Amidst rising prices and soaring inflation, the term “shrinkflation” was coined to refer to a growing problem of reducing product sizes while maintaining (or increasing) retail prices. Like other countries tackling inflation, the Korean Government recently announced its plan to improve the notification system to inform consumers of reductions in product capacity. In this update, we highlight some of the key developments and policy trends regarding shrinkflation in Korea.
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Amendments to Existing Regulations |
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Proposed Amendment to the “Act on Labeling and Advertising of Foods, Etc.”
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Businesses making any changes to product volumes must clearly indicate the changes, with violations subject to a fine of up to KRW 5 million. |
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The Minister of the Ministry of Food and Drug Safety (the “MFDS”) may conduct a fact-finding survey on foods to announce any changes on product amount, etc. |
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Proposed Amendment to the “Act on Fair Labeling and Advertising”
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If a business operator changes the volume or quality of a product that could have a significant impact on consumers’ choice, the business entity must indicate the changes (before and after). |
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Proposed Amendment to the “Act on Price Stabilization”
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Businesses may be ordered to indicate changes in the product volume, as well as any changes in raw materials. |
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Proposed Amendment to the “Framework Act on Consumers”
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The Korea Consumer Agency may conduct a fact-finding survey on the reduction of capacity or decrease in product quality, and may publish the survey results. |
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Establishment and Amendment of Administrative Rules |
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MFDS: Amendment to the Notification on “Labeling Standards for Foods, Etc.” (Administrative Notice dated February 20, 2024 - Effective as of January 1, 2025)
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In the event of a reduction in the content of a food product, stickers or other labels will indicate the product content before and after the change (for at least three months from the date of such change). |
Example: Content 00g (product whose content is changed, content is reduced by 00g or 00%) |
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However, the following foods are not subject to labeling: (i) foods not directly sold to consumers (e.g., supplied to catering facilities); (ii)agricultural and livestock products and marine products in their natural state; (iii) raw material foods supplied to the food manufacturing and processing industry and the livestock processing industry; and (iv) foods that have not increased in price. |
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KFTC: Amendment to the “Notification on Designation of Unfair Consumer Transaction Practices by Business Entities” (effective from Q1, 2024)
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A business entity’s failure to notify changes in important matters of its products, such as capacity, size, weight, number, and important raw materials, will be deemed wrongful, and violations will be subject to a corrective order or administrative fine (KRW 5 million for the first violation and KRW 10 million for the second violation). |
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Businesses must notify consumers of important changes by: (i) posting the change on the product’s package; (ii) posting the change on the manufacturer’s website; or (iii) posting the change at the product’s sales place for at least three months. |
Regulations related to shrinkflation are expected to be strengthened, particularly given the growing importance of guaranteeing consumers’ right to know about indirect price increases.