The red tape trap
The government was lampooned on the Internet and social networking services for its plan to regulate discounted sales of imported beer brands. Media outlets reported that the Ministry of Strategy and Finance promised domestic beer producers that it would introduce regulations on price competition among imported beer brands, which now command more than 40 percent of the local market. The ministry denied it was mulling such an action after an outpouring of criticism of its alleged plan. The issue remains controversial on the Internet despite the ministry’s denial.
Beer regulations are the latest in a series of useless government interferences in the retail market. The government started off its regulatory campaign with the Device Distribution Improvement Act in October 2014, designed to tame mobile carriers’ competition for customers through subsidies of new handset purchases. It then institutionalized a fixed price system for publications, restricting discounts on books to 10 percent. Those actions were plainly against the consumer right of choices and did little to bring down retail prices. A series of similar regulations - limiting price competition in PC cafes and indoor golf practice establishments - are pending in the National Assembly for approval.
Now foreign beers join the list of government-condoned price fixing systems. Consumers complain about the government meddling in pricing that ends up raising retail prices, which puts a dent in their pockets and solely benefits companies. The government sounds frustrated because it actually didn’t do anything to tame beer discounts. It should ask itself why the public believed it did. Instead of complaining about the public overreacting, economic authorities and companies must see the fiasco as a testament to how doubtful and mistrusting consumers have become. From all the angry protests and complaints, it’s obvious the public suspects the authorities and dominant corporate players of conspiring to rip them off.
We can no longer expect a blind preference for local brands over foreign ones from consumers. They actually resent domestic manufacturers for relying on sentimentalism toward local brands to make easy money. Sales of local beer brands rose 4 percent last year while those of foreign brands jumped 25 percent. Foreign names are expected to take up half of the domestic beer market next year. Consumers care little about whether their money stays in the country. They want the two local household beer brands to concentrate on making better-tasting products instead of whining that foreign competitors are stealing their market.
Korean consumers today look at the quality and price and not the country of origin. Shopping on overseas websites has become commonplace. Global discount promotions like Singles Day in China and Black Friday in the United States attract as much interest from Korean buyers as local sales events. Foreign consumers are the same. They purchase Korean brands through online sites. We live in a borderless marketplace. Companies must withstand competition from foreign counterparts as much as they do from local rivals.
It is a naive and even damaging thought if authorities believe they can protect the market through price controls. Beer is one category that doesn’t improve if protection is made stronger. Korean beer brands would more likely be saved if the regulations were scrapped and were pushed into the jungle of the free market.
The government should fix the alcohol law, which is unfavorable for small and midsize producers and importers and allow players to compete on quality.
Korea is fourth from the bottom on the scale of corporate regulations among the OECD countries. One study claims that Korea’s gross domestic product growth could improve by two percentage points if the regulations were slashed to a level of the OECD average.
Regulations are hard to slash because of bureaucratic laziness and corporate selfishness. The government must do less, and companies must do better.
JoongAng Ilbo, Nov. 25, Page 30
The author is an editorial writer of the JoongAng Ilbo.
by Yang Sunny