"Large-scale Distribution Business Act Needs Adjustment to Match Changes in the Distribution Market"

Special Seminar Hosted by the Korean Competition Law Association
"Caution Needed in Regulatory Application Decisions" Also Pointed Out

There have been calls for the revision of the "Act on Fair Transactions in Large-Scale Distribution" (hereinafter referred to as the Large-Scale Distribution Act), enacted to regulate unfair trade practices by large distribution companies against suppliers, to better align with the transformed distribution market.

On the 30th, the Korean Society of Competition Law held a seminar titled "The Legal Systematic Status and Major Issues of the Large-Scale Distribution Act" at the Press Center in Jung-gu, Seoul. At the event, Professor Hong Dae-sik of Sogang University Law School stated, "Ten years after the enforcement of the Large-Scale Distribution Act, the domestic distribution market situation, which was the legislative background at the time of enactment, has rapidly changed. For a virtuous cycle where competition between large-scale distributors and suppliers in the domestic distribution market is protected and consumer welfare is enhanced, it is time to break down or significantly repair the outdated system and create new channels."

Professor Hong Dae-sik of Sogang University Law School is giving a greeting at a seminar held at the Seoul Press Center on the 30th.
[Photo by Korea Competition Law Association]

The Large-Scale Distribution Act was enacted in 2011 when department stores and large supermarkets monopolized the domestic distribution market, intensifying conflicts between large-scale distributors and suppliers. At that time, the law aimed to protect suppliers, who were relatively in a subordinate position, by prohibiting large-scale distributors from engaging in acts such as reducing product payments, shifting promotional costs, and forcing exclusive transactions, with criminal penalties imposed for violations.

Professor Hong said, "After the enforcement of the Large-Scale Distribution Act, large-scale distributors were forced to operate only according to the standards and methods prescribed by the law, leading to institutional fixation of business models and a contraction of sales promotion activities. Subsequently, TV home shopping, T-commerce, and other sectors that grew later also experienced stagnation in growth and competition once they became subject to the Large-Scale Distribution Act." He added, "As distribution channels have expanded and diversified online and consumer purchasing tendencies have changed, the power dynamics between large-scale distributors and brand product suppliers are also shifting."

The Large-Scale Distribution Act is also the main legal tool used by the Fair Trade Commission to regulate transactional relationships in the domestic distribution market. However, disputes often arise because the law excludes cases where "superior bargaining position" is denied (Article 3 of the same law). This is because, under the current domestic distribution market environment, the difference in status between large-scale distributors and suppliers is not as straightforward as in other industries such as shipbuilding or construction.

Professor Shin Young-soo of Kyungpook National University pointed out in his presentation that careful consideration is needed when setting the scope of application for the Large-Scale Distribution Act. Professor Shin said, "It is necessary to operate the system when the status gap between parties is clear and significant. However, there have been many cases where the status gap was ambiguous or parties were placed in conflicting positions depending on the transaction aspect, leading to disputes over transaction conditions or benefits."

Concerns were also raised about the Fair Trade Commission’s full application of the Subcontracting Act to private brand (PB) products of distribution companies. Professor Jung Jae-hoon of Ewha Womans University Law School said, "The application of the Subcontracting Act to the distribution sector should be limited to cases where protection under the Large-Scale Distribution Act is lacking and protection is inevitable. Unless there are special circumstances, the Large-Scale Distribution Act, which reflects industry-specific characteristics, should be given priority."

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