How to kill innovation through legislation

The majority Democratic Party (DP) is pushing for a bill that would make the Korea Association of Realestators (KAR) mighty powerful, despite strong criticism about the massive harms from collective actions from interest groups of licensed professionals like doctors and lawyers.

A revision to the Realtor Act by DP Rep. Kim Byung-wook proposes to elevate the KAR as a “statutory body,” enabling the lobby group to regulate and punish its members for violating ethics code or disrupting the real estate market order. The bill will be tabled for a review and vote at the legislation subcommittee of the Land and Transportation Committee of the National Assembly next week.

The bill has the potential to block innovation in property technology and the so-called proptech startups. The association can use its authority to dampen the influence of app-based realtors like Zigbang and Dabang, which charge lower rates for housing postings than regular real estate brokers.

The association representing brick-and-mortar realtors could exploit the law to accuse the cheaper, digital services of engaging in an act disrupting the market order, given the ongoing conflict between traditional players and rising online players. The association invited a corrective order from the Fair Trade Commission in 2019 for banning member realtors from joining Zigbang and other real estate platforms.

The DP is pressing with the bill despite opposition from the Land Ministry, which opposes the legislation in light of public distrust with realtors from a series of rent scams recently. The ministry has uncovered 880 realtors who were involved in rent scams, so far this year.

The DP has dug up the bill, which was sitting idle for 14 months, ahead of the April 10 parliamentary election in order to appeal to some 630,000 realtors across the country. The majority party must not repeat the folly of pushing the so-called Tada ban law to outlaw the app-based van-hailing service to win favor with taxi drivers shortly before the last parliamentary election in 2020.

Platform-based start-ups are being killed before they can blossom due to a number of lobbying groups. The associations representing lawyers, doctors, pharmacists and accountants have been pressuring online service providers to eliminate them. As a result, Korea has become one of the very few developed countries that does not have Uber.

The government and politicians should be mediating between the conflicts of interests and encourage entries of new “destructive” players to facilitate innovation of the economy. But unfortunately, our politicians are pushing the country backwards by merely chasing votes before the election.