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KFTC imposes corrective measures on 7 platform operators for violating the E-Commerce Act

  • DATE WRITTEN : 2022-03-29
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March 7, 2022
Korean Fair Trade Commission, E-Commerce Division

The Korea Fair Trade Commission (led by Chairperson Sung-wook Joh, hereinafter the \"KFTC\") decided to impose corrective measures on Naver, Kakao, 11st, eBay, Interpark, Coupang, and Tmon after finding that these seven platform operators failed to properly provide information about product sellers or the criteria for the settlement of consumer disputes in advance.

\\\#. Major violations
A business operator that brokers transactions between sellers and consumers shall inform consumers that it is only an intermediary and not a party to the transaction (the other party to the contract), but the platform operator did not properly inform this [Violation of Article 20 of the Act]
While brokering transactions between sellers and consumers, the platform operator did not properly inform consumers of information about sellers or take measures that enable consumers to access relevant information [Violation of Article 20 (2) of the Act]
The platform operator did not provide criteria that can assist consumers in resolving complaints and disputes that may arise when using its platform [Violation of Article 20 (3) of the Act]

First, according to the current Act on the Consumer Protection in Electronic Commerce (hereinafter the \"E-Commerce Act\"), when a business operator that \"brokers\" transactions between sellers and consumers issues a contract to a consumer who purchased a product, it should notify that it is only an intermediary and not a seller by stipulating this fact in the issued contract. (Article 20 of the Act, Article 11-2 (1) 2 of the Enforcement Rule)

However, Coupang did not indicate that it is not the seller when issuing the contract to the consumer who purchased from its \"Marketplace\" platform. Moreover, even the \"Coupang\" logo displayed at the bottom of the contract may have easily misled the consumer into thinking that Coupang is the other party to the contract.

Due to this practice, consumers did not exactly know whom to ask for refund or return and who is liable for defects in products (the seller of the product or the other party to the contract). Furthermore, it hindered the exercise of their rights since they had to go through many trials and errors to find the seller. Thus the KFTC decided that it is in violation of Article 20 (1) of the E-Commerce Act. Coupang corrected the violation by adding at the bottom of the contract that \"For marketplace products (open market), Coupang conducts the brokerage of mail orders and it is not the seller.\"

Secondly, it is stipulated in the current E-commerce Act that the business operator that \"brokers\" transactions between sellers and consumers have to check the trade name, name of the representative, address, phone number, e-mail address, mail order business registration number of the seller and the name of the agency which accepted the registration if the seller is a business operator and provide these details to consumers \"before concluding an order.\"

In addition, if the seller is not a business operator (if the seller is an individual), the business operator shall check the name, phone number and e-mail address of the seller and provide the consumer (buyer) the method to gain access to such information. (Article 20 (2) of the Act, Article 25 of the Enforcement Decree)

But Naver, 11st, eBay and Interpark failed to properly provide consumers with information on sellers or access to such information. For instance, Naver did not inform consumers of the e-mail addresses of businesses that sell products on Naver Shopping, an open market service operated by Naver, and also it did not provide consumers how they can get the e-mail addresses of individual sellers.

Moreover, 11st did not provide consumers with a method to view the names and e-mail addresses of individual sellers who sell products through its open market service \"11st.\" and eBay also did not inform consumers how to view the names of individual sellers who sell products on its \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\"Auction\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\" open market service. In addition, Interpark did not provide consumers with a method to view the names, addresses and e-mail addresses of individual sellers who sell products through its open market service.

Due to these practices, consumers had no choice but to engage in transactions without knowing who the seller was and where to contact when a product was defective. As a result, when selecting products or asking for return, refund and compensation for damage, it was inevitably difficult for consumers to exercise their rights guaranteed by the law. The KFTC therefore viewed that these practices violated Article 20 (2) of the E-Commerce Act. All four business operators corrected the violations by properly displaying the seller\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\'s information or offering consumers a way to access such information.

Thirdly, it is prescribed in the E-Commerce Act that the business operator that brokers transactions between sellers and consumers have to resolve complaints arising from the use of its platform (cybermall) or disputes consumers have with sellers by preparing human resources and facilities needed for receiving and handling disputes between sellers and consumers or complaints from consumers.

Moreover, according to the Act, platform operators (brokers) have to prepare standards for resolving consumer complaints or related disputes caused by themselves or sellers in advance and notify these criteria to consumers through the platform (cybermall). They specifically have to investigate the cause of a consumer complaint or dispute, notify the consumer of the progress of the investigation within 3 business days, and notify the consumer of the result or resolution within 10 business days. (Article 20 (3) of the Act, Article 25-2 of the Enforcement Decree)

However, they failed to implement this obligation. For example, 11st, eBay, Interpark, Coupang, and Tmon did not create specific standards for resolving consumer complaints and disputes. They only included the basic principles related to the handling of consumer complaints and disputes in the \"Consumer Terms and Conditions\" or then\"FAQ Board\" and they did not separately inform consumers of the specific details.

Although Naver and Kakao have been separately displaying information related to consumer complaint and dispute resolution to consumers, they have been providing information just on the \"procedure.\" They did not notify substantive and specific standards necessary for dispute resolution, such as who is liable in certain situations and how liability can be imposed, or depending on circumstances (e.g. who is at fault and etc.), how liability can be shared between consumers and businesses.

The KFTC stated that these were violations of Article 20 (3) of the E-Commerce Act since consumers were restricted from exercising their right to transparently and quickly resolve complaints or disputes experienced in the process of using the platform according to the procedures guaranteed by the Act and subordinate legislation.

Accordingly, the business operators will each prepare \"substantive and specific standards for resolving consumer complaints and disputes\" within 60 days from the date of receiving the KFTC\'s resolution on this case and submit the corrective order implementation plan including the standards to the KFTC. The KFTC will closely examine whether their implementation measures are sufficient to correct violations of the law, and if necessary, the KFTC will discuss with business operators on ways to improve them.

With this decision made by the KFTC, when using e-commerce platforms, consumers will be able to know more clearly who the seller of the product is and what standards and procedures can be used to resolve any complaints or disputes that may arise. Moreover, through this decision, it is expected that better and faster redress for consumers will be achieved since consumers dissatisfied with products can ask their complaints to be resolved according to predetermined standards and procedures.

Moreover, in order to be prepared for damages or disputes that may arise from purchasing products, the KFTC stated that it is important for consumers to check whether the seller is a platform operator or an individual seller registered on a platform and to check in advance whether it is possible to find out the sellers address, contact information, and e-mail address.

Furthermore, the KFTC emphasized that if consumers check whether the criteria for resolving complaints are properly provided and what the details are in advance, they can assert their rights such as urging platform operators to resolve disputes in accordance with the criteria when damage or disputes arise.

Lastly, in order to protect the rights and interests of consumers who use e-commerce platforms more effectively, the KFTC stated that it will dedicate its efforts to strengthen law enforcement and improve the system, with its \"Digital Market Response Team\" playing the central role.

*The Korean text of the documents is confirmed to be authentic and English version is only for reference
      
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