[The Editors' Verdict] Outdated Regulations on Large Supermarkets: Time for Reform

The Yoon Suk-yeol administration is actively exploring various ways to ease the long-standing regulations on large supermarket operations that have been in place for over a decade, accelerating related discussions. The Fair Trade Commission and the Ministry of Trade, Industry and Energy have begun consultations to relax restrictions on early morning deliveries by large supermarkets, and the Presidential Office is also engaging in a public opinion campaign by putting the abolition of mandatory closure days for large supermarkets to an online public vote. While small business owners are raising their voices in opposition, calling it "the removal of the last protective barrier for neighborhood businesses," the policy's effect of cutting outdated regulations that have strayed from their original purpose is encouraging as it injects vitality into the economy.

The regulations on large supermarket operations were introduced in 2010 with the aim of protecting neighborhood businesses. Large supermarkets are required to close on the 2nd of every month and their operating hours are limited from 10 a.m. to midnight. Additionally, stores larger than 3,000 square meters are prohibited from opening within a 1 km radius of traditional markets. Although the intent was to revitalize traditional markets and protect small business owners, there have been many criticisms regarding its effectiveness. Consumers do not necessarily visit traditional markets on the mandatory closure days of large supermarkets. Restrictions on early morning deliveries have been criticized as unfair discrimination because they benefit online shopping malls like Coupang and Market Kurly instead of traditional markets.

Several studies have been published on this issue. Last year, the Federation of Korean Industries surveyed consumer perceptions regarding distribution regulations on large supermarkets and found that only 8.3% of consumers visited traditional markets to purchase daily necessities on large supermarket closure days. In May, the Korea Chamber of Commerce and Industry surveyed 1,000 consumers who had experience using large supermarkets, and 67.8% responded that regulatory easing was necessary. The preferred methods for easing regulations included implementing mandatory closure days considering regional characteristics (29.6%), abolishing regulations (27.5%), and reducing the number of mandatory closure days (10.7%).

Moreover, the decline of large supermarkets negatively affects not only direct and indirect employment but also employment in surrounding commercial areas. According to a research analysis titled "Evaluation of 10 Years of Distribution Regulations and Coexistence Measures" by the Korean Distribution Science Association, when one large supermarket store closes, 945 jobs are lost directly, and 429 jobs disappear within a 3 km radius. This means a total of 1,374 jobs are lost when one large supermarket store shuts down.

Nevertheless, the continuation of regulations on large supermarket operations is largely the responsibility of the political sphere. The approach has been one of populist regulation, prioritizing the backlash and voices of specific groups over the benefits of the majority of consumers. Even now, bills aimed at further strengthening distribution regulations are being continuously proposed in the National Assembly.

Globally, since 2010, very few countries have strengthened regulations on the distribution industry. Major countries overseas, such as the United States and France, are pursuing policies to secure global competitiveness by easing regulations on distribution companies.

It is now time to address distribution regulations that have been left untouched due to a binary logic of strong versus weak or have been effectively neglected due to conflicting interests. In the rapidly changing environment inside and outside the distribution sector, accelerated by the expansion of the online market due to COVID-19, removing outdated regulations that have blocked progress will rather lay the foundation for coexistence and trigger virtuous cycles such as revitalizing domestic consumption and creating jobs.

Kwangho Lee, Head of Distribution Economy Department

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