South Korea Fines Companies for Shrinking Products Without Notice

South Korea's Fair Trade Commission will fine food makers and suppliers up to $7,300 for "shrinkflation" without proper notification. The new regulation, effective in August, aims to protect consumers from unknowingly bearing the burden of price increases due to product downsizing.

Aqsa Younas Rana
New Update
South Korea Fines Companies for Shrinking Products Without Notice

South Korea Fines Companies for Shrinking Products Without Notice

South Korea is cracking down on the practice of "shrinkflation," where companies reduce the size or quantity of their products without informing consumers or lowering prices. The country's Fair Trade Commission (FTC) announced that food makers and suppliers will face fines of up to 10 million won ($7,300) if they engage in such practices without proper notification. The new regulation is set to take effect in August following a three-month grace period.

Why this matters: This move highlights the growing concern about consumer protection and transparency in business practices, particularly in the face of rising inflation and economic uncertainty. As other countries struggle with similar issues, South Korea's approach could serve as a model for addressing shrinkflation and promoting fair transactions.

Under the new rule, companies must display labels for three months if they downsize their products, resulting in a higher unit price. Most processedfood makers and manufacturersof household supplies will be affected by this measure. Violators will be fined 5 million won for their first offense and 10 million won for a second offense. The FTC has designated shrinkflation as an unfair transaction subject to penalties, aiming to protect consumers from unknowingly bearing the burden of price increases resulting from product downsizing.

The FTC explained the rationale behind the new regulation in a statement: "The change was aimed at preventing a situation where companies reduce the size, standard, weight or quantity of their products without sufficient notice so that consumers unknowingly bear a substantial price increase." This move comes as households struggle with dwindling purchasing power amidst soaring inflation, making shrinkflation a significant concern for consumers.

The South Korean government has been taking steps to address rising prices, including cutting tariffs on food imports and pressuring companies to limit price hikes. Surging food prices and living costs were a major issue in the recent parliamentary elections, which resulted in a defeat for President Yoon Suk Yeol's ruling party. The new regulation on shrinkflation is part of the government's efforts to protect consumers and ensure transparency in transactions.

An FTC official stated, "We've decided to stipulate that corporate practices of downsizing products while maintaining prices without any notice constitute unfair transaction acts." The official added, "The move is expected to help resolve asymmetric information issues between customers and manufacturers and create a better transaction culture." The regulation applies to daily necessities such as milk, coffee, instant noodles, toilet paper, and shampoo.

Last year, the government confirmed that the quantity or size of 37 products from nine categories had been reduced without a corresponding price decline, including cheese, beer, and milk. While current law does not prohibit shrinkflation practices, the FTC's new regulation aims to address this loophole and ensure transparency in transactions. As South Korea takes a proactive approach to combat shrinkflation, the question is whether other countries will follow suit in implementing similar measures to protect consumers.

The FTC's decision to impose fines on companies engaging in shrinkflation practices without proper notification underscores that transparency and fairness in consumer transactions should be a priority for businesses, especially during challenging economic times. With the global economy facing inflationary pressures, the issue of shrinkflation is likely to remain a concern for households worldwide.

Key Takeaways

  • South Korea cracks down on "shrinkflation" with fines up to $7,300.
  • Companies must display labels for 3 months if they downsize products.
  • First-time violators face $3,650 fine, second-time $7,300.
  • New rule aims to protect consumers from unknowing price increases.
  • Regulation applies to daily necessities like milk, coffee, and shampoo.