Anti-chaebol regulation eased

Updated : 2014-06-11 17:26

Anti-chaebol regulation eased
By Yoon Ja-young

The government plans to ease restrictions on chaebol in their competition with small companies and mom-and-pop stores.
The National Commission for Corporate Partnership (NCCP) announced plans to improve the regulations on competition between conglomerates and SMEs, Wednesday.
Back in September 2011, the commission designated 16 items, including rice cakes and laundry soap, as “markets that are suitable for SMEs.” It has designated 100 items so far, and conglomerates were directed not to enter those markets.
The measure was aimed at restricting reckless expansion of businesses by conglomerates and protecting mom-and-pop stores and small businesses.
The designation is valid for three years, and can be extended for another three years upon agreement. Small businesses planned to request that most of those items be designated again.
However, the commission announced plans to ease the regulations.
First of all, even when the markets are designated as SME-suitable, the commission opened ways for them to be de-listed after going through a deliberation process.
The markets dominated by mid-tier companies, or where large businesses are at a disadvantage against foreign companies, or the sector exclusively dominated by a small company, are also subject to deregulation.
Foreign companies will also be categorized into big, mid-tier and small companies according to their business size in Korea, and be subject to the regulation accordingly. A business where over 30 percent of the stake is owned by a foreign company with more than 500 billion won in assets will also be regarded as a conglomerate.
The commission also cited the laundry soap market as an example of a market dominated by a single small company. After LG Household & Healthcare withdrew from the market, an SME, Mukunghwa, has dominated the market without competition.
Consumer satisfaction will also be considered in designating markets suitable for SMEs.
The commission determined that it should refrain from regulations that go against market principles and can weaken corporate competitiveness.
Small companies, however, are claiming that the commission is favoring conglomerates amid the deregulation mood fostered by Cheong Wa Dae.
“The plan doesn’t fully reflect the opinions of the SMEs. We fear that the measure will be deteriorated due to distortion by some,” the Korea Federation of SMEs announced.
The small companies say that the improvement plan should not aim to exclude some items from the regulation.
The Federation of Korean Industries (FKI), a chaebol mouthpiece, however, welcomed the plan, especially because it sets up principles and guidelines.
“When the measure was first introduced in 2011, it caused chaos as there were no guidelines at all,” a spokesperson for FKI said.
The measure is expected to continue causing controversy as small companies and conglomerates come up with contrasting data to back up their arguments. According to the association of bakeries, more than 500 bakeries, which are not franchises of conglomerate bakeries, opened around the country after they were designated as such a sector.
However, conglomerates point out that foreign companies are taking 60 percent of the LED market following restrictions on conglomerates.