Imbalances in bargaining power should be addressed through unfair practice regulation and competition promotion

The Fair Trade Act is a law designed to ensure that market prices and trading conditions are formed through competition. This is also why practices such as multiple businesses jointly setting prices or collectively refusing to deal are regulated as collusion. When competition disappears, consumer choice narrows and innovation and efficiency also weaken.

The government is pursuing revisions to the Fair Trade Act in a direction that would allow certain business operators, such as small business owners, SMEs, and truck owner-operators, to engage in collective bargaining and collective action. Under the proposal, if certain conditions are met, the collusion provisions would not apply even if they jointly negotiate prices, commissions, supply prices, freight rates, or trading conditions.

The policy concern is understandable. Small-scale businesses often lack sufficient bargaining power against large corporations or platforms. Unfair trading practices such as unilateral contract changes, commission hikes, and delayed payments for supplied goods must also be corrected.

That does not mean, however, that differences in bargaining power should be resolved through joint price-setting. Regulating unfair trade practices and allowing businesses to jointly determine prices and trading conditions are entirely different in nature.

It is also difficult to regard workers’ collective bargaining under labor law and independent business operators’ joint price negotiations as the same thing. Workers’ collective bargaining is premised on a subordinate employment relationship between employer and employee. By contrast, individual business operators are, in principle, market participants who compete with one another on price, quality, productivity, and service levels. If they jointly demand prices, this may go beyond negotiations with trading counterparties and restrict competition among businesses itself.

Simply renaming it collective bargaining does not change that character. If multiple businesses demand the same prices and conditions and, when those demands are not accepted, jointly refuse to supply or transport, then in substance this comes close to joint price negotiations and a collective refusal to deal.

In the market, businesses differ in cost, productivity, and quality. Efficient businesses should be able to expand transactions by offering lower prices or better terms. New businesses should be able to enter the market through differentiated services and pricing. If collective bargaining becomes widespread, these differences may disappear, and prices are more likely to be determined by organizational bargaining power rather than competition.

If joint refusals to supply and transport are also permitted, the ripple effects would be even greater. Logistics, in particular, is the foundation connecting manufacturing, distribution, and construction as a whole. If collective action by some businesses halts production and supply, the costs will be borne by the entire economy, not just the parties to the transaction.

Nor do the costs simply disappear. If supply prices, freight rates, and platform commissions rise through collective bargaining, firms will reflect this in product prices, delivery fees, logistics costs, and service charges. The benefits of collective bargaining may accrue to certain businesses, but the costs may be broadly passed on to consumers and other market participants.

The possibility that the influence of existing business associations will grow must also be examined. Associations with unclear representativeness may be able to negotiate prices on behalf of all businesses. Businesses that do not join such associations may in effect be forced to accept unfavorable trading conditions. Even if a new business tries to enter the market at a lower price, it may face pressure from existing associations. A system intended to protect the weak may be distorted into an entry barrier that protects the position of incumbent businesses.

What is needed is not an expansion of exemptions from collusion rules, but precise regulation of unfair trade practices. Delayed payments, unilateral contract changes, unfair cost shifting, and abuse of superior bargaining position must be strictly sanctioned. It is also necessary to expand the use of standard contracts, increase disclosure of trading conditions, and establish swift dispute mediation procedures. Entry barriers and exclusive trading structures should be improved so that businesses can choose among multiple trading partners.

Separate protective measures may be considered for businesses that are economically dependent on a particular firm or platform. However, the scope and conditions of such protection must be clear. Conduct such as jointly determining prices and quantities or collectively shutting down essential logistics networks must not be broadly permitted.

The purpose of the Fair Trade Act is not to artificially increase the bargaining power of a particular group. It is to prevent abuse of trading position while maintaining market competition. The cause of protecting the weak must not become a license for joint price-setting and collective refusals to deal.

Imbalances in bargaining power should be addressed through regulation of unfair practices and the promotion of competition. Prices should be determined not by the power of organizations, but by the choices of businesses and by competition.

Researcher Ho-jun Wang, Center for Free Enterprise (CFE)

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Original title: 협상력의 불균형은 불공정행위 규제와 경쟁 촉진으로 해결해야

Author: Ho-jun Wang

Date: 2026-07-07

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=29254