KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

I. Background and Purpose of Research

▶ Background of the Study

○ Although policies and research on regulatory reform have been actively pursued for some time, the label of a "regulatory republic" persists, with regulations not only increasing in number but also becoming more stringent.

- Recently, the "sandbox" concept introduced in the UK's financial regulations was adopted into the legal framework in Japan and subsequently introduced into Korea under the name "regulatory sandbox." However, public confidence in its effectiveness remains uncertain, contrary to the government's promotional efforts.

- Such circumstances raise valid doubts about whether the existing policies and research on regulatory reform amount to mere theoretical discussions.

○ If successful cases of regulatory reform can be identified, analyzed qualitatively from multiple perspectives, and synthesized into specific principles, it would not only increase the likelihood of individual reforms succeeding but also clarify that regulatory reform is not an end in itself. Rather, it serves as a means toward the ultimate goals  of good administration and good governance. This approach could further progress regulatory reform to achieve the continuous deterrence of newly introduced regulations. Likewise, appropriately analyzing failed cases of regulatory reform could provide meaningful lessons and principles to guide future efforts.

▶ Purpose of the Study

○ Only by qualitatively analyzing both successful and unsuccessful cases of regulatory reform and practically deriving the spirit of innovation (entrepreneurship) from the results can existing policies and research on regulatory reform, which often remain repetitive and theoretical, be advanced to a higher level.

 

Ⅱ. Case Analysis

▶ Regulations on the Designation of Children's Food Safety Protection Zones

○ The designation of Children's Food Safety Protection Zones was intended to prevent negative impacts on children's eating habits by selling junk food or high-caffeine foods in stationery stores or small markets near schools. Within the children's food safety protection zone, establishments that meet safe and hygienic facility standards and do not sell high-calorie, low-nutrient foods or high-caffeine foods are pointed out as excellent sellers of children's favorite foods and are provided with support for facility improvement costs, etc. It happens. 

○ However, due to a sharp decline in the school-age population and rapid changes in commercial areas around schools, large supermarkets and especially convenience stores have emerged as the main businesses instead of stationery stores and small stores. These businesses do not require significant incentives such as facility improvement costs. The effects of zone designation and excellent sales business designation are greatly halved. In a analysis, establishing dietary safety environments had neither a direct nor an indirect impact on children’s hygiene safety and nutritional safety.

○ Legislative measures to make the zone designation method, which is standardized at a 200m straight line distance between school boundaries, more flexible and designate specialized zones for each region can be considered. In addition, as the number of applications for excellent sales establishments is low, it is necessary to find means to attract them, and this is especially connected to the improvement of the self-regulation system. Considering that the designation of excellent sales establishments was originally a self-regulation, it is possible to consider converting it into an incentive for the sale of recommended foods, rather than an incentive for restricting sales of high-calorie and low-nutrition foods and performing restrictive actions.

▶ A Study on the Regulation of the Provision of Liquor and Tobacco among Youths

○ In Korea, there are many cases in which adolescents, who are providers of violations, report their sellers after receiving alcohol or cigarettes, and abuse regulations. The purpose of introducing the regulation is justified, but it presumes the problem of regulatory reality in which unforeseen cases of regulatory abuse occur at the time of introduction of the regulation.

○ First, it is necessary to introduce education to prevent recurrence for adolescents who have attempted to purchase alcohol and tobacco.Second, it was suggested that certain sanctions should be introduced for adolescents who purchased alcohol and cigarettes from business owners using active deception and intimidation. It is necessary to devise sanctions that can exert educational effects at the same time as sanctions corresponding to responsibility for actions. Third, the cost of compliance with regulations and the cost of enforcement of regulations must be considered. The current youth alcohol and tobacco regulations have the aspect that the state bears few costs and unilaterally bear the costs of regulatory purposes to operators. Legislators give discretion to exempt from sanctions in the event of juvenile alcohol and tobacco provision activities that cannot be attributed to business operators, but do not provide specific grounds, and the costs necessary for establishing judgment standards and fact-finding are passed on to local governments. The competent departments of local governments are uniformly deciding whether to dispose of sanctions and settle them depending on the results of related criminal penalties. For appropriate  and balanced regulatory operation (law enforcement), it is necessary to prepare a system in the form of supporting regulatory enforcement costs and manpower at the national level.

▶ A Research on the Book Price Regulation

○ Although there was consensus on the practical benefits of the regulation when it was introduced, the distorted book pricing system, which was far from the essence of the book pricing regulation, was introduced from the beginning to stimulate the e-commerce market, and the primary purpose of the regulation, which was to protect publishers and local bookstores, was undermined.

