As the National Assembly accelerates legislation to shorten the payment deadline for suppliers from large retail companies, concerns are rising not only within the retail sector but also among small business organizations. While there is agreement on the need to improve cash flow for suppliers, critics argue that a uniform reduction in deadlines, without considering transaction structures, could lead to reduced orders and settlement disputes.
According to the National Assembly and industry sources, the National Assembly's Political Affairs Committee held a plenary session on September 3 and passed an amendment to the 'Act on Fair Transactions in Large-Scale Distribution.' This follows the bill's approval by the Subcommittee on Legislative Review just two days earlier. The amendment will now proceed to the Legislative and Judiciary Committee and the full assembly for further review.
The key aspect of the amendment is the reduction of the legal payment deadline for direct purchases from suppliers by large retailers from a maximum of 60 days to 35 days. The payment deadline for online intermediary transactions, such as special purchases and open markets, will also be cut from 40 days to 20 days. If payments are settled monthly, they must be made within 20 days from the purchase closing date. However, exceptions may be allowed by presidential decree in cases where payment is not possible due to reasons not attributable to the retailer.
The retail sector has voiced strong opposition, citing increased financial burdens and potential negative effects of the new system. The Korea Online Shopping Association (KOLSA) issued a statement the previous day, urging a reconsideration of the uniform reduction in settlement deadlines, stating, "The arbitrary shortening of settlement periods should not hinder the recovery and coexistence of the retail ecosystem." In direct purchases, retailers assume ownership and inventory risks, and reducing the payment deadline from 60 to 35 days could increase the instances where suppliers must be paid for unsold goods, thereby heightening cash flow pressures on retailers.
The association also pointed out that in online and home shopping, sales are often confirmed only after processes such as order cancellations, returns, refunds, and quality inspections. Paying suppliers upfront could lead to increased disputes during the post-settlement process, prompting calls for a grace period, gradual reductions, and differentiated applications based on business type, transaction type, and company size.
Small businesses and platform operators have also expressed their concerns. The Korea Platform Business Association stated, "For small businesses, securing stable order volumes is more critical for survival than a few days of earlier settlements," highlighting the potential for reduced orders. The Korea Small Business Association and the Korea Startup Forum also warned that the liquidity burden on retailers could lead to decreased purchases from emerging and small brands.
However, actual settlement periods are reportedly shorter than the legal maximum. According to a written survey by the Fair Trade Commission, the average payment periods are 27.8 days for direct purchases, 23.2 days for special purchases, 21.3 days for consignment, and 20.4 days for store rentals. On average, direct purchases are already settled within the 35-day limit set by the amendment, suggesting that the impact of the law change may primarily affect transactions with longer settlement periods.
An industry insider remarked, "Creating an environment where suppliers can continue stable transactions is more important than merely shortening the settlement period by a few days," adding that the system must be carefully designed to prevent the financial burden on retailers from leading to reduced purchases of new or small business products.
* This article has been translated by AI.
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