Case on Restriction on Business Hours of Discount Stores

[2016Hun-Ba77·78·79 (consolidated),June 28, 2018] * First Draft

In this case, the Constitutional Court held that the provisions of the Distribution Industry Development Act, which allowed the mayor of a Special Self-Governing City or the head of a district, Si/Gun/Gu to order discount stores or quasi-superstores to restrict business hours or designate a day for compulsory closedown, do not violate the Constitution.

Background of the Case

The petitioners are corporations operating discount stores or quasi-superstores (hereinafter referred to as “Discount Stores, etc.”)in Jung-gu of Incheon, Bucheon, and Cheongju, under the Distribution Industry Development Act.

The heads of Jung-gu of Incheon, Bucheon, and Cheongju imposed a disposition on Discount Stores, etc. to designate compulsory closedown on every second and fourth Sundays pursuant to Article 12-2 of the Distribution Industry Development Act and relevant ordinances of the local governments. Also, dispositions regarding the restriction of business hours was imposed as follows: from 00:00 am to08:00 am by the head of Jung-gu, Incheon, from 00:00 am to 10:00 am by the heads of Bucheon and Cheongju, respectively.

The petitioners filed a lawsuit to revoke the disposition aforementioned and moved to request a constitutional review of Article 12-2 of the Distribution Industry Development Act, but upon rejection, filed a constitutional complaint.

Subject Matter of Review

The subject matter of review in this case is whether Sections 1, 2, and 3 of Article 12-2(hereinafter referred to as the “Instant Provision”) of the Distribution Industry Development Act (amended by Act No. 11626 on January 23, 2013) violate the Constitution.

Provisions at Issue

Distribution Industry Development Act (amended by Act No. 11626 on January 23, 2013)

Article 12-2(Restrictions, etc. on Business Hours of Superstores, etc.)

(1) The Mayor of a Special Self-Governing City or the head of a Si/Gun/Gu may order discount stores (including a store which is established within a superstore and meets the requirements for a discount store) and quasi-superstores to restrict business hours or suspend business, designating a date for compulsory closedown as prescribed in the following subparagraphs, where deemed necessary for the establishment of sound practices in distribution, employees’ health rights, and win-win development for both superstores, etc. and the small and medium distribution industry: Provided, That the foregoing shall not apply to a superstore, etc. prescribed by ordinance of the local government concerned, in which the sales of agricultural and fishery products under the Act on Distribution and Price Stabilization of Agricultural and Fishery Products account for at least 55 percent of the annual turnover.

1. Restrictions on business hours

2. Designation of a date for compulsory closedown

(2) The Mayor of a Special Self-Governing City or the head of a Si/Gun/Gu may place restriction on business hours from 0 a.m. to 10 a.m. pursuant to paragraph (1) 1.

(3) The Mayor of a Special Self-Governing City or the head of a Si/Gun/Gu shall

designate two days for compulsory closedown each month pursuant to paragraph (1) 2. In such case, a day for compulsory closedown shall be designated from among holidays, but it shall be possible to designate a day, which is not a holiday, for compulsory closedown through agreement with interested parties.

Summary of the Decision

1. Whether the principle of clarity has been violated

Taking into account the background and purpose of legislation of the Instant Provision as well as the related provisions comprehensively, the Instant Provision may be sufficiently interpreted as requiring the mayor of a Special Self-Governing City and etc. to either restrict business hours or designate a date for compulsory closedown, or to apply both measures based on the necessity of regulating business operation. It can be sufficiently interpreted that when applying the compulsory closedown measure, two days shall be designated for each month. This would also be sufficiently understood as such by ordinary people with sound common sense and general legal sentiments. Thus, the Instant Provision does not violate the principle of clarity.

2. Whether the rule against excessive restriction has been violated

The legislative purpose of the Instant Provision to establish sound practices in distribution, to promote win-win development for both superstores, etc. and the small and medium distribution industry, and to protect employees’ health rights, is legitimate. Also, the appropriateness of means of can be acknowledged in restricting the business hours of Discount Stores, etc. and designating a day for compulsory closedown. Leaving the competition between Discount Stores, etc. and small and medium retailers to take its own course based on the principle of free market economy would disrupt fair competition in the distribution market, undermine checks and balance among economic players and normal market operation, and pose a threat to the very survival of the

