[Altesch Shock] Busy Preparing Countermeasures Only After Losing Home Ground in China

⑤ Ministry of Industry, Fair Trade Commission, and Personal Information Protection Commission Intensify Pressure on Ali and Temu
C-Commerce Responds as Government Regulations Become Realistic

As C-commerce (Chinese e-commerce) platforms like AliExpress and Temu expand their influence in the domestic market, the government and related industries are also busy responding. The government and industry have decided to form a kind of team to explore countermeasures, and the Fair Trade Commission is examining compliance with exaggerated advertising and consumer protection regulations.

According to the Ministry of Trade, Industry and Energy and others, the government held a 'Distribution Industry Innovation Meeting' earlier this month with industry officials and experts, and plans to launch a tentative 'Distribution Future Forum' involving academia, industry, and government within this month. The forum aims to gather opinions from various sectors for innovation in the distribution industry and reflect them in policies.

The reason the government is launching a broad organization encompassing industry and academia to devise countermeasures is that the domestic market 'expansion' of C-commerce is becoming serious. Ali and Temu have recently been expanding their investments in the domestic market using price competitiveness as a weapon, attracting consumers. They are also holding large-scale discount events such as anniversary sales, which are estimated to involve massive marketing expenses. Through such investments, the monthly active users (MAU) of C-commerce platforms have surpassed those of major domestic e-commerce platforms, causing a sense of crisis in the industry. If this continues, the domestic distribution market could be swallowed by C-commerce.

Ministry of Trade, Fair Trade Commission, and Personal Information Protection Commission Apply All-Out Pressure... C-commerce Says "We Will Comply with Domestic Laws"

The first to take action was the Fair Trade Commission (FTC). Early last month, the FTC sent investigators to Ali Korea's office to investigate suspicions of violations of consumer protection obligations. It is reported that the FTC secured materials related to Ali Korea's consumer dispute response through on-site inspections. Ali Korea is a domestic corporation established by Ali, responsible for marketing in the Korean market.

The FTC is examining whether Ali has fulfilled consumer protection obligations stipulated in the Electronic Commerce Act. According to the Electronic Commerce Act, communication sales brokerage businesses like Ali must provide consumers with identity information of resident companies. They must also have personnel and facilities to respond to consumer complaints and dispute resolution.

An investigation into another platform, Temu, is also underway. The FTC is investigating Temu for violations of the Electronic Commerce Act and the Act on Labeling and Advertising. Specifically, the investigation targets allegations of false and exaggerated advertising by Temu and violations of consumer protection obligations under the Electronic Commerce Act. However, since the domestic corporation recently established by Temu has not yet fully commenced business activities, the investigation is being conducted in writing.

According to the Electronic Commerce Act, communication sales brokerage businesses must provide consumers with identity information of resident companies and have personnel and facilities to handle consumer complaints and dispute resolution. The FTC is reportedly verifying whether Temu complies with these consumer protection regulations. Since Temu's entry into the domestic market in July last year, it has rapidly expanded its market share in domestic e-commerce through aggressive marketing. During this process, it provided cash-equivalent coupons to domestic customers, and there is interest in whether the multi-level marketing method used in the 'Invite a Friend' event is also under investigation.

An FTC official stated, "If there are legal violations by (C-commerce platforms), we will respond strictly."

In response to the FTC's investigation, Ali expressed a fundamental position to comply with domestic laws. An Ali representative said, "We are doing our best to maintain cooperation with the FTC," and "We will comply with all relevant Korean laws and regulations for the best interests of our stakeholders and consumers." Temu also stated a fundamental position, saying, "We are doing our best to comply with the laws and regulations of the markets where we operate."

The Ministry of Trade and other related ministries have formed a task force (TF) to prepare comprehensive measures related to overseas direct purchases (direct imports). On the 7th of last month, the government held a meeting chaired by Bang Gi-seon, Director of the Office for Government Policy Coordination, and formed the 'Overseas Direct Purchase Comprehensive Measures TF.' The government decided to form the TF as it judged that comprehensive countermeasures for overseas direct purchases were necessary.

The management status of domestic consumer personal information by C-commerce platforms is also being closely examined. The Personal Information Protection Commission (PIPC), an agency under the Prime Minister, is conducting an investigation into the collection and use of personal information by these companies. The PIPC is reviewing whether C-commerce companies have violated the Personal Information Protection Act, and the investigation is expected to be completed soon.

Recently, the PIPC held a meeting with local e-commerce companies in Beijing, China, and conveyed that no grace period can be given to C-commerce companies for compliance with the Personal Information Protection Act. Choi Jang-hyuk, Vice Chairman of the PIPC, said, "While expressing understanding of the difficulties faced by Chinese companies, we clearly conveyed that no grace period can be granted." Accordingly, if violations of the Personal Information Protection Act by C-commerce companies are detected, fines are expected to be imposed.

Consumer protection obligations for C-commerce operators are also expected to be strengthened. The FTC announced a legislative notice for amendments to the Electronic Commerce Act at the end of last month. According to the amendment, overseas businesses without an address or office in Korea must designate a domestic agent for consumer protection if they exceed certain criteria such as sales or number of users. The domestic agent of the overseas business will fulfill consumer protection obligations under the Electronic Commerce Act related to consumer complaints and disputes. They will also be the subject of submission of materials or documents related to investigations of legal violations or service of documents.

Additionally, to facilitate the relief of small-scale consumer damages, a consent decision system will be introduced into the Electronic Commerce Act. The consent decision system is a system that suspends the review process upon the business operator's application and approves corrective measures prepared by the business operator to restore competitive order and reasonably compensate consumer damages.

As domestic government regulations become a reality, C-commerce companies are also responding. It has been confirmed that Ali has a team within its Korean branch, Ali Korea, dedicated to responding to domestic laws and regulations such as the Electronic Commerce Act. This team is known to be responsible for devising business strategies in accordance with domestic laws and regulations. An Ali representative explained, "Like other platforms, we operate a team for compliance with relevant laws and regulations," and added, "We are not forming a new TF to respond to government regulations."

Series Order

① Ultra-low price strategy that swallowed Korea... Fathers face job loss crisis
② Ali's 'Zero Commission' policy saves entrepreneurs
③ "Embrace China" Ali attracts talent... What about job creation effects?
④ Even if it's Chinese-made, if it's cheap, consumers buy... Consumer trends have changed
⑤ Busy preparing countermeasures only after losing the home ground to China