[The Editors' Verdict] It's Time to Establish an E-Commerce Mutual Aid Association

The root cause of the TMON·WEMAKEPRICE (Timep) unsettled payment incident is not Timep's financial difficulties. The essence lies in a financial accident triggered when Koo Young-bae, CEO of Qoo10, acquired Timep and used it for Qoo10 Group's fundraising and sales inflation purposes. This is the 'Koo Young-bae fraud and embezzlement case' (charges listed in the prosecution's search warrant), not the 'Timep incident.' Timep, along with sellers and buyers, is another victim of CEO Koo. Therefore, seeking recurrence prevention measures through e-commerce regulation is not an appropriate approach. The main responsibility lies with the government. Financial authorities must strengthen supervisory powers and be vigilant about abnormal fund movements in companies under watch.

However, the government and political circles have started to crack down on e-commerce. The government has proposed review plans such as mandatory separate management of escrow (safe payment) for sales proceeds and banning concurrent operation of electronic payment gateway (PG) services. Both ruling and opposition parties have each proposed amendments to the Electronic Commerce Act to shorten the open market sales payment settlement cycle, which is usually 30 to 60 days in industry practice, to 5 days and 14 days respectively.

Preventing misconduct by e-commerce companies is natural. However, harsh cash management regulations will strangle the entire e-commerce industry. This is because generating operating cash flow by utilizing sales proceeds is the business model of e-commerce. No e-commerce company can survive solely on the average 14% sales commission of open markets. Starting an e-commerce startup would also become impossible. If this happens, it will only become easier for Chinese platforms like AliExpress, Temu, and Shein, which are exempt from domestic laws, to dominate Korea. In trying to fix the horn, they end up killing the cow. The industry also voices concerns that stricter regulations could lead to increased burdens on sellers. A household goods seller who operates on multiple open markets worried that shortening the settlement cycle would raise commission rates. This means they would have to offer more discounts in exchange for earlier accounts receivable collection. When whales fight, the shrimp’s back breaks.

Banning concurrent PG operations is a typical example of zigzag administration. The registration of e-commerce PG companies, including Timep, was initially pushed by financial authorities to grant e-commerce financial institution status and supervise them under the Electronic Financial Transactions Act. They neglected their own oversight but blame PGs; if separated, financial authorities would lose grounds to directly oversee e-commerce in the future. Its effectiveness is questionable. If a PG is a subsidiary and has bad intentions, it cannot be prevented.

There is a solution that protects sellers and buyers without shrinking the e-commerce ecosystem. Funeral service providers manage subscribers’ payments for decades until the service is provided. After frequent incidents of losing money due to mid-term business closures, the Fair Trade Commission established the Korea Funeral Mutual Aid Association in 2010 under the Installment Transactions Act for the funeral industry. Similarly, in 2002, the Direct Selling Mutual Aid Association and Korea Special Sales Mutual Aid Association were established under the Door-to-Door Sales Act for the multi-level marketing industry. Consumer anxiety in both industries significantly decreased after the establishment of these mutual aid associations.

This model can be directly applied to e-commerce. Article 24, Paragraph 10 of the Electronic Commerce Act already stipulated at the time of the 2002 law enactment that "business operators or telemarketing sellers engaged in electronic commerce may establish mutual aid associations for consumer protection." The government and industry have simply been inactive. If a mutual aid association had existed, some compensation for Timep victims would have been possible. Even now, the government and industry need to put their heads together to establish such an association. The best time to act is when it’s late.