Democrats Urge Linked Processing of Law to Strengthen SME Negotiation Power
Guarantee Collective Action for Subcontractors on Price Increases
Fair Trade Commission Opposes Citing Risk of Price Collusion
The 'Amendment to the Small and Medium Enterprise Cooperatives Act,' which strengthens the bargaining power of small and medium enterprises (SMEs) against large corporations, has emerged as the biggest variable in the postponement of the expanded application of the Serious Accidents Punishment Act. Starting from January next year, the Serious Accidents Punishment Act will be expanded to workplaces with fewer than 50 employees, and the Democratic Party of Korea is putting forward the linked processing of the bill to postpone this application and the amendment to the Small and Medium Enterprise Cooperatives Act.
According to political circles on the 8th, the Democratic Party is demanding the passage of the Amendment to the Small and Medium Enterprise Cooperatives Act along with conditions for the National Assembly's approval of a bill to postpone the application of the Serious Accidents Punishment Act by two years, including ▲ an apology from the government for lack of preparation ▲ a concrete future preparation plan and support measures ▲ an official commitment from the government and economic organizations regarding the expanded enforcement of the Serious Accidents Punishment Act. Hong Ik-pyo, the floor leader of the Democratic Party, stated at the beginning of this month’s Supreme Council meeting, "We must pass the amendment to the Small and Medium Enterprise Cooperatives Act, which guarantees the collective actions that SMEs are actually demanding and strengthens their bargaining power."
On the 5th, participants hold hand placards at the Korean Confederation of Trade Unions rally urging the halt of the amendment to the Serious Accidents Punishment Act held in front of the National Assembly in Yeouido, Seoul. Photo by Hyunmin Kim kimhyun81@
The bill mentioned by Floor Leader Hong is the 'Amendment to the Small and Medium Enterprise Cooperatives Act' originally proposed by Woo Won-sik, a Democratic Party lawmaker, in June 2021. This bill aims to exempt collective actions such as price increases in subcontracting and consignment transactions from the application of the Monopoly Regulation and Fair Trade Act (Fair Trade Act) to strengthen the bargaining power of individual SMEs with weak negotiation capabilities.
Under the current Small and Medium Enterprise Cooperatives Act, the Fair Trade Act does not apply to collective actions such as price increases by cooperatives, business cooperatives, and federations, provided that consumer interests are not harmed. Although this provision is intended to guarantee the collective actions of cooperatives, the concept of consumer has been unclear, and the law has been criticized as largely ineffective. Depending on the scope of consumers, the collective actions of cooperatives could be subject to penalties under the Fair Trade Act.
In response, Representative Woo defined the final consumer as 'a person who uses goods for consumption or production activities,' as specified in the Consumer Basic Act. Additionally, the bill includes provisions that exempt cooperatives from the Fair Trade Act when they adjust prices or production volumes in relation to subcontracting or consignment transactions.
The government opposes this amendment. The Ministry of SMEs and Startups stated, "While it is necessary to clarify the concept of consumers to activate the collective actions of cooperatives," it expressed concerns that "in addition to the current authority to negotiate subcontracting payment adjustments, broadly allowing price increases or production volume adjustments during cooperative collective actions related to subcontracting or consignment transactions could lead to cases of collusion." The Fair Trade Commission also raised objections starting from the definition of consumers, stating, "If the scope of consumers is limited, intermediate consumer businesses could suffer from cost increases due to collective actions by cooperatives, which could ultimately harm final consumers." Regarding the provisions related to subcontracting and consignment transactions, it also expressed a negative stance, saying, "Unlimited allowance of collusion could occur."
Meanwhile, Lee In-seon, a lawmaker from the People Power Party, also submitted a similar bill to the National Assembly. The amendment clarifies the concept of consumers in the Small and Medium Enterprise Cooperatives Act and includes provisions that exempt cooperatives from the application of the Fair Trade Act if their market share is below 50%, even if they increase prices or adjust production volumes.
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