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South Korea has announced a crackdown on “shrinkflation”, saying producers of food and daily necessities must inform shoppers of any reduction to their product sizes or face fines.
The Korea Fair Trade Commission said on Friday it was designating the practice of slimming down products while keeping their prices unchanged and not informing consumers as an “unfair transaction”.
“This measure is to prevent a situation where reasonable consumers are forced to bear indirect price increases, as it is difficult to notice changes in product sizes or quantity if the prices and packages remain the same,” the KFTC said in a statement.
The South Korean move comes amid international anger at the practice of shrinking products to pass on the cost of inflation to consumers.
US President Joe Biden in March criticised companies for downsizing products, while French finance minister Bruno Le Maire has called shrinkflation a “scam” and announced that supermarkets would have to label products where volumes had been reduced.
Under the new South Korea rule, if producers of processed foods including ham, cheese and noodles or household supplies such as toilet paper, toothpaste and detergents want to downsize products, they must put notices on packages or websites or at stores for the three months following the change.
The new rule will take effect in August, with violators subject to a Won5m ($3,700) fine for a first offence and Won10m for a second.
High consumer prices have helped drive down the public approval ratings of South Korean President Yoon Suk Yeol, whose ruling party suffered a stinging defeat in parliamentary elections last month.
In March, Yoon ordered “extraordinary measures” to bring consumer prices under control, including cuts to tariffs on food imports and spending Won150bn to subsidise food supplies.
South Korea’s annual consumer price inflation eased for the first time in three months in April to 2.9 per cent from 3.1 per cent in March, but prices of fresh food were up 19.1 per cent from the same month of 2023.
As the government has discouraged companies from raising prices to tame inflation, packages have shrunk.
In November, the government set up a dedicated price-investigation team for daily price checks on staple items and in December listed examples of shrinkflation on the website of the state Korea Consumer Agency.
Among the items featured were a bag of honey butter-flavoured almonds from HBAF reduced by 20 grammes, a sausage made by CJ CheilJedang whose weight was cut by 12.5 per cent and a packet of sliced cheese from Seoul Dairy that was slimmed down 10 per cent.
Park Chong-hoon, head of research at Standard Chartered in Seoul, said authorities needed to bring inflation under control in order to cut interest rates to spur domestic consumption and boost the economy.
“I am not sure how effective the new rule can be in fighting inflation, but it shows how desperate the government is,” Park said.
Source: Economy - ft.com
