[The Editors' Verdict] It's Time to End Market Control-Style Price Management

After Chuseok, Price Increases Continue
Fair Trade Commission and Others Mobilize to Pressure Companies
Premature Controls Undermine Market Autonomy

[Asia Economy Reporter Kwangho Lee] Even after the Chuseok holiday, a period identified as a time when inflation would ease, food prices continued to rise, prompting the Yoon Seok-yeol administration to pull out the ‘market control-style price management’ card previously used during the Lee Myung-bak administration. This marks a sharp shift from the ‘market-friendly price management’ principle, which aimed to reduce producers' cost burdens through tax cuts and other measures to encourage voluntary lowering of consumer prices, to a market control-style price management approach.

On the 19th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho chaired a meeting to review living costs, targeting price hikes by food companies. Deputy Prime Minister Choo warned that some price increase movements could exacerbate the burden on citizens and hinder the stabilization of inflation, threatening to conduct joint inspections with relevant ministries and the Fair Trade Commission to check for unfair practices. Chairman Han Ki-jung of the Fair Trade Commission echoed this stance, pressuring that appropriate measures would be taken against monopolistic and collusive behaviors causing price increases.

The government’s threats recall the ‘MB Price Index’ from the Lee Myung-bak administration, which designated 52 daily necessities as items for focused management.

At that time, Pulmuone Foods suspended price increases for 153 products across about 10 items, including tofu and bean sprouts, less than a day after announcing the hikes. Seoul Milk and Dongwon F&B postponed their price increase plans after sensing the government’s price control scrutiny. OB Beer announced plans to raise the ex-factory prices of beers like Cass but withdrew the increase three days later, while Lotte Chilsung Beverage raised prices on 20 products including Chilsung Cider, Pepsi Cola, and Lets Be, only to revert them about a month later.

The government also conducted collusion investigations targeting products like ramen. For example, ‘Shin Ramyun Black,’ marketed as a premium ramen with the slogan ‘nutritional value of a bowl of seolleongtang,’ was fined for false and exaggerated advertising. Although the official reason was misleading advertising, it was widely believed that the real target was the price. Ultimately, Nongshim decided to halt sales five months after the product’s launch.

The government’s use of the Fair Trade Commission to pressure companies is seen as a declaration to repeat the old practices of past administrations. Ordering individual companies not to raise prices can be viewed as an overreach.

Recent price increases by food companies are simply due to the inability to bear cost burdens caused by global inflation, and companies should not be coerced as if they are unfairly profiting from high inflation. Rather than repeatedly imposing policy demands that burden companies, the government’s proper response is to prepare fundamental support measures for steep raw material price increases, such as subsidies for flour price hikes in the first half of this year, and then request restraint on price increases.

For the time being, food companies will try to suppress product prices as much as possible in the spirit of sharing the pain, but eventually, larger price hikes may occur. The government must not forget that premature market control-style price management can undermine market efficiency and autonomy.

Kwangho Lee, Head of Distribution Economy Department

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