[Inside Chodong] Local Governments Should Take the Lead in Easing Large Supermarket Operation Regulations

Seoul Metropolitan Council Eases Regulations on Large Supermarkets
Alibaba and Temu's C-Commerce Offensive... Encroaching on Traditional Markets
Early Morning Delivery by Supermarkets Expected Through Local Ordinance Amendments

"If we wait for the law to be amended, we don't know when change will come. In the meantime, our distribution companies have to endure the unilateral offensives of Alibaba and Temu. Moreover, due to the Distribution Industry Development Act (Distribution Act) aimed at protecting traditional markets, the reality is that traditional markets are being encroached upon by Chinese e-commerce companies."

The ordinance to ease the mandatory holiday closure and business hour restrictions on large supermarkets, which have been in place for 12 years following the amendment of the Distribution Industry Development Act, passed the Seoul Metropolitan Council on the 26th. Kim Ji-hyang, a Seoul city council member who sponsored the ordinance, recently told reporters in a phone interview that the background for easing regulations on large supermarket operations was the rise of C-commerce (Chinese e-commerce) as the biggest threat to the domestic distribution industry.

The core of this ordinance is to allow large supermarkets to offer early morning delivery. The existing Seoul city ordinance restricted large supermarkets' business hours from "12:00 AM to 10:00 AM." This has been revised to "business hour restrictions within the range of 12:00 AM to 10:00 AM." In other words, the business hour restriction system is maintained, but the scope is left to the discretion of the district mayor. Additionally, online delivery is permitted as long as it does not overlap with offline business restriction hours. Along with this, the clause requiring two mandatory closure days per month has been amended to remove "public holidays" and instead decide through consultation with stakeholders.

The issue of early morning delivery by large supermarkets has been a regulation consistently raised by the distribution industry alongside the shift of mandatory closure days to weekdays. Currently, early morning delivery by large supermarkets is fundamentally blocked. This is because the Ministry of Government Legislation interprets that online business activities using offline stores as logistics and delivery bases are also restricted during business hour limits or designated mandatory closure days.

The amended ordinance does not exceed the regulatory scope stipulated by the Distribution Act. The original proposal was to completely remove business hour restrictions for online delivery, but it was revised and approved following the opinion of a Seoul Metropolitan Council expert who pointed out that it could directly conflict with the Distribution Act. Council member Kim explained, "The regulation of large supermarket operations is determined by the special autonomous mayor and the mayor, county governor, or district mayor under the Distribution Act," adding, "This ordinance allows them to exercise their authority more actively within the scope of the law and enables the Seoul mayor to recommend this." There are many ways to reduce regulations without amending the law.

The best way to remove regulations is through legislative amendment. However, the political and distribution sectors share the view that it is unlikely to expect an amendment to the Distribution Act after the 22nd National Assembly general election. Both major parties are struggling with reorganizing their leadership after receiving the election results. Once the 22nd National Assembly convenes, tedious negotiations for parliamentary organization will follow. Considering the rapidly changing distribution market atmosphere day by day, waiting for the law to be amended could lead to a situation where both domestic distribution companies and traditional markets wither away.

If amending the law is difficult, local governments with authority should use their powers more actively. Regarding business hour restrictions, the Distribution Act sets the standard as "business hour restrictions within the range of 12:00 AM to 10:00 AM." However, most metropolitan governments apply stricter regulations, such as restricting business hours from "12:00 AM to 10:00 AM." In fact, local governments have strengthened regulations. These local government-level regulations need to be eased. Fortunately, some districts in Seoul and Daegu City have completed amendments to shift mandatory closure days to weekdays, and Busan and Daejeon cities are pursuing additional regulatory easing. As seen in this ordinance, further easing of business hour restrictions on large supermarkets is possible. It is hoped that other local governments will refer to this ordinance and take more proactive steps to ease regulations.