Agriculture ministry criticized for price control
The agriculture ministry is facing growing criticism for stopping E-mart and other private firms charging more for their goods in the name of stabilizing consumer prices.
Critics say the ministry should not tell firms what to do; stressing that supply and demand in a free market should determine the value of goods and services.
On Friday, E-mart, headed by Shinsegae Vice Chairman Chung Yong-jin, decided to lower chicken prices by 15 percent — a day after it hiked by the same percentage — at the request of the Ministry of Agriculture, Food and Rural Affairs, the company said.
BBQ Genesis was forced to retract its decision last week to increase fried chicken prices by 10 percent.
Korea’s largest fried chicken franchise did so after the agriculture ministry, headed by Kim Jae-soo, threatened to ask the National Tax Service and the Fair Trade Commission to investigate the company if it went ahead with the plan.
On Thursday, the country’s largest discount store chain, which runs 147 outlets nationwide, began charging shoppers 15 percent more for chicken.
But on Friday, e-mart had to bring the price back down after an agriculture ministry official asked the retailer to do so.
“On Thursday, we hiked chicken prices for the first time in 40 days because of rising costs,” an e -ma r t sp o k e s ma n said.
“But we received a phone call from the agriculture ministry telling us it is not a good time to do so as the recent rotten poultry scandal in Brazil has put upward pressure on prices.
After holding a series of meetings, we decided to accept the ministry’s request.”
According to the spokesman, the ministry expressed concerns that when E-mart increases prices, other retailers will follow, which will then encourage fried chicken franchises and other restaurants to charge consumers more.
“As a market leader, we decided to refrain from raising chicken prices for now,” he said.
“We hope this will prompt more consumers to come to our stores and buy more.”
The agriculture ministry confirmed that it had asked E-mart not to increase chicken prices.
“Given what’s been happening in the market, such as the avian influenza outbreak and the distribu- tion of rotten Brazilian poultry, we asked E-mart to refrain from raising the prices,” a ministry spokesman said.
“It was just simply a request for cooperation.”
However, critics cried foul over the ministry’s moves, saying it should not meddle in the market without legitimate cause.
“It is unfortunate that the government has been sending wrong signals to market players that authorities will interfere in the market anytime they would like to,” an analyst at one of Korea’s major business associations, who declined to be named, said.
“I can see why the government wants to keep stable the prices of chicken and other fresh goods frequently purchased by consumers.”
But the thing is, the value of goods and services should be set by supply and demand.
Government intervention distorts the market, which is bad for both producers and consumers.
Consumers will decide whether to pay more for chicken, the analyst added.
“What the government should do is to maintain market order and make rules fair for everyone,” he said.
“It should let the invisible hand of the market control everything else. Bureaucrats must stop pressing businesses not to increase prices.”