Restaurateurs demand lower card costs

In a rare collective action, owners of restaurants across the country rallied in Seoul on Tuesday, demanding a cut in commissions they pay to credit card companies.

From around 11 a.m., buses carrying restaurateurs from provincial cities arrived at Olympic Stadium in Seoul, where the rally was held. The Association of Restaurant Owners, the organizer of the demonstration, claimed nearly 75,000 have gathered.

“Credit card firms charge too high commission rates on small restaurants. It is an issue threatening the business of many small merchants in the country,” said Nam Sang-man, the association’s chief.

The demonstration came a day after major card firms announced a plan to lower the commission rates to below 1.8 percent of the transaction amount from the current above 2 percent.

However, Nam and participants of the rally demanded further cuts.

“We want 1.5 percent, just like other shops run by large conglomerates,” the official said.

At present, card firms charge 1.51 percent of commission fees on gas stations on average, 1.6-1.7 percent on hypermarkets and 2.17 percent on department stores.

The average for restaurants is 2.6 percent.

Restaurant owners have been complaining about the high commission rates for years. However, their anger simmered recently as they face slowing business amid sluggish domestic demand, while card firms are poised to post record profits.

According to market analysts, the combined net profit of Korea’s seven card companies are likely to top 2 trillion won this year, the highest on record. Commissions are the mainstay of their profits, accounting for 46.1 percent of their total income in 2010.

Politicians, wary of voter sentiment ahead of by-elections next week, were quick to side with restaurant owners, denouncing card firms as greedy.

In Tuesday’s rally, Reps. Hong Joon-pyo and Sohn Hak-gyu, leaders of the top two political parties ― the ruling Grand National Party and the main opposition Democratic Party ― participated.

Park Won-soon and Na Kyung-won, the top two candidates for the upcoming Seoul mayoral by-election also showed up.

Hong said he had submitted a legislative proposal aimed at forcing card firms to apply a universal commission rate to member shops, be it a small restaurant or hypermarket chains run by major retailers.

“If passed, it would lower commission rates to 1.5 percent for all small proprietors,” he said.

Credit card firms, while lying low mindful of mounting pressure, insist that they just can’t afford any more concession to restaurants.

Commission rates have come down to the lowest possible level already, given the small size of payments occur in restaurants.

On Monday, Shinhan Card, the industry’s largest, decided to lower commission rates for small proprietors from the current level of above 2 percent to the 1.6-1.8 percent range. Previously, the company defined “small proprietors” by those having annual revenue of less than 120 million won, but it raised the bar to 200 million won.

Its smaller competitors followed suit, promising to bring down their rates below 1.8 percent.

The move came after top financial regulator Kim Seok-dong last week “recommended” card issuers to look for ways to lower commission rates.

By Lee Sun-young (milaya@heraldcorp.com)