Gmarket and Coupang Face Proliferation of 'Unauthorized' Phone Sellers... Pre-Approval System to Be Revised

Agency obtains carrier approval
to appoint sales points under 'Prior Consent System'
Poor management... illegal sales surge
"Only legitimate businesses suffer" complaints

Information and Communications Promotion Association steps in for improvement
Unified approval application window

[Asia Economy Reporter Cha Min-young] Store A, which sells the latest smartphones on online malls such as Gmarket, 11st, SSG.com, and Coupang, openly displays a prior approval letter obtained in 2019 and continues to sell, but it is a "ghost store" that cannot even be found by address search on the association's website. In the case of Ilsandong-gu, Gyeonggi-do, 238 out of 297 stores registered as offline stores?accounting for 80%?have had their prior approvals canceled or have not received approval. Many non-professional sellers also operate by registering all three major mobile carriers’ agencies and selling general consumer goods such as supplements and health functional foods simultaneously.

As contactless smartphone sales increase on online shopping malls, the prior approval system for mobile phone stores is expected to be improved. The prior approval system is a system under Article 8 of the Act on the Improvement of Distribution Structure of Mobile Communication Terminal Devices, whereby agencies appoint stores after obtaining prior approval from mobile communication service providers. Originally created to understand the complex distribution structure of the mobile communication sales industry, which connects the three major carriers, agencies, and stores, it has been criticized for inadequate post-management and response, with claims that "only legally operating businesses suffer losses."

According to the related industry on the 27th, the Korea Information and Communication Promotion Association, which oversees the prior approval system, is conducting a bid for the "Online Prior Approval Management Enhancement System Improvement Service" until the 29th. Both the management and operation functions of store prior approval and the management and operation functions of ID card scanners will be revised. The price evaluation weight is about 10%, so the content of the business proposal is expected to be the core.

Previously, stores could apply for prior approval, but now the application window will be unified so that agencies apply. The information notification service will also be strengthened so that mobile carriers can know the agencies’ store prior approval information. Verification of whether the URL of online sales points is posted will become stricter. Prior approval information will be accessible weekly to reduce difficulties related to annual inspections. The management and operation functions of ID card scanner equipment, which are provided only to prior approval companies, will be improved, and the history of equipment misuse will also be managed.

Originally, the mobile phone sales business structure is complex, with the three major carriers entrusting sales to agencies, and agencies re-entrusting to individual stores. Approved stores print out prior approval letters and post them at their business locations, and online sellers are required to post the prior approval certification mark and a URL linking to the original certification text on their online sites, but violations of this are frequent. Post-processing to filter these out is conducted once a year, and even this is not properly enforced. There have been many tricks such as multiple stores sharing the same prior approval letter.

Complaints that only those legally authorized suffer losses also come from sellers. A representative of the National Mobile Communication Distribution Association said, "Basically, the association is a gathering of places within the legally authorized framework," adding, "We willingly obtain prior approval for legal operation, even though there is a possibility of being included in future regulatory surveillance. However, nowadays, illegal operations are rampant online, so it feels like only those who obtained approval before are the fools."

The government has decided to further strengthen the management of online stores. A representative from the Korea Communications Commission explained, "As stores proliferate online, there has been a continuous consensus on the need for methods to reduce consumer damage in advance," adding, "This is part of strengthening overall sales management."