○ About 20 years have passed since the book price fixing system was introduced, but the ministry in charge has turned a blind eye to the goal of promoting culture through the book price fixing system even as of January 2024, and has announced a policy to promote the flexibility of book prices at local bookstores by treating books similarly to general goods, which has caused the most important administrative counterpart that the regulation is intended to protect, local bookstores, to oppose the regulation.

○ The biggest problem is the lack of communication and persuasion with stakeholders, and it is a typical example of the problem that the closed-door and top-down administration is still continuing today.

▶ Research on the so-called Special Power Grid Bill

○ The Special Power Grid Bill aims to establish special exceptions to the existing Power Development Promotion Act (hereinafter referred to as the “Power Development Promotion Act”) and the Act on Compensation and Support for Areas Surrounding Transmission and Transmission and Distribution Facilities (hereinafter referred to as the “Transmission and Distribution Facilities Surrounding Act”). It is necessary to examine whether these special power grid bills are appropriate policy alternatives from the perspective of regulatory law.

○ The proposed special power grid bill would further strengthen the extraordinary nature of the existing Power Development Act and the Transmission Facility Surrounding Act, despite their extraordinary nature, and is therefore controversial. The current power grid crisis shows that the KEPCO's ability to operate as a de facto monopoly is reaching its limits, while at the same time, the existing approach is not very conducive to enhancing public acceptance. Nevertheless, it is clear from our fieldwork that the need to expand the transmission grid is urgent enough to warrant this legislative flurry of attempts.

○ A temporary law could be considered as a policy alternative, and accountability is important in this regard. Increasing citizen participation can be the most fundamental means of regulatory reform. Indirect state action should be approached from a disciplinary rather than regulatory perspective. 

▶ A Study on the Regulatory Exception for Demonstration of OTC Drug Vending Machine

○ OTC drug video vending machine is a device that allows drug users to purchase OTC drug after receiving video consultation using a remote device. The business operator applied for a regulatory sandbox demonstration exception under the Special Act on Promotion and Convergence of Information and Communications (ICT Convergence Act) in 2019, and conditional approval was granted for the application for demonstration exception in 2022, and the project began.

○ Additional conditions can be used to ensure the safety of new products and services as well as to mediate conflicts surrounding the  regulatory exceptions for demonstration. However, excessive conditions may cause new conflicts, lead to difficulties in implementing demonstration projects, and may violate the legal limits.

○ Additional conditions are commonly used in regulatory sandboxes, and in this regulatory exceptions for demonstration, various conditions were added as a means of conflict mediation. However, additional conditions may cause another conflict or may not correspond to the original purpose for verification, and may cause significant difficulties for the project. Therefore, it is necessary to specify the requirements and limitations of the additional conditions for  regulatory exceptions for demonstration in the ICT Convergence Act and to introduce a prior review system for additional conditions.

○ In this case, the procedure was prolonged due to opposition from stakeholders over whether or not to allow the exceptions for demonstration, and there was distrust in the content and process of the deliberation. The more strongly conflict resolution is required surrounding regulatory innovation, the more necessary it is to guarantee procedures for business operators and ensure transparency in administration in order to secure trust and acceptability of administrative decisions.

○ If, as in this case, the conflict surrounding the empirical special case is difficult to realistically adjust within the current regulatory exceptions for demonstration system, it is necessary to seek a way to establish an upper-level coordination organization to arrive at an appropriate point of harmony.

▶ A Study on the Abolition of ActiveX-Based Security Programs

○ ActiveX is a type of plug-in (an extension program that enables tasks or processing that cannot be implemented by the web browser's own functions) for web browsers developed by Microsoft (hereinafter referred to as 'MS'). It is simply a security program that implements the 'certificate authentication' function unique to Korea in the Internet Explorer (hereinafter referred to as 'IE') web browser of MS, which had the highest user share at the time.

○ The fundamental reason why foreigners have had difficulty using Korean online shopping malls is not ActiveX itself, but the fact that user authentication (to obtain user authentication in a foreign country, you must visit a diplomatic mission of the Republic of Korea) that is required as a preliminary step for the issuance of a “certificate of authentication” that is led by the Korean government and is practically forced to be used is virtually impossible. Therefore, the fundamental cause of the hindrance to foreigners' use of Korean online shopping malls lies in the certificate of authentication system, so the target and focus of regulatory innovation should have been focused on this, but the government at the time was only focused on the complete abolition of ActiveX, which led to the failure of the regulatory innovation policy.

