As a follow-up to the unresolved settlement crisis involving T-MEP (Tmon·WeMakePrice) in 2024, the National Policy Committee of the National Assembly approved an amendment to the Large-Scale Distribution Business Act to shorten large retailers' payment settlement cycle from 60 days to 35 days. But it turned out that the 35 days passed by the Assembly's subcommittee was decided as a political compromise without a legitimate basis. Critics say the slapdash number, crafted without regard for corporations' financial structures or commercial practices, will sow confusion across the retail industry and pile on unnecessary expense.
◇ National Policy Committee subpanel passes 35 days without clear grounds
According to the minutes of the National Policy Committee's Second Subcommittee on Bill Review held on the 1st, released on the National Assembly's minutes system on the 14th, ruling and opposition lawmakers tossed out disparate figures—7 days, 20 days, 30 days, 40 days—without clear standards for the settlement deadline on direct-purchase transactions. In the process, when Park Sang-hyun of the Democratic Party of Korea, the National Policy Committee's floor manager, said, "Let's make it about 35 days," 35 days was floated. Park Sung-hoon of the People Power Party then pressed the Korea Fair Trade Commission (FTC), saying, "There is no precise answer or basis from the FTC as to why 35 days. If you just say 35 days, couldn't we just decide 'make it 30 days,' or 'make it 38 days'? We need an explanation as to why it shouldn't be 40 days but must be 35 days." However, Seo Il-jun of the People Power Party, who chairs the subcommittee, said, "There are a lot of proposals for 30 days, some for 20 days, so this is a compromise," adding, "Let's pass 35 days for now." He also said, "Let's supplement it over the next year."
Park Dae-chul of the People Power Party criticized, "Are you certain retailers will never go bankrupt? This is not something to decide in haste," but Han Chang-min of The Social Democratic Party of Korea retorted, "There is no such thing as absolutes when systems change," and 35 days ultimately passed.
◇ "Major confusion" feared as 35 days ignores commercial practice
Industry officials say 35 days outright ignores commercial receivables settlement practice. In corporate finance, payment cycles are typically run in monthly units such as 30, 60, and 90 days. The "35 days after closing once a month" standard is out of sync with corporations' accounting linkages, bank buyer's credit loans, and the maturity structures of bills and bonds. It does not meaningfully ease liquidity pressure for retailers, while only wasting administrative and IT expense on an overhaul of settlement systems and a rerouting of closing cycles.
The 35-day standard could also backfire by squeezing sales channels for small and midsize suppliers. In direct purchases, retailers bear the full risk of unsold inventory. If the settlement cycle is rushed, retailers will cut purchases to focus on large corporations or popular brands with high turnover to secure liquidity, inevitably shrinking orders for products from small and new companies.
It also lags international norms. Global large retailers such as Amazon and Walmart in the United States flexibly operate settlement cycles of up to 90 days depending on product characteristics and transaction type. Some analyses say that if the settlement cycle is reduced from 60 days to 30 days, an additional expense of 5 billion won per year could occur based on an annual cost of goods purchased of 1 trillion won.
Seo Yong-gu, a professor of business administration at Sookmyung Women's University, said, "The 60-day settlement cycle for large retailers has been fixed by long-standing industry practice and reflects the broader financial system," adding, "Because the date was arbitrarily set by politicians without scientific grounds, the retail field will inevitably experience major confusion for some time." Seo also said, "Ultimately, settlement terms are a mutual contract between suppliers and retailers. If you listen to only one side and ignore the other, side effects are unavoidable."
Retailers among domestic online platform corporations with a high share of direct purchases or their own settlement cycles will be hit hardest. Coupang, Kurly, and SSG.com are representative. Coupang pays 100% of the amount 15 business days after month-end closing, Kurly pays up to two months later, and SSG.com settles up to 40 days later. Open-market platforms such as Naver operate systems that settle within 10 days.
An e-commerce industry official said, "The essence of the T-MEP incident was not the settlement cycle but the misappropriation of sales proceeds," adding, "A numbers-driven shortening of settlement cycles will only reduce bulk purchasing, creating side effects that strip manufacturers of inventory disposal options and small sellers of sales opportunities."
Still, the 35-day settlement cycle could be revised. The subcommittee review is the first step to fine-tune the details of a bill. Before finalization, the bill must still pass the National Policy Committee's general meeting, The National Assembly's Legislation and Judiciary Committee (system and wording review), and a floor vote in the National Assembly.