Even if Returns Are 'Arbitrarily' Rejected, the Fine Is Only 2.5 Million Won... Fair Trade Commission to Revise the 'Jeonsang Act'

The Fair Trade Commission (FTC) has decided to strengthen sanctions against online