'Excessive Penalties for Internet·IPTV' KT Fined 2.3 Billion Won... Issues with Unrefunded Amounts Also Raised

KCC to Approve at Full Meeting on the 29th

[Asia Economy Reporter Cha Min-young] KT, which was found to have imposed excessive penalties on subscribers during the renewal process of high-speed internet and IPTV contracts and failed to notify important details such as prize information, has been fined 2.3 billion KRW by the government.

The Korea Communications Commission (KCC) held a plenary meeting on the 29th and imposed a corrective order along with a fine of 2.257 billion KRW on KT for imposing penalties without justifiable reasons on high-speed internet and IPTV subscribers and failing to notify important matters at the time of subscription.

The KCC, during the ‘Inspection on Unfair User Discrimination in Providing Prizes for Bundled Products’ conducted since February last year, confirmed that KT operated the contract renewal system without reporting the terms of service and imposed excessive penalties on subscribers without basis in the terms of service. It also found that KT failed to notify users of important matters such as prize details. Consequently, the KCC judged that user interests were seriously infringed and conducted a fact-finding investigation this year.

KT introduced the contract renewal system on January 1, 2019, but ▲ sold services without reporting important usage conditions such as fee discounts, contract periods, and penalties in the terms of service, ▲ imposed approximately 1.06 billion KRW in penalties on contract renewal subscribers that were not stipulated in the terms of service, and ▲ failed to notify important matters at the time of subscription, such as the fact that additional discounts for discount-type contract renewal subscribers are considered prizes and that the full amount of the additional discount will be charged as a penalty if canceled within one year.

However, KT recognized the issues of unreported terms of service and unfair penalty imposition and stopped selling the ‘contract renewal’ service from November 5 last year. It reported changes to the terms of service and refunded part of the unfairly imposed penalties to users. Jang Bong-jin, Director of the Telecommunications Market Research Division at the Consumer Policy Bureau, explained, "54% of the profit infringement cases and about 75% of the cases of failure to notify important matters have been refunded," adding, "Since subscriber information is unavailable after six months, refunds are difficult, and this was taken into account when calculating the fine for the violation." According to current law, domestic telecommunications companies may use and retain customer personal information only during the service subscription period and must retain and use it for no more than six months after service termination or full payment of fees.

The KCC judged that KT’s acts of imposing penalties without justifiable reasons and failing to notify important matters constitute serious infringements on user interests. Accordingly, along with imposing fines, the KCC issued a corrective order to improve future work procedures so that user protection measures can be prepared when launching new products or changing important service usage conditions.

Chairman Han Sang-hyuk stated, "As seen in the recent KT telecommunications service outage issue, telecommunications services have a significant impact on the lives of the public, so telecommunications service providers must strive to protect users," and added, "The KCC will continue to pay close attention to prevent acts that infringe on user interests."

Some have pointed out the need for improvements regarding KT’s handling of unrefunded unfair profits. Standing Commissioner Kim Hyo-jae said, "Although some damage recovery has been made, the financial damage is considerable," and noted, "Of the 1 billion KRW in unfair profits, 500 million KRW has been returned, but 440 million KRW cannot be returned due to legal blind spots. KT’s use of unrefunded amounts for social contributions is a matter of goodwill, but there are areas where penalties cannot be imposed, which is problematic." Standing Commissioner Kim Chang-ryong also said, "Using illegally obtained profits for social contributions is problematic; they should be returned, and the KCC needs to devise measures to close these regulatory gaps." Vice Chairman Kim Hyun pointed out, "KT also received a reduction related to the 10-gigabit (10 Gbps) high-speed internet violation case this year. Awareness is needed."

KT must publicly announce the fact that it received the corrective order for 8 days at the entrances of its headquarters and agencies and for 3 days on its official website within one month from the date of receiving the order. KT must submit an implementation plan for improving work procedures and publicizing the corrective order in consultation with the KCC within 14 days and report the results after implementation.