Bottom 10% wholesale market firms face license revocation under new rules

Wholesale market corporations and market wholesalers that rank in the bottom 10 percent in government evaluations may now face license revocation. The government has also established grounds to recommend reductions in consignment fee rates when operating profit margins rise significantly above historical levels.

The Ministry of Agriculture, Food and Rural Affairs announced Tuesday that it has completed and put into effect revisions to subordinate regulations under the amended Agricultural and Fishery Products Distribution and Price Stabilization Act.

The revisions are follow-up measures aimed at promoting competition among wholesale market corporations and strengthening protections for shippers and consumers. Key changes include new standards for staffing dedicated to fixed-price and negotiated trading, new criteria for recommending consignment fee rate adjustments, and more specific thresholds under which poor evaluation results for wholesale market corporations and market wholesalers can lead to license revocation.

The revisions define "poor performance" — previously left vague — as a ranking in the bottom 10 percent of government evaluations conducted under the act. Wholesale market corporations or market wholesalers that fall into that bracket become subject to license revocation proceedings.

A formal appeals process has also been established. Those subject to evaluation may file an objection within 30 days of receiving their results. The measure is intended to ensure objectivity and procedural fairness, given that evaluation outcomes can lead to consequences as serious as license revocation.

New criteria have also been introduced under which the government may recommend that wholesale market corporations and market wholesalers adjust the consignment fee rates they charge shippers. The recommendation mechanism applies when a firm's average operating profit margin for the year rises by a set level above its five-year average, or when an adjustment is deemed necessary to protect the interests of shippers and consumers without materially harming the firm's operations.

The minister of agriculture, food and rural affairs or the minister of oceans and fisheries may issue such a recommendation after providing advance notice and hearing the firm's views. The specific conditions for triggering the mechanism and the scope of any requested adjustment will be set out in a separate ministerial notice.

Standards for dedicated staff to promote fixed-price and negotiated trading have also been introduced. Fixed-price and negotiated trading refers to transactions in which shippers and buyers agree on a price in advance or through individual negotiations, rather than through auction.

Dedicated staff must include people with relevant qualifications or experience — such as licensed auctioneers or agricultural product quality managers — and must include at least one licensed auctioneer.

The required number of staff varies by a corporation's annual trading volume. Firms handling less than 100,000 metric tons per year must have at least one dedicated staff member; those handling between 100,000 and 200,000 metric tons must have at least three; and those handling 200,000 metric tons or more must have at least six. However, the requirement may be relaxed by up to half, taking into account each corporation's volume of fixed-price and negotiated transactions.

"These revisions to the subordinate regulations of the act are significant in that they lay the legal groundwork for promoting competition among distribution players in wholesale markets and strengthening their public role," said Seo Jun-han, the ministry's director general for retail and consumer policy. "We will work to reinforce the public-interest role of public wholesale markets and foster healthy competition, creating a distribution environment that satisfies both shippers and consumers."