[Editorial] Delivery Payment Deadlines Should Not Be Set by Law

- Transaction terms should be left to free trade and contracts between firms… the uniform shortening of payment deadlines should be reconsidered

- The 35-day rule could distort transaction structures involving orders, inventory, and fund management, and shrink the business ecosystem

- Regulations ostensibly aimed at protecting small and medium-sized enterprises could instead reduce orders and sales channels, creating the “paradox of protective regulation”

The Legislation Review Subcommittee of the National Assembly’s Political Affairs Committee passed an amendment to the Act on Fairness in Large Retail Business Transactions that shortens the payment deadline for delivery charges by large retailers with annual sales of KRW 100 billion or more from the current maximum of 60 days to 35 days. It also includes a reduction in the payment deadline for special purchase, consignment, and lease transactions from the current 40 days to 20 days. The stated purpose is to prevent a recurrence of damage like the unsettled payment crisis involving TMON and WeMakePrice and to protect small suppliers.

However, it is worth reconsidering whether having the state uniformly set payment deadlines for delivery charges is truly an appropriate solution for protecting small businesses. Product type and turnover rate, inventory burden, transaction size and creditworthiness, supply price and order volume all differ by firm and by product. When payment is made is likewise a core element of a commercial contract, determined together with these conditions. Binding all such arrangements to a single legal standard is excessive government intervention in transaction terms and risk-sharing structures between firms.

In particular, there is a considerable gap between the lesson that should be drawn from the TMON-WeMakePrice incident and the regulatory means now being adopted. The core of that incident was that the platform failed to pay settlement funds owed to sellers on time, causing large-scale damage. By contrast, direct-purchase transactions by large distributors involve the distributor purchasing goods directly and bearing both inventory and sales risk. Uniformly shortening payment deadlines even for direct-purchase transactions, on the grounds of preventing damage from unsettled payments, is an approach that expands the scope of regulation far beyond the actual cause of the problem.

The single figure of a 35-day payment deadline does not simply change the timing of when money changes hands. In transactions between firms, supply price and order volume, inventory burden, sales risk, return conditions, and payment deadlines are determined in an interconnected way. If only the payment deadline is legally forced forward, distributors are likely to adjust other transaction terms to offset the increased working-capital burden. They may reduce order volumes, prioritize faster-moving products, and have greater incentive to deal mainly with suppliers whose transaction records and creditworthiness have already been verified.

In that process, the parties that may actually suffer are SMEs, startups, and new brands. From the distributor’s perspective, products with limited sales history or unproven marketability carry greater inventory risk. If payment must also be made earlier, the incentive to deal with new suppliers or to purchase products on a trial basis may fall even further. A regulation intended to protect small businesses could thus end up producing the “paradox of protective regulation,” whereby it reduces their orders and sales channels instead.

Direct-purchase transactions themselves may also contract. If distributors must bear both inventory risk and the burden of early payment, they are more likely to reduce direct purchases or shift to other transaction methods such as special purchase or consignment. A regulation intended to improve suppliers’ cash flow could instead result in fewer stable business opportunities. When just one of the transaction terms between firms is uniformly controlled, its effects inevitably spread across the entire business ecosystem, including fund management, ordering, inventory management, and the selection of trading partners.

Foreign systems likewise do not show that simply shortening payment deadlines to a single number is the international standard. The EU sets 60 days as the default for business-to-business transactions, while still recognizing exceptions based on agreement between the parties and the nature of the transaction, and it applies different payment deadlines in agricultural and food transactions depending on product characteristics. Chile also has a 30-day principle, but allows exceptions by agreement between contracting parties under certain conditions. In other words, overseas systems consider not only payment deadlines but also industry characteristics, transaction types, and contractual relationships.

What the government and the National Assembly should do is not substitute their judgment for normal contractual terms between firms. If nonpayment or abuse of bargaining position is the problem, those acts should be regulated directly. If the misuse of settlement funds or the risk of insolvency is the issue, then it is appropriate to devise measures aimed at the root cause, such as greater transparency in the management of settlement funds or payment guarantees. Uniformly shortening payment deadlines for all large retailers that are conducting business normally should be approached cautiously from the standpoint of proportionality between regulatory objectives and means.

Of course, if distributors’ financing and transaction costs rise, part of that burden may be passed on to suppliers and consumers through higher prices or adjusted transaction terms. But the more important issue is that the free transaction structure between firms could become more rigid, and opportunities for new small suppliers and products to enter the market could diminish.

The best way to protect SMEs is not to make transactions with large firms more difficult, but to create a market in which they can trade freely with more businesses. The more active competition becomes among distribution channels, and the more trading partners there are, the stronger the bargaining power of small suppliers can become. Rather than uniformly dictating private contractual terms, the government should focus on strictly regulating unfair practices while creating an environment in which free trade, contracts, and competition can function smoothly.

The timing of payment for delivery charges is not a matter for the National Assembly to set as a single number for all firms. Companies should be allowed to negotiate and contract freely over price, order volume, inventory burden, and payment terms according to the characteristics of their products and transactions. To avoid good intentions of protecting small businesses producing the opposite result of reducing their business opportunities and sales channels, the uniform shortening of payment deadlines for delivery charges should be reconsidered.

2026. 9. 7.

Center for Free Enterprise (CFE)

---

Original title: [논평] 납품대금 지급기한, 법으로 정할 일이 아니다

Author: Center for Free Enterprise (CFE)

Date: 2026-09-07

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=29496