Fair Trade Commission at the Government Complex in Sejong City. [Photo by Yu Dae-gil]
Small businesses supplying subcontracted products will now have the opportunity to engage in collective bargaining with large corporations. The government has decided to amend the legal framework to ensure that collective negotiations conducted by economically weaker parties, such as small and medium-sized enterprises (SMEs) and small business owners, do not constitute collusion. This change will also allow for collective actions to enhance their bargaining power.
The Fair Trade Commission announced this initiative on June 30 during a Cabinet meeting held at the Blue House. The proposed amendments aim to protect the rights of economically weaker parties while minimizing adverse effects such as price increases and consumer harm.
Previously, the government operated a public-private task force to allow collective bargaining for SMEs and small business owners while mitigating potential negative impacts. After gathering feedback from stakeholders representing both large corporations and the interests of SMEs, the government developed these regulatory improvements.
Initially, the government will allow collective bargaining for small businesses and small business owners without prior review. The rationale is that while there is a significant need for their collaboration, the impact on the market is limited. Collective negotiations will be permitted when all participants are classified as small businesses under the Small and Medium Enterprises Basic Act and the opposing party is a large or medium-sized enterprise.
Collective negotiations that include medium-sized enterprises will also be allowed after notification. If a medium-sized enterprise is part of the negotiation, the collusion regulations will not apply after a formal notification process. However, the total annual revenue of the participating businesses must be less than that of the opposing party, and each participant must have a dependency of over 30% on transactions with that party.
Various agreements and information exchanges that were previously classified as collusion will now be permitted. This includes agreements and exchanges of information regarding prices, transaction terms, volumes, and regions. However, information exchanges related to bid collusion will not be allowed, as they could undermine the competitive nature of bidding.
Collective actions, such as joint refusals to supply to large corporations, will also be generally permitted. The Fair Trade Commission views this as a necessary action to strengthen bargaining power.
A Fair Trade Commission official stated, "If a franchise headquarters is classified as a large or medium-sized enterprise, franchisees will be able to engage in collective bargaining with the headquarters. Additionally, merchants using delivery apps will be able to negotiate transaction terms, including fees, through collective bargaining and actions. Subcontractors can also refuse to supply in response to demands for price reductions from large corporations."
This legal amendment applies to business-to-business (B2B) transactions but does not extend to business-to-consumer (B2C) transactions due to concerns that consumer prices may rise. Furthermore, if collective bargaining leads to significant consumer harm or competitive restrictions, a prohibition order may be issued.
The provisions that previously deemed collective actions illegal when members of labor unions had a business character will also be revised. This includes special employment workers such as insurance agents and golf caddies. The Fair Trade Commission explains that an exemption from the Fair Trade Act is necessary considering labor rights.
Based on the discussions from this Cabinet meeting, the Fair Trade Commission plans to prepare amendments to the Fair Trade Act and the Small and Medium Enterprises Cooperative Act in the second half of the year and push for legislation.
The Fair Trade Commission announced this initiative on June 30 during a Cabinet meeting held at the Blue House. The proposed amendments aim to protect the rights of economically weaker parties while minimizing adverse effects such as price increases and consumer harm.
Previously, the government operated a public-private task force to allow collective bargaining for SMEs and small business owners while mitigating potential negative impacts. After gathering feedback from stakeholders representing both large corporations and the interests of SMEs, the government developed these regulatory improvements.
Initially, the government will allow collective bargaining for small businesses and small business owners without prior review. The rationale is that while there is a significant need for their collaboration, the impact on the market is limited. Collective negotiations will be permitted when all participants are classified as small businesses under the Small and Medium Enterprises Basic Act and the opposing party is a large or medium-sized enterprise.
Collective negotiations that include medium-sized enterprises will also be allowed after notification. If a medium-sized enterprise is part of the negotiation, the collusion regulations will not apply after a formal notification process. However, the total annual revenue of the participating businesses must be less than that of the opposing party, and each participant must have a dependency of over 30% on transactions with that party.
Various agreements and information exchanges that were previously classified as collusion will now be permitted. This includes agreements and exchanges of information regarding prices, transaction terms, volumes, and regions. However, information exchanges related to bid collusion will not be allowed, as they could undermine the competitive nature of bidding.
Collective actions, such as joint refusals to supply to large corporations, will also be generally permitted. The Fair Trade Commission views this as a necessary action to strengthen bargaining power.
A Fair Trade Commission official stated, "If a franchise headquarters is classified as a large or medium-sized enterprise, franchisees will be able to engage in collective bargaining with the headquarters. Additionally, merchants using delivery apps will be able to negotiate transaction terms, including fees, through collective bargaining and actions. Subcontractors can also refuse to supply in response to demands for price reductions from large corporations."
This legal amendment applies to business-to-business (B2B) transactions but does not extend to business-to-consumer (B2C) transactions due to concerns that consumer prices may rise. Furthermore, if collective bargaining leads to significant consumer harm or competitive restrictions, a prohibition order may be issued.
The provisions that previously deemed collective actions illegal when members of labor unions had a business character will also be revised. This includes special employment workers such as insurance agents and golf caddies. The Fair Trade Commission explains that an exemption from the Fair Trade Act is necessary considering labor rights.
Based on the discussions from this Cabinet meeting, the Fair Trade Commission plans to prepare amendments to the Fair Trade Act and the Small and Medium Enterprises Cooperative Act in the second half of the year and push for legislation.
* This article has been translated by AI.
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