Kim Won-i, Survey of 500 SMEs Nationwide
32.8% Find Ministry of SMEs Role Inappropriate... "Need to Strengthen Negotiation Power"
"Request Right to Discuss Eradication of Unfair Price Cuts"
One in five small and medium-sized enterprises (SMEs) that have traded with large corporations reported experiencing so-called "unfair price cutting" and other unfair practices. The investigation revealed that the "gapjil" (abuse of power) by large corporations against SMEs has not yet been eradicated, highlighting the need for practical measures to strengthen the bargaining power of SMEs, who are the weaker party in transactions.
According to a survey conducted on the 17th by Rep. Kim Won-i (Mokpo) of the Democratic Party of Korea, in collaboration with the Korea Federation of SMEs and commissioned to Korea Research, 20.4% (102 companies) of 500 small manufacturing firms with experience trading with large corporations over the past three years reported experiencing unfair practices when selling products to large corporations.
When asked about specific types, 68.6% (70 companies) cited unfair determination or reduction of delivery prices. This was followed by unfair contract cancellations or changes at 25.5% (26 companies), unfair returns at 23.5% (24 companies), and non-payment or delayed payment at 21.6% (22 companies).
Despite sanctions from the Fair Trade Commission and mediation by the Ministry of SMEs and Startups, the practice of "price cutting" by large corporations appears not to have improved. Regarding how they responded to unfair sales transactions, 55.9% (57 companies) reported no response or acceptance, the highest proportion, while 49% (30 companies) reported mediation through negotiation.
Among the 500 respondent companies, 275 had purchased raw materials from large corporations within the past three years, and 18.9% (52 companies) reported experiencing unfair practices during this process. In purchasing transactions, 69.2% (36 companies) experienced unfair supply price determination or increases. The rates of experiencing unfair practices when SMEs sell to or purchase from large corporations were similarly around 20%.
When asked about the causes of unfair delivery price determination, 59% (295 companies) pointed to "lack of win-win efforts by large corporations and indiscriminate profit-seeking," 16% (80 companies) cited "weak penalties for unfair trade," and 14.8% (74 companies) responded "low bargaining power of SMEs."
Regarding the appropriateness of the role of the Ministry of SMEs and Startups, the main government agency responsible for eradicating unfair practices, 32.8% (164 companies) responded "very or somewhat inappropriate," more than twice the 13% (65 companies) who said it was "appropriate."
When asked about tasks to promote win-win cooperation between large corporations and SMEs and to resolve polarization, 66.2% (331 companies) selected "creating an environment where SMEs can receive fair prices by strengthening their bargaining power," followed by "strengthening government support and investment for SMEs" at 43.4% (217 companies), and "establishing measures to eradicate unfair trade practices" at 42.4% (212 companies).
Rep. Kim said, "It has been revealed that the 'gapjil' of large corporations against SMEs still persists, but the role of the Ministry of SMEs and Startups is perceived as inadequate in the field. Legislative measures should be prepared to enhance bargaining power, such as granting SMEs-centered cooperative associations the right to request negotiations on contract terms when dealing with large corporations."
Meanwhile, this survey was conducted by Korea Research from September 23 to 27 via email and phone with 500 small manufacturing companies nationwide. The margin of error is ±4.38% at a 95% confidence level.
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