Companies over a certain size will be restricted from opening new bakeries or restaurants as part of government efforts to protect small- and medium-sized firms in those trades.

A state-funded panel on Tuesday added 14 service trades including confectioneries and diners as well as manufacturing of plastic bags and buckwheat flour to the list of business categories suitable for only SMEs.

 “The regulations will apply to large confectioneries, or those with annual sales of over 20 billion won and more than 200 employees under the SME law,” said Yoo Jang-hee, chief of the National Commission for Corporate Partnership.

 “Foreign companies obviously have to abide by the rules the commission has agreed upon with the private sector. If a foreign enterprise (of a restricted trade) sets up a branch in Korea, the commission will respond after discussions with related agencies in its home country such as the Antitrust Division of the U.S. Department of Justice.”

The panel advised large enterprises to keep the number of new franchised bakeries they open each year under 2 percent of their total in the previous year. They must also refrain from opening new stores within 500 meters of small bakery shops.

Exceptions are given, however, to conglomerates’ in-store confectioneries which they open in compliance with the Distribution Industry Development Law in their department stores, large discount store chains, supermarket chains and hotels.

Conglomerates are also advised not to enter the bakery business through mergers and acquisitions or shifting trades, for instance from a coffee shop chain to confectionery.

The panel’s “recommendations” are in fact regulations as companies that refuse to accept them are instructed by the Small and Medium Business Administration to “adjust” their business. Those that do not follow the SMBA’s order can be subject to imprisonment of under a year or fines of 50 million won or less.

The latest “recommendations” on franchised or in-store confectioneries are effective from March 1 through February 2016.

The panel also urged the national trade association of confectioneries to raise the competitiveness of small bakery shops by introducing an accreditation system, taking steps to improve their baking techniques and marketing skills, and establishing training institutes for baking and confectionery management.

The commission also advised conglomerates not to enter the restaurant business or expand their existing restaurant chains from April 1 through March 2016.

The regulations apply to seven types of eateries including Korean, Chinese, Japanese, Western and other cuisines, as well as snack bars that sell kimbab and noodles.

Exceptions apply to opening these eateries in large shopping malls, subway station areas and new towns of over 3.3 million square meters developed by the government and newly developed commercial zones.

A council comprising of two members from conglomerates, two from SMEs, two representing public interests and one from the commission will determine the details of the exceptions.

Also added to the list of trades suitable for only SMEs on Tuesday were the operation of vending machines, retail of bicycles, books and magazines, household gas, used cars, flowers and plants.

By Kim So-hyun
(sophie@heraldcorp.com)