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KFTC orders YouTube, Netflix, and other OTT services to make cancelling membership and payment easy

  • DATE WRITTEN : 2022-03-29
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February 14, 2022
Korean Fair Trade Commission, E-Commerce Division

The Korea Fair Trade Commission (led by Chairperson Sung-wook Joh, hereinafter the \"KFTC\") ordered Google, Netflix, KT, LG Uplus and Content Wavve to cease interfering with their users\' cancellations of memberships and VOD purchases. In addition, the KFTC imposed a combined fine of 19.5 million won on these five over-the-top (OTT) video streaming service providers for their unfair business practices.

First, according to the current Act on the Consumer Protection in Electronic Commerce (hereinafter the ¡°Electronic Commerce Act¡±), a consumer can cancel a purchase order (cancellation of a contract) and get a full refund for online video content and other types of digital content that have not been accessed within seven days from the date of purchase (Article 17 and Article 18 of the Act). However, the five service providers set unfair cancellation terms and conditions which go below the level of consumer protection guaranteed by the Electronic Commerce Act and posted them on their product sales pages.

To begin with, while Google offers ¡°YouTube Premium¡± subscription plan and Netflix offers ¡°Netflix¡± subscription plan, they informed consumers that \"once consumers entered into the contract for the service, cancellation is not allowed and only cancellation of streaming service for the next month is allowed.\" Moreover, KT made ¡°Olleh TV Mobile¡± streaming plan to be refundable only in cases of issues related to the purchased content within six days from the date of purchase.

Also, LG Uplus did not allow refunds if membership points were used to purchase video content and told consumers that they could not cancel their subscriptions during the first month. Furthermore, while Content Wavve offers paid subscription service on Wavve, Content Wavve informed consumers that since all their products are paid in advance, they cannot be cancelled or refunded.

As stated above, these service providers provided false information regarding consumer rights to cancel contracts. Although consumers had the right to cancel memberships and VOD payments within the statutory period, they had no choice but to give up on exercising such right due to these false statements.Since these acts \"hindered consumers from cancelling contracts by providing false or exaggerated information,\" the KFTC considered them as violations of Article 21 (1) 1 of the Electronic Commerce Act.

Secondly, it is stipulated in the current Electronic Commerce Act that electronic commerce business operators which enable consumers to join memberships and sign contracts online have to also make it possible for consumers to cancel their memberships, withdraw from agreements, and terminate or cancel or modify contracts online (Article 5 (4) of the Act).

However, while KT, LG Uplus and Content Wavve made it easy for consumers to join memberships and enter into contracts online, consumers were not allowed to terminate or cancel or modify contracts online. For instance, KT showed \"Cancellation Process: Inquiries and Customer Center\" on the product sales page of ¡°Olleh TV Mobile¡± and told consumers who posted messages that they want a cancellation on the inquiries board to \"call its customer service center.\"

In addition, although LG Uplus sells online video streaming plans on its ¡°Uplus Mobile TV¡± and ¡°Uplus Customer Center,¡± users were informed to call the company\'s customer service center for cancellation of contracts. Moreover, Content Wavve sells online video streaming plans on its Oksusu service, but the company informed users to contact the customer service center in order to make cancellation requests. Due to these practices, consumers who wanted cancellation had no choice but to go through a tiresome process such as calling the customer service center, and the KFTC viewed that such acts violated Article 5 (4) of the Electronic Commerce Act.

Thirdly, under the current Electronic Commerce Act, businesses have to notify consumers of information regarding the deadline, process, and effect of contract cancellation so that they can clearly understand the terms of a transaction before concluding a contract and sign a deal without any mistakes or errors (Article 13 (2) of the Act).

However, while Google sells VOD content and ¡°YouTube Premium¡± subscription service through its cybermall* YouTube and Netflix sells \"Netflix subscription service,\" they did not provide the above mentioned information to consumers. For this reason, consumers had difficulties in knowing information regarding the deadline, process, and effect of cancellation and exercising their legally guaranteed right to cancel. The KFTC therefore viewed that Google and Netflix violated Article 13 (2) of the Electronic Commerce Act.

* Cybermall is a virtual shopping mall established to transact goods, etc. using computers, etc. and information communications facilities

Fourthly, it is prescribed in the current Electronic Commerce Act that the operator of a cybermall has to indicate the trade name, name of the representative and address of the business place on the first page shown to consumers, and that page needs to be linked to the web page that discloses information on businesses on the KFTC\'s website. Moreover, the operator is required to show its online sales registration number on the product sales page (Article 10 (1) and Article 13 (1) of the Act, Article 11(4) of the Enforcement Decree and Article 7 of the Enforcement Regulations).

However, Google, Netflix, KT, LG Uplus and Content Wavve did not provide their identification information on the cybermall\'s first page. Among these service providers, Google and Netflix did not link the cybermall\'s first page to the KFTC\'s web page that discloses information on businesses, and LG Uplus did not display its mail order sales registration number on the product sales page. Since these practices made it difficult for consumers to know information about the business they transact with, the KFTC determined that they violated Article 10 (1) and Article 13 (1) of the Electronic Commerce Act.

With the KFTC¡¯s measures, consumers will be able to fully exercise their rights to cancel contracts guaranteed under the Electronic Commerce Act when cancelling online video streaming service membership contracts or purchase of VOD content. Moreover, the cancellation right will be guaranteed even when a consumer signs up again after cancelling his or her membership.

Lastly, the measures imposed on the five service providers will be monitored and managed by the KFTC¡¯s ¡°digital market response team,¡± which was launched after expanding and reorganizing the ICT (Information and Communications Technology) task force team at the end of January. In addition, the KFTC will continue to make efforts to improve law enforcement and systems to ensure stronger protection of consumer rights and interests in the digital economy sector, including online video streaming services.

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