Pocket-change penalties keep big retailers openE-Mart’s store in Paju, Gyeonggi, was given a seven-day suspension in 2010 for selling cheese 18 days past its sell-by date, but the store remained open.
According to the Food Sanitation Act, instead of closing for seven days, it could pay a fine of 1.66 million won ($1,562) per day.
Since its daily sales were about 200 million won, it was a no-brainer for E-Mart to pay the fine and stay open.
In 2011, large retailer Save Zone I&C in Seongnam, Gyeonggi, also was ordered to suspend business for seven days for selling fish paste and quail eggs kept at room temperature. It paid an 11.62 million won fine and kept selling.
Almost no large discount stores close when ordered to suspend business for violations of the Food Sanitation Act because of a penalty system that favors the biggest, most profitable stores.
According to a report on the crackdown on retailers from 2010 through June, which the ruling Saenuri party lawmaker Kim Hyun-sook received on Sunday from the Health and Welfare Committee of the National Assembly, 461 retailers, including 39 with 10 billion won or more in annual sales, were given suspensions and 83 percent, or 382, paid fines rather than shut down.
Article 53 of the Enforcement Decree of the Food Sanitation Act divides penalties into a total of 26 categories with the first grade applying a 50,000 won daily fine to stores with annual sales of 20 million won of less if they were to stay open. Grade 26 assesses a fine of 1.66 million won a day to stores with 10 billion won or more in annual sales.
The problem lies in the ratio of penalties to sales. A mom-and-pop store with annual sales of 15 million won must pay a fine of 50,000 won per day on daily sales of 41,000 won to stay open.
On the other hand, for a large discount store chain with annual sales of 10 billion won and daily sales of 27.4 million won, 1.66 million won a day is about 6 percent of sales.
Kim pointed out that the penalty system is far more of a burden for small stores. “Since early last year, the encroachment of large retail companies into small retail businesses has been raised as a big social issue, yet the penalties imposed on large discount stores are so small that they are virtually exempt from the government regulation,” said Kim.
“Although we knew that frozen fish should not be retailed as refrigerated products, we kept it on the refrigerated shelves as we could continue selling if we got caught by paying a small penalty,” said a spokesman for a large discount store chain, which was recently handed a business suspension.
“Correcting the unfairness between large discount store chains and small stores is the start of economic democratization,” said the lawmaker. “The calculation base for penalties should be improved through consultation with the government, the National Assembly and the legislative research agency.”
BY LEE SO-AH [firstname.lastname@example.org]
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