small and medium retailers, eventually hampering social justice in the economy. To prevent this from happening, the State may regulate and coordinate such practices according to Article 119 Section 2 of the Constitution. Considering the rapid decline of small and medium retailers, it is likely that they may be withdrawn from the market or find it extremely difficult to recover competitiveness before the effect of a long-term national support policy sets in. Therefore, the lawmakers’ decision to help the small and medium retailers secure their competitiveness by imposing direct restrictions on the business of Discount Stores, etc. cannot be deemed unreasonable. The Instant Provision requires the mayor of a Special Self-Governing City, etc. to limit the restriction of business hours from midnight until early morning when there are relatively fewer consumers, and to designate two days for compulsory closedown among legal holidays. The Instant Provision also requires the mayor of a Special Self-Governing City, etc. to impose the business restrictions or other necessary measures according to the specific circumstances of the local distribution market. Considering all these aspects, the minimum restriction requirement is also met. Due to the Instant Provision, Discount Stores, etc. and the consumers may encounter economic losses, and the consumers may experience the inconvenience, however, such consequences are limited to the minimum scope necessary to serve the legislative purpose. Meanwhile, the legislative purpose is very significant, and thus the Instant Provision fulfills the balance of interests. Hence, the Instant Provision does not violate the rule against excessive restriction nor does it infringe upon the freedom to conduct one’s occupation.

3. Whether the principle of equality has been violated

Although the Instant Provision discriminates Discount Stores, etc., which are subject to business restrictions, from other types of superstores not subject to such restrictions, it is reasonable for it is based upon the fact that they have different impacts on the local economy. In addition, the Instant Provision discriminates Discount Stores, etc. with sales of agricultural and fishery products accounting for at least 55 percent of the annual turnover, from the superstores which do not fall in such criteria. However, such discrimination also can be considered as reasonable, since it is based on the specialty of agricultural and fishery products and the State’s duty to protect such industries. Therefore, the Instant Provision does not violate the principle of equality.

Dissenting Opinion of Justice Cho Yong-Ho

The Instant Provision is an economic regulation aimed to protect the ‘competitors’ rather than promote ‘competition’. Accordingly, restricting business hours of Discount Stores, etc. and designating a day for compulsory closedown cannot be deemed as the appropriate measures as it interrupts free and fair competition as well as threatening the foundation of free market economy. In order to revive and recover the competitiveness of traditional markets, the State has already implemented relevant policies, such as investing public money for modernizing the facilities of the traditional markets, providing tax benefits on money spent in the traditional markets, issuing various gift certificates to be used in the local markets and economy pursuant to the ‘Special Act on the Development of Traditional Markets and Shopping Districts’. Such measures can be less encroaching and be even more effective to achieve the legislative purpose of the Instant Provision. Employees’ health rights can be ensured through the enhancement of relevant statutes on labor that are different from the existing Labor Standards Act, for instance, by adopting shift work system or guaranteeing break times during work hours and offering regular leaves to each employee, or with more fundamental social welfare policies. The Instant Provision can only be justified when there is not enough time to wait for the effect of other supporting measures for the traditional markets. However, there is no specific sunset law for the regulation or the termination of imposing such restriction on business hours. Considering all these aspects, the Instant Provision does not meet the minimum restriction requirement. There are no significant results of empirical survey to show that implementation of the Instant Provision was effective in inducing more sales to traditional market, etc. from Discount Stores, etc. Contrary to the legislative intent of lawmakers, the benefits from such regulations go to convenience stores, multi shopping malls, or online shopping malls etc. The business restrictions by the Instant Provision considerably limits the freedom to conduct occupation of the owners of Discount Stores, etc. which leads to the reduction of sales. It also weakens the international competitiveness of the domestic distribution industry, and damages small and medium traders, farmers, fishers and livestock breeders that supply goods who suffer from loss of business and jobs. In addition, the loss suffered by individual shops in Discount Stores, etc. and nearby micro enterprises selling goods to the consumers visiting Discount Stores, etc. are enormous as well. Rising operation cost at Discount

Stores, etc. resulting from declining business efficiency will be reflected in the increase in consumer price. This will have a significant impact on the right of choice of consumers who prefer Discount Stores, etc. and cause the reduction in tax revenues due to the decrease of consumption. As a whole, it is a crucial issue of public interests. While the effects of public interest of protecting traditional markets gained through the Instant Provision are almost nothing or very insignificant, public interests restricted or infringed upon by the Instant Provision were exceptionally immense. When all these aspects are taken into account collectively, the Instant Provision does not meet the balance of interests. Therefore, the Instance Provision violates the rule against excessive restriction, thus infringing upon the freedom to conduct occupation of the owners of Discount Stores, etc.

* This translation is provisional and subject to revision.