Korea to expand requirement to display unit price for food products

[Photo by Lee Chung-woo]

The South Korean government will expand the requirement to indicate unit prices to a wider range of processed food items and apply it online. The move is in response to the growing practice among food manufacturers of keeping prices unchanged but reducing product capacity amid high inflation and an economic downturn.

Following an emergency cabinet meeting chaired by Deputy Minister and Minister of Finance and Economy Choo Kyung-ho at the Seoul government complex on Wednesday, the government decided to mandate the indication of changes in capacity on product packaging, expanding the list of items under the obligation to include instant foods, cup noodles, and hygiene products. There are currently 84 items subject to the obligation to display unit prices, and the unit price display system will also cover online stores.

To make it easier for consumers to recognize changes in unit prices, the method of indicating capacity on product packaging will now display both the pre-change and post-change capacities. Measures to designate changes in capacity, specifications, ingredients, and other key information as unfair business practices if they are not communicated to consumers are also being debated, with fines of up to 30 million won for violations, according to the Korea Fair Trade Commission (KFTC).

The government has acted on suspicion of deceptive pricing practices (shrinkflation) that turned out to be proven. According to the KFTC on Wednesday, a survey of 209 processed food items whose prices are tracked by the Korean Consumer Agency revealed that the capacity of 19 products in three categories decreased between December 2022 and November 2023. These products include 16 seasoned nut products by HBAF Co., CJ Cheiljedang’s two-pack bundle sausages, and Seoul Dairy Co-op’s 20- and 15-slice Cheddar cheese products, and the Korea Consumer Agency analyzed that the capacity of these products decreased by 7.7 to 12.5 percent.

The government also detected instances of deceptive price increases via the recently established center to report such unfair practices. Among the 53 reports received until the previous week, there were instances of actual capacity reduction, including Mondelez International Inc.’s seven Halls products and two Yonsei Milk’s home delivery-only milk products. The reduction in capacity ranged from 10.0 to 17.9 percent, with only HBAF and Yonsei Milk notifying consumers of the capacity change on their own online malls and elsewhere.

Out of 10 products suspected of engaging in shrinkflation in media reports, nine were confirmed to have a reduced capacity in 2023, including Dongwon F&B Co.’s seasoned seaweed products, Oriental Brewery Co.’s eight-can bundle Cass canned beer, and Pulmuone Corp.’s corndog products, whose product capacity decreased by 1.3 to 20 percent. But the Korea Consumer Agency explained that, while admitting the capacity change, some manufacturers claimed that the products had updates in packaging or recipe.

With the detection of these pricing practices, the government plans to strengthen the monitoring system as well. It will develop a monitoring system for over 10,000 products distributed in big box stores and online stores through agreements with distribution companies, and the range of household staples whose prices are tracked by the Korean Consumer Agency will also be expanded to about 500 products in 158 categories from the current 336 products in 128 categories. Additionally, a dedicated team for price investigation within the Korea Consumer Agency will continuously monitor compliance with voluntary agreements and operate the reporting center.

But expanding the scope of unit price display obligation for online platforms, such as the inclusion of online marketplaces and open markets, will be finalized in February 2024 once stakeholders’ opinions are heard.