[The Editors' Verdict] Hopes That the Lee Jaemyung Administration Will Be Different

Controversy Over Mandatory Closures for Large Discount Stores Spreads
E-Mart and Lotte Shopping Stock Prices Plummet
Criticism Emerges Even Within the Ruling Party... Legal Amendment Uncertain
Lead Proposer Also Says "Unnecessary Conflict"

The debate over regulations on large discount stores is intensifying. This comes amid expectations that the Democratic Party, having succeeded in a change of administration, will strengthen regulations on large discount stores. In the stock market, the corporate value of Lotte Shopping, which operates Lotte Mart, and E-Mart, the leading operator in the sector, has plummeted. As the expansion of the online market has pushed the large discount store industry to the brink of collapse, criticism is mounting that such legislation is "anachronistic."

Regulation of large discount stores was identified as the first "regulatory reform" initiative by former President Yoon Suk-yeol, who was impeached, immediately after he took office in 2022. In a public forum on livelihoods held in January last year, former President Yoon announced plans to ease regulations, such as mandatory holiday closures for large discount stores and bans on early morning deliveries, to boost domestic demand. At the time, the industry responded coldly.

The current Distribution Industry Development Act requires large discount stores and Super Supermarkets (SSMs) to close twice a month on public holidays and prohibits operations from midnight to 8 a.m. If these regulations are abolished, operating hours will increase and early morning delivery, similar to e-commerce platforms, will become possible. However, the industry argues that "no remedy is effective." As the center of consumption has already shifted to the online market and the number of customers visiting offline stores has drastically decreased, extending operating hours would only increase labor costs, further worsening profitability.

During the previous administration, there was a growing movement among local governments, which have the authority to regulate large discount store operations, to shift mandatory closure days to weekdays. In February 2023, Daegu became the first city in the country to move mandatory closure days for large discount stores to weekdays, and last year, Seocho District in Seoul also made the switch for the first time in the city. The recent controversial bill on large discount store regulations explicitly stipulates mandatory public holiday closures in the law to limit such local government authority.

Once again, the industry remains indifferent. Out of 17 metropolitan governments and 226 basic local governments, only 82 have shifted mandatory closure days for large discount stores to weekdays. In Seoul, only 4 out of 25 districts?Seocho, Dongdaemun, Jung, and Gwanak?have made the change. This suggests that even if the law is amended, the impact will not be significant.

The amendment in question was proposed by Oh Sehee, a proportional representative of the Democratic Party elected in last year’s general election. Representative Oh previously served as president of the Korea Federation of Micro Enterprises. It is perhaps natural that she would introduce a bill representing the interests of small business owners. However, for the amendment to pass the National Assembly, she must persuade 299 fellow lawmakers. While the Democratic Party, which secured a majority in last year’s general election, could pass the amendment as a party platform at any time, there are currently voices of opposition to the amendment within the ruling party as well.

On June 11, Representative Oh wrote on her Facebook page, "I have become the center of excessive controversy due to clickbait media reports," adding, "It is not desirable to interpret the bill excessively or steer the direction of its review in one direction at a stage where even a review has not taken place." She argued that since the bill has not even been discussed once in the relevant standing committee, the controversy over mandatory closures for large discount stores is an unnecessary conflict.

This controversy was sparked by concerns in some quarters that the Lee Jaemyung administration will strengthen corporate regulations. This is a result of the "learning effect" from the Moon Jaein administration’s policies to protect the underprivileged, which were exemplified by failures in real estate policy. However, the Lee Jaemyung administration is being staffed with entirely different figures, from the president’s close aides to the policy working group. President Lee Jaemyung’s first declaration upon taking office was "overcoming recession." It is expected that he will not pursue regulations that would dampen domestic demand.