SME Sector "Online and Offline Distribution Fees Must Be Reduced... Serious Market Imbalance"

[Asia Economy Reporter Junhyung Lee] The Korea Federation of Small and Medium Business (KSMB) announced on the 9th that it held the 2nd Distribution Industry Committee meeting of 2021 at the KSMB headquarters located in Yeouido, Seoul.

The KSMB operates the Distribution Industry Committee to prepare policy response measures to enhance the competitiveness of small and medium distribution businesses. The committee is composed of 22 chairpersons and heads of cooperatives related to small and medium distribution companies.

At the meeting, discussions continued regarding difficulties related to commission fees charged to tenant companies by distribution types. Jin-guk Lee, a research fellow at the Korea Development Institute who gave the keynote presentation, announced the results of an analysis on the cost burden status by online and offline distribution channels such as open markets, delivery apps, and large supermarkets, the commission fee determination structure, and trends of unfair trade. Lee pointed out, "The negotiation power of tenant companies is the most important factor in the commission fee determination process." He proposed institutional improvement measures to reduce the negotiation power gap between tenant companies and platforms, including ▲revising the contents of the distribution transaction survey ▲granting collective bargaining rights to tenant companies ▲introducing a disclosure system for large-scale distribution transactions.

The attending committee members unanimously agreed that the market imbalance has deepened and that urgent resolution is needed for unfair trade issues, including the sales commission burden on small and medium enterprises and small business owners. Dong-jae Lee, chairman of the KSMB Distribution Industry Committee, said, "The burden from platform competition has been passed on to the sales commissions paid by tenant companies, and this is even more severe in specialized platforms such as fashion," adding, "Since various unfair practices such as excessive commission fees and monopolistic contract coercion are occurring, proactive measures are necessary to create a fair online distribution ecosystem."

Yukyung Song, chairman of the KSMB Distribution Industry Committee, stated, "The market imbalance centered on large-scale distribution companies not only increases the burden on tenant companies but can also lead to a decline in consumer welfare," adding, "Reducing the negotiation power gap and information asymmetry between large-scale distribution companies and tenant companies to resolve market imbalance will be a key task for the committee going forward." Chairman Song added, "We plan to actively work toward the passage of the 'Online Platform Fairness Act,' which is currently pending in the National Assembly," and "We will establish legal and institutional measures to alleviate the cost burden on tenant companies through legislative responses and recommendations with the Distribution Industry Committee in the future."