- Strengthening consumer protection obligations by mandating the designation of a domestic representative for foreign businesses -
- Introducing a consent decree system in the E-Commerce Act to promptly address consumer harm -
The Korea Fair Trade Commission (hereinafter 'KFTC') announced that the amendment to the "Act on Consumer Protection in Electronic Commerce" (hereinafter the 'E-Commerce Act') passed the Cabinet meeting today.
Background and Progress
As the scale of e-commerce with foreign businesses has increased, so have related consumer complaints and disputes. However, in the case of foreign businesses without a domestic address or office, consumer protection obligations under the E-Commerce Act were insufficient, leading to repeated consumer harm. Additionally, deceptive practices by businesses related to probability-based items have caused numerous small-scale consumer damages, but individual consumers faced difficulties in seeking redress through separate lawsuits due to time and cost constraints.
In recognition of these issues, the KFTC discussed system improvement measures for creating a game industry ecosystem that enhances the rights of game users during a public forum on January 30th. On March 13th, in collaboration with related ministries, the KFTC announced "Consumer Protection Measures Related to Overseas Online Platforms." The proposed amendment to the law includes these improvement measures and comprehensive countermeasures, aiming to prevent consumer harm related to foreign businesses that frequently occurs in e-commerce and to provide prompt redress for individual consumers.
The KFTC has proceeded with the necessary steps to ensure the smooth implementation of the system improvements, including drafting the amendment bill in the first half of this year, issuing a public notice of the legislation (March 26, 2024 - May 7, 2024), collecting opinions from related ministries (March 26, 2024 - April 5, 2024), and undergoing review by the Ministry of Government Legislation (June - August 2024). The finalized amendment bill was approved at today’s Cabinet meeting following these processes.
Key Contents of the Amendment
The key contents of the amendment include mandating the designation of a domestic representative for certain foreign businesses and the introduction of a consent decree system. The specifics are as follows:
- Mandatory Designation of a Domestic Representative
Under the amended law, foreign e-commerce operators or intermediaries (hereinafter referred to as 'e-commerce operators, etc.') without a domestic address or office, who meet certain criteria based on sales, consumer scale, etc., must designate a domestic representative in writing.
The domestic representative has two primary obligations: firstly, to take necessary measures to handle consumer complaints and disputes in accordance with Article 13(5) (related to Article 13(2)8) and Article 20(3) of the E-Commerce Act. Secondly, if deemed necessary by the KFTC for law enforcement purposes, the domestic representative must comply with requests for documents or materials under Article 81(1)3 of the "Monopoly Regulation and Fair Trade Act" (hereinafter 'Fair Trade Act').
Additionally, the domestic representative must maintain valid communication channels with the designated e-commerce operators, etc., and under Article 39 of the amended law, in accordance with Article 98 of the Fair Trade Act, the domestic representative is the recipient of official documents.
To align with the amendment's intent of strengthening consumer protection obligations, e-commerce operators, etc., must designate a domestic representative who has a domestic address or office. Furthermore, to prevent confusion among consumers, if an e-commerce operator, etc., has established a domestic corporation or has a domestic corporation over which they exert significant influence in terms of management, such as through board composition or business operations, that corporation must be designated as the domestic representative.
Additionally, e-commerce operators, etc., who have designated a domestic representative must submit the representative's name, address, telephone number, and email address to the KFTC and disclose this information on their websites so that consumers can easily access it. As the domestic representative fulfills the consumer protection obligations on behalf of the e-commerce operator, etc., any legal violations by the domestic representative in performing these duties will be regarded as actions taken by the e-commerce operator, etc., making them subject to corrective orders and fines.
Furthermore, to ensure the effective operation of this system, it is important to selectively impose the domestic representative designation obligation on relevant entities. Therefore, the KFTC may request that the relevant business submit data regarding sales, consumer scale, and other matters specified by Presidential Decree to verify whether they meet the criteria for designation.
2. Introduction of a Consent Decree System
According to the amendment, businesses under investigation or review by the KFTC (hereinafter 'applicant') may apply for a consent decree, which allows for the suspension of the review process to voluntarily resolve consumer rights violations or improve business practices.
When applying for a consent decree, the applicant must submit a written request detailing the facts, necessary corrective measures for improving business practices, and measures for consumer and other business harm redress. The KFTC, after investigating the facts, may issue a consent decree if it finds that the proposed corrective measures are balanced with the expected corrective actions for the law violation and are appropriate for restoring business practices or protecting consumers and other businesses.
If the applicant fails to implement the consent decree by the set deadline without just cause, the KFTC may impose a daily penalty of up to 2 million KRW until the decree is fulfilled or canceled.
Future Plans and Expected Effects
The amendment to the "Act on Consumer Protection in Electronic Commerce," which passed the Cabinet meeting today, will be submitted to the National Assembly later this month following presidential approval.
If the amendment is passed by the National Assembly as proposed, e-commerce operators, etc., who meet certain criteria and impact consumers will be required to address consumer complaints and disputes through a domestic representative even if they do not have a domestic address or office. Additionally, by newly introducing the consent decree system to the E-Commerce Act, which is already regulated under seven other KFTC laws, businesses may offer corrective measures to address consumer harm in cases of legal violations, allowing for prompt consumer redress.
The KFTC will actively participate in the legislative discussions at the National Assembly to ensure that the expected effects are realized and will also work on revising subordinate regulations to ensure the smooth implementation of the amended law.