[The Editors' Verdict] Anachronistic Extension of the Distribution Industry Act’s Sunset Provision

Extension of Large Supermarket Business Restrictions Passed by National Assembly
Regulations Extended Based on Hasty Research Report
Policies Shift with Each Administration... A Step Back from a Fair Society

"Civil servants have no soul."

This is a saying that resurfaces every time there is a change in administration. It suggests that, since government policies shift dramatically depending on the political orientation of the ruling party, civil servants-being salaried employees-inevitably adjust themselves to align with the new administration. In this context, Vice Chairman Kwon Daeyoung of the Financial Services Commission's comment that "debt-fueled investment is a type of leverage" seems almost endearing, as it lacks any real substance of harm.

The recent amendment to the Distribution Industry Development Act, which passed the National Assembly plenary session on November 13, succinctly illustrates how soulless civil servants can hold back the community. This amendment, which extends the sunset clause for business restrictions on large supermarkets and Super Supermarkets (SSMs), was processed without a single debate for or against it-not only in the relevant standing committee, the Trade, Industry, Energy, SMEs and Startups Committee, last September, but also in the Legislation and Judiciary Committee and the plenary session earlier this month.

The Ministry of Trade, Industry and Energy, the main responsible body, played a significant role by expressing during the subcommittee's bill review that "policies to protect traditional markets and small business owners need to be pursued in a long-term and stable manner," thus supporting the extension of the regulations. Ironically, the ministry had pushed for an amendment to the Distribution Industry Development Act to ease restrictions on large supermarkets immediately after former President Yoon Sukyeol promised such deregulation in his New Year's address last year. Yet, in just over a year, the ministry has taken the exact opposite position. Up to this point, this could be understood as an inevitable dilemma faced by soulless civil servants.

The real issue lies in the research report that the ministry used as the basis for extending the sunset clause. The study, conducted to assess the effectiveness of the business restrictions on large supermarkets-originally set to expire on the 23rd of this month-was flawed from sample selection to analysis methods. The researchers analyzed credit card sales data over the past five years in areas where large supermarkets and SSMs had opened, examining changes in sales at nearby retail stores before and after the openings. However, out of over 2,000 stores, only 17 (8 large supermarkets and 9 SSMs) were included in the analysis. While the revision of the "Three Data Laws" allows for broad use of card big data, the study selected only a small sample.

Furthermore, while the Distribution Industry Development Act specifies a three-year period for commercial district analysis, the study considered only 150 days after a store opened as a long-term effect. Moreover, it used a regression analysis technique (RDiT), typically employed to observe short-term changes over two to three weeks, to measure effects over 60 days or more, ultimately concluding that store openings cause a decline in retail sales. This not only violated the law but also distorted the results, raising suspicions of intentional misuse of research methodology.

Most notably, the report surveyed 1,000 consumers about their use of retail outlets and concluded, "If consumers cannot use large supermarkets and SSMs, they are expected to turn to online shopping malls." Despite the fact that the competitors of large supermarkets and SSMs subject to regulation are not traditional markets or small retailers, the ministry supported the extension of business restrictions.

Research lacking in validity does more than undermine trust in policy-it can shake the very foundation of a fair society. Currently, half of SSMs are franchise stores. While SSMs were overwhelmingly operated by large corporations when the regulations were first introduced in 2013, over the past decade they have become a popular startup option for small business owners. Because the policy fails to reflect these changes, small business owners operating SSMs now face unfair business restrictions, unlike convenience store owners. Had the ministry's research report taken this into account, the Legislation and Judiciary Committee might have carefully reviewed whether the amendment conflicted with the Franchise Business Act, and the extension of the Distribution Industry Development Act's sunset clause might not have been processed without proper discussion.

This content was produced with the assistance of AI translation services.