False Information Provided to Obstruct Consumer Withdrawal of Subscription
Violation of the Electronic Commerce Act Detected and Corrected
[Asia Economy Sejong=Reporter Dongwoo Lee] Consumers using online video services (OTT) such as Google, Netflix, KT, LG Uplus, and Content Wave will find it easier to cancel membership contracts or refund content payments in the future.
On the 13th, the Korea Fair Trade Commission (KFTC) announced that it has decided to issue corrective orders and impose fines totaling 19.5 million KRW on five OTT operators, including Google and Netflix, for obstructing consumers' withdrawal from membership contracts and cancellation of VOD payments.
According to the KFTC, these OTT operators set and announced withdrawal conditions less favorable than those guaranteed by law, thereby hindering free exercise of withdrawal rights. While contract formation such as membership subscription was made easy online, cancellation procedures required cumbersome steps like phone calls, which was deemed to obstruct withdrawal.
Under the current Electronic Commerce Act Articles 17 and 18, consumers who purchase digital content such as online videos and have not viewed it can cancel (withdraw) the purchase at any time within 7 days from the purchase date and receive a full refund.
However, Google and Netflix, selling ‘YouTube Premium’ and ‘Netflix’ subscription services respectively, informed consumers that ‘once the contract is concluded, withdrawal is not possible, and only cancellation for the next month's service is allowed.’ KT also guided that refunds for ‘Olleh TV Mobile’ video passes are only possible within 6 days from the purchase date and only if there is a problem with the content. LG Uplus, selling single-item products, stated that payment cancellations are not possible when membership points are used, and Content Wave informed that all subscription services on ‘Wavve’ are prepaid products, so payment cancellations and refunds are not allowed.
The KFTC judged these actions as ‘obstructing consumers’ withdrawal by providing false or exaggerated information,’ violating Article 21, Paragraph 1, Subparagraph 1 of the Electronic Commerce Act.
Withdrawal Only via Phone Call
Obstruction of Free Contract Cancellation
The KFTC also specified that preventing consumers from withdrawing online violates the Electronic Commerce Act. Businesses conducting electronic commerce must allow consumers to withdraw membership, cancel, terminate, or change contracts online if they enable online membership registration and contract subscription (Article 5, Paragraph 4).
However, KT, LG Uplus, and Content Wave allowed easy online contract formation such as membership subscription but did not permit contract cancellation, termination, or changes online. KT required consumers to express withdrawal intentions through a 1:1 inquiry board and then directed them to contact the customer center by phone. LG Uplus and Content Wave also required direct phone contact with customer centers to process withdrawals.
They also violated the obligation to provide information on withdrawal deadlines, methods, and effects. Businesses must inform consumers of the withdrawal period, methods, and effects before contract conclusion so that consumers can understand transaction conditions accurately and avoid mistakes or misunderstandings (Article 13, Paragraph 2).
Google, selling VOD content and ‘YouTube Premium’ subscriptions on its operated cyber mall YouTube, and Netflix, selling ‘Netflix subscription services,’ did not provide such information to consumers. The KFTC judged that consumers had difficulty properly understanding withdrawal deadlines, methods, and effects, making it hard to exercise their legally guaranteed withdrawal rights.
Operators also failed to properly provide their identity information. Google, Netflix, KT, LG Uplus, and Content Wave did not display their identity information on the initial screens of their operated cyber malls, and among them, Google and Netflix did not link their cyber mall initial screens to the KFTC’s business information disclosure page. LG Uplus also did not display its mail-order business registration number on the sales screen. The KFTC judged that these actions made it difficult for consumers to properly know the operators they were dealing with and violated Articles 10, Paragraph 1 and 13, Paragraph 1 of the Electronic Commerce Act.
Corrective Orders and 19.5 Million KRW Fine Imposed
Measures to Maximize Exercise of Withdrawal Rights
The KFTC plans that this action against OTT operators will enable consumers to fully exercise their withdrawal rights guaranteed under the Electronic Commerce Act for membership contract cancellations and VOD content payment cancellations.
Consumers will also be fully guaranteed these rights even if they re-subscribe to memberships after joining and withdrawing.
The KFTC stated, "This measure will be monitored and managed by the newly expanded ‘Digital Market Response Team,’ launched last month as part of the ICT dedicated team," adding, "We will continue to do our best in law enforcement and system improvement to ensure stronger protection of consumer rights in the digital economy sector, including online video services."
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