In the latest example of "reality imitating art," the Joong Ang Daily reports today that representatives of large and small retailers met in Seoul on Monday to"discuss how to resolve their deepening conflicts." Regular readers of this site will recall that small retailers in Korea, feeling the competitive pinch from larger discount stores (E-Mart, HomePlus, Costco, etc.), have recently sought to employ the government cudgel against their rivals. For its part, the government (at the local, regional, and national levels) has put in place restrictions on when large stores can be open, what products they may sell, and where they can locate new outlets.
All of which has stirred up quite a kerfuffle.
And so, a bunch of head honchos got together and have apparently agreed to play nice. By now, however, we ought to know that when producers play nice with one another, consumers had best watch their wallets.
Large stores voluntarily agreed to limit the number of new outlets they roll out and close existing ones on some weekends, according to the Ministry of Knowledge Economy.
The non-binding pledge came after small vendors and traditional markets blamed large retailers for unfairly poaching their business by expanding aggressively.
If you're experiencing flashbacks to Ayn Rand's 1957 novel Atlas Shrugged, you're not alone. In reading the Joong Ang's story this morning, I couldn't help but think back to the scene in Atlas in which the National Alliance of Railroads passes their so-called "Anti-Dog-Eat-Dog" rule, allegedly implemented to prevent "wasteful competition" between railroads and to give all players a fighting chance, but which in reality is merely a ploy to drive a more successful railroad out of business.
Of course, the end result of such collusion - and of the sort that took place in Seoul this week - is that consumers either can't get what they want, or must pay higher prices for lower quality.
Of course, the end result of such collusion - and of the sort that took place in Seoul this week - is that consumers either can't get what they want, or must pay higher prices for lower quality.
In Atlas Shrugged, Rand may well have been thinking back upon Adam Smith's warnings about the get-togethers of businesses types. In The Wealth of Nations, Smith cautions:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
It was with no small amount of dismay, then, that I read these lines in the Joong Ang story:
With Knowledge Economy Minister Hong Suk-woo presiding, they agreed to form a “Retail Industry Development Consultative Group” by Nov. 15 to create a lasting and effective conflict-solution platform.
Exasperating as this is, it's hardly surprising. I long ago gave up on the Korean government's - and, more specifically, the Korean Fair Trade Commission's - promises to "strengthen consumer's rights" (see here, here, and here for past instances of my frustration with the FTC).
Amidst all these dirty dealings, one company nevertheless continues to endear itself to me. Costco, which has refused to close its stores on Sunday in defiance of a Seoul city ordinance, was notably absent from Monday's spectacle in collusion. At least one business is still standing up for its right to make an honest profit and, in the process, do right by its customers.
