ruling Party, Government, and Cheong Attend
94% of Platform Tenants Respond "Endure Losses Without Countermeasures"

[Asia Economy Reporter Kim Bo-kyung] A survey revealed that one in five small and medium-sized enterprises (SMEs) and small business owners operating on online platforms have experienced unfair practices. Excessive fees and advertising costs, as well as unilateral settlement procedures, were perceived as the most unfair. The SME community unanimously agreed that these imbalances in the market, known as the new economy's "three unfair issues," must be resolved.

The Korea Federation of SMEs held a "Policy Forum to Resolve the New Economy's Three Unfair Issues" on the 13th at the Federation's headquarters in Yeouido, Seoul, in celebration of the 33rd Small and Medium Enterprise Week.

The new economy's three unfair issues refer to ▲unfairness in transaction prices between large and small-to-medium enterprises in supply dealings ▲market imbalances between platform operators and tenant companies in the online distribution market ▲and the irrationality of the system that induces lowest-price bidding in the procurement market.

The forum was attended by key figures responsible for legislation and policy in the fair economy sector, including Lee Hak-young, Chair of the National Assembly Industry, Trade, Energy, SMEs and Startups Committee; Kwon Chil-seung, Minister of SMEs and Startups; Cho Sung-wook, Chair of the Fair Trade Commission; and Lee Byung-heon, Presidential Secretary for SMEs and Startups.

In his keynote presentation, Choo Moon-gap, Head of the Economic Policy Department at the Federation, explained that during the recovery from the COVID-19 crisis, polarization between large and small-to-medium enterprises has intensified, while the online market has rapidly grown to a scale of 161 trillion won.

As the market rapidly changes, issues of unfair transactions between companies and market imbalances are worsening. Typical examples include large corporations not reflecting raw material price increases in supply prices, or online platform companies demanding excessive sales commissions from tenant companies.

Choo emphasized, "Currently, SMEs lack the capacity for innovation such as digital transformation," adding, "Resolving the new economy's three unfair issues is necessary to overcome polarization between large and small-to-medium enterprises and to restore innovation capacity."

According to the Federation's survey, 20.7% of SMEs and small business owners operating on online platforms reported experiencing unfair practices in the past three years. When examining types of unfairness (multiple responses allowed), excessive fees and advertising costs (90.3%) and unilateral settlement procedures (30.6%) were identified as the biggest problems.

Choo stated, "94% of tenant SMEs and small business owners said they endure losses without any special countermeasures," urging, "The enactment of the Online Platform Fairness Act must be expedited."

Regarding unfair transactions, a survey on desired policy tasks from the field (multiple responses allowed) showed the following priorities: "Reflecting raw material price increases in supply prices (75%)," "Rationalizing payment terms for supply payments (31%)," and "Strengthening sanctions against unfair practices (17%)."

Kim Nam-geun, Chair of the Reform Legislation Special Committee at the People's Solidarity for Participatory Democracy (PSPD), said, "The supply price adjustment negotiation system has strict requirements, limiting its regular use, and there is concern about retaliation such as transaction suspension by large corporations," adding, "There is a need to reintroduce the supply price linkage system."

The domestic procurement market, which has grown to 145 trillion won, is still centered on low-price contracts, forcing SMEs to incur losses. This was also cited as the "irrationality of the system," one of the new economy's three unfair issues.

According to the Federation's survey, 39.3% of SMEs participating in the procurement market responded that the system is "unreasonable," and one in three procurement SMEs (32.3%) reported suffering losses due to accumulated deficits or foregoing appropriate profits.

Kim Ki-moon, Chair of the Korea Federation of SMEs, criticized, "Ten years ago, the irrationality of the system was a problem of financial institutions discriminating against companies based on size, but now the issue lies in the procurement system where low-price contract practices cause losses the more you supply."

He added, "If the new economy's three unfair issues are not resolved, the dual structure between companies and the expansion of conflicts between social classes could become major obstacles to the Korean economy's leap forward."

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