Yeo Song-eon-seok Proposes Mandatory Law for E-commerce Escrow and Shortening Settlement Cycles

On the 7th, Song Eon-seok, a member of the People Power Party, announced that he has taken the lead in proposing a partial amendment to the "Act on Consumer Protection in Electronic Commerce, etc." to prevent the recurrence of the TMON and WEMAKEPRICE incidents.

Song pointed to the lack of institutional measures as the cause of the large-scale insolvency crisis at TMON and WEMAKEPRICE. It was revealed that the sales proceeds of the subsidiaries TMON and WEMAKEPRICE were used during the reckless business expansion of their parent company, Qoo10 Group, but under current law, there are no regulations regarding the management of sales proceeds by e-commerce platform companies.

While the current Large-scale Distribution Industry Act stipulates the period within which distributors must settle payments, the Electronic Commerce Act does not regulate the settlement cycle of platform companies. Song criticized that TMON and WEMAKEPRICE operated a settlement cycle of up to 70 days and used the payments owed to sellers as interest-free loans.

The amendment to the Electronic Commerce Act, led by Song, requires platform companies (telecommunication sales intermediaries) to manage sales proceeds separately (escrow) through banks or other institutions designated by presidential decree, and allows for corrective measures if this is not implemented. It also stipulates that the settlement cycle of e-commerce platform companies must be within 5 days from the date the consumer confirms the purchase, and if the settlement is delayed, an interest rate set by the Fair Trade Commission must be added and paid.

In cases where platform companies have their registration canceled or are declared bankrupt, banks or other institutions managing the sales proceeds separately must prioritize payment to the sellers.

Song pointed out the problem, saying, "The essence of this incident lies in the fact that e-commerce platform companies, operating in a legal and regulatory blind spot, recklessly used the payment funds temporarily held while mediating between consumers and sellers. Meanwhile, sellers and small business owners who have suffered serious difficulties due to delayed payments are now facing the risk of a chain bankruptcy crisis."

He added, "As of the first half of 2023, e-commerce accounts for 49.5% of the entire retail market, but the laws and systems to protect sellers and consumers are insufficient. We will do our best to ensure the passage of the amendment to the Electronic Commerce Act in the National Assembly to prevent damages like the TMON and WEMAKEPRICE incidents from happening again."