The liquid e-cigarette industry, which has grown in a regulatory blind spot, now faces a direct hit as amendments to the Tobacco Business Act take effect. Liquid e-cigarettes containing synthetic nicotine have been reclassified as tobacco products under the law, bringing vape shops and other retailers under institutional regulations. While mass closures of shops are an immediate concern, some warn that demand may shift to nicotine-free and nicotine-like products, creating yet another regulatory blind spot.
According to industry sources on January 12, the key element of the Tobacco Business Act amendment taking effect on January 24 is the expansion of the definition of tobacco from traditional cigarettes to all tobacco and nicotine-based products. As a result, synthetic nicotine liquid e-cigarettes, which were not previously classified as legal tobacco products, will now be subject to government supervision just like conventional cigarettes.
Until now, liquid e-cigarettes had existed in a regulatory gray zone. Liquid e-cigarettes using synthetic nicotine as an ingredient were not legally classified as tobacco, subjecting them to relatively loose regulations. Shops could operate without separate tobacco retailer designation, and sales and promotions through online platforms and social media were effectively left unchecked. The market expanded rapidly through this gap. According to one wholesale company supplying products to vape shops, the number of retailer members increased nearly sevenfold from about 300 in 2018 to 2,084 last month.
The industry cites the tobacco retailer designation requirements as the biggest burden. To register as a tobacco retailer, shops must meet certain distance requirements from existing establishments, but this is difficult because existing tobacco sales networks such as convenience stores are already densely distributed. The government plans to suspend distance restrictions between tobacco retailers for two years and temporarily reduce taxes to minimize damage to small business owners, but the response on the ground has been cold. An official from the Korea E-Cigarette Industry Association said, "With the existing sales network so densely established, obtaining retailer designation itself is not easy. Many shops may be unable to enter the regulated system and may have to close."
Closures are already occurring. Mr. Kim, who has operated an e-cigarette shop in Yeongdeungpo-gu, Seoul for 10 years, recently decided to close his business. He said that once the amendment takes effect, he would need to register as a tobacco retailer, but meeting the requirements is difficult given his shop's circumstances, making it hard to continue operating. According to data submitted to the office of People Power Party lawmaker Ahn Sang-hoon by the Seoul Metropolitan Government, annual tobacco retail license applications have remained at 1,300 to 1,500 over the past five years, but actual designations dropped sharply from 1,391 in 2024 to 995 last year.
Manufacturers will also inevitably be affected. After the amendment takes effect, synthetic nicotine liquid e-cigarettes will be subject to the same taxes and levies as regular cigarettes, making price increases unavoidable. The industry expects that price increases will lead to decreased demand, increasing the burden on manufacturers.
Some in the industry note that the burden on small retailers increased all at once as the government moved to close the regulatory gap. However, others view this regulatory reform as an inevitable normalization measure, given how quickly the synthetic nicotine liquid e-cigarette market expanded by exploiting the regulatory blind spot.
The problem is that a balloon effect could occur as demand shifts to nicotine-free and nicotine-like products that remain outside regulations. These products are often distributed through online sales or peer-to-peer transactions on social media, making them difficult to manage. Concerns are growing as nicotine-free and nicotine-like products are already spreading among teenagers. Lee Byung-jun, chairman of the Korea E-Cigarette Industry Association, warned, "Businesses may resort to workarounds by shifting to nicotine-like products to avoid regulations. If the market moves to nicotine-like products whose safety has not been sufficiently proven, it could push consumers into an even more dangerous environment."
