The Supreme Court Rules the Garak Market Consignment Fee Restriction Ordinance Enforcement Regulations 'Lawful'... Supports Seoul City

Supreme Court Rules 'City Ordinance Enforcement Rules Valid' in Administrative Lawsuit Filed by Four Garak Market Wholesale Corporations... Seoul City Halts Practice of Passing Increased Handling Fees to Consignment Commissions... Annual Shipper Burden Reduced by About 1.4 Billion KRW, Basis Established to Limit Excess Profits of Wholesale Corporations

Garak Mall Fruit and Vegetable Direct Market

[Asia Economy Reporter Jong-il Park] The Supreme Court ruled on July 8, 2021, that the Seoul Metropolitan Government’s ordinance enforcement regulations on agricultural and marine products wholesale markets, which set the maximum consignment commission that the Garak Market fruit and vegetable wholesale market corporation can charge consignors lower than that of Gangseo Agricultural Products Wholesale Market (hereinafter ‘Gangseo Market’), do not violate the principle of equality in an administrative lawsuit filed by four wholesale market corporations.

Seoul City has long viewed excessive profits and trading margins of wholesale market corporations as one cause of increased distribution costs and has continuously strived to maintain consignment commissions at an appropriate level.

In particular, to eradicate the practice of wholesale market corporations passing on the standard handling fees they must bear to consignors, Seoul amended the ordinance enforcement regulations of the Seoul Metropolitan Government’s agricultural and marine products wholesale market ordinance (hereinafter ‘ordinance enforcement regulations’) in 2017 to prohibit any increase in the consignment commission for the Garak Market fruit and vegetable category beyond the 2016 level. The amendment also limited the consignment commission cap for Garak Market fruit and vegetable category to be lower than that of Gangseo Market, as Garak Market is the most influential among nationwide public wholesale markets.

In response, four wholesale market corporations of the Garak Market fruit and vegetable category filed a lawsuit with the Seoul Administrative Court in 2017, claiming that the ordinance enforcement regulations violated the constitutional principle of equality.

While the lower courts and the High Court previously ruled that setting a separate consignment commission cap only for Garak Market’s wholesale market corporations violated the principle of equality and was unlawful, the Supreme Court found that the relevant provisions did not violate the principle of equality.

The Supreme Court stated, “Considering the scale, status, and influence on transactions of the wholesale markets, it is permissible to apply differentiated consignment commission caps. In particular, Garak Market has a large transaction volume and high operating profits for wholesale market corporations, and unlike Gangseo Market, wholesale market corporations practically monopolize transactions with consignors, making it highly likely that handling fees borne by wholesale market corporations are passed on to consignment commissions.” The Court thus upheld Seoul City’s position that the ordinance enforcement regulations restricting the increase of consignment commissions beyond the 2016 level are lawful.

This Supreme Court ruling is significant in that it not only reduces consignors’ consignment commission burden by approximately 1.376 billion KRW annually (as of 2020) but also establishes grounds to limit excessive profits of wholesale market corporations in line with the establishment purpose of public wholesale markets to protect consignors and consumers.

Kim Kyung-ho, President of the Seoul Agricultural and Marine Products Corporation, welcomed the Supreme Court ruling, stating, “Wholesale market corporations will no longer be able to pass on increased handling fees to consignment commissions, which will actively promote improvements in the outdated handling system.” He emphasized, “We must continue to make efforts to strengthen the public nature of wholesale market corporations and prevent excessive surplus profits in the future.”

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