○ The improvement of web compatibility through the abolition of ActiveX and the introduction of the security program executable file method (exe file method) as a regulatory innovation led by the government is not the result of the government's success in regulatory innovation, but rather the result of Microsoft's continuous and gradual policy to discontinue plug-ins (ActiveX) for IE, the abolition of IE, and the natural migration of Internet users to various web browsers and changes in users.

○ The government's regulatory innovation policy, which incorrectly set  the target and focus of regulatory innovation as the complete elimination of ActiveX, reveals a lack of understanding of Internet technology and suggests that prior to the establishment and enforcement of regulatory innovation policies, a preliminary review of science and technology that can enable and support regulatory innovation policies should be conducted.

▶ A Study on P2P Car Sharing Services

○ Allowing regulatory exemptions for testing through the ICT Regulatory Sandbox enables the exploration of new organizational methods (of human and material resources) facilitated by digital technologies. This initiative is particularly aimed at addressing mobility demands that traditional passenger transportation service providers have not adequately met, thereby presenting a compelling public interest in regulatory improvement.

○ Compared to previous ride-sharing services that caused significant conflicts with interest groups, the regulatory sandbox framework has enabled a relatively stable and productive testing process. By analyzing the factual and normative differences between the two approaches, it is possible to assess whether introducing new organizational methods for human and material resources through digital technologies is appropriate and how such processes should be managed for optimal outcomes.

○ Furthermore, this process has prompted the modernization of regulations, such as vehicle age limits applied to traditional car rental businesses. Thus, the regulatory sandbox testing exemption system not only supports businesses that apply new technologies but also provides opportunities to improve outdated and unreasonable regulations applied to traditional business models.

 

Ⅲ. Expected Effects

▶ Implications for legislative proposals

○ Legislation on the principles and procedures of development administration    

- From a theoretical point of view, it is important to distinguish developmental administration from regulatory administration, which refers to the exercise of public power to intervene for public welfare in a developed country on the premise that markets and enterprises are free from the government, while developmental administration refers to the exercise of public power to mobilize markets and enterprises to achieve national development goals such as economic growth led by the government in a developing country.

○ Legislation on principles and procedures of planning administration - administrative legislation

- Administrative planning can be implemented in a variety of forms, some of which are in the name of planning, but more often administrative planning in the practical sense, which takes the form of administrative legislation or administrative act, is more frequent, and it is necessary to improve the process of administrative legislation or administrative act that is actually administrative planning to enable scientific forecasting of the future and adjustment of interests through wide consultation.

○ Legislation on the principles and procedures of planning administration - administrative act

- In the case of administrative acts, the hearing procedure is introduced, but the scope of application is narrow and the implementation of the hearing procedure is not mandatory unless it is invasive; first of all, it is necessary to expand the scope of application to make the hearing procedure mandatory for administrative acts that constitute administrative plans in a practical sense, and furthermore, it is necessary to improve the hearing procedure to enable scientific prediction of the future.

○ Legislation on the principles and procedures of administration on accountability

- The General Act on Public Administration provides regulations on proactive administration, but proactive administration requires a system that relieves the responsibility and other burdens of the person in charge or the actor, so it is necessary to approach it strategically from the perspective of accountability, which has a wider scope as a concept that includes it rather than the concept of responsibility, which has a legal context.

○ Legislation on the principles and procedures of self-regulation

- In view of the fact that self-regulation is a public-private partnership on regulation that goes beyond mere private autonomy, it is desirable to establish the basis for self-regulation in the law, and furthermore, if regulations on the principles and procedures of self-regulation are established, it may encourage the active participation of operators and organizations that lack the ability to self-regulate as a result of excessive reliance on government regulation, and it may also facilitate the prompt resolution of complaints and redress of rights through the participation of third parties.

▶ Implications for legislative strategy

○ The role of legislation in context

- For simple, clear-cut issues, the strategy of legislating for specific alternatives is appropriate, and for complex or uncertain issues, the strategy of legislating for appropriate criteria and procedures that allow for justifiable conclusions rather than specific alternatives is appropriate.

○ The effect of legislation in context

- Where conflicts of interest are difficult to resolve, it is preferable to pursue new regulations or regulatory reform through legislation that limits their effect to the extent possible (e.g., sunset laws) rather than an all-or-nothing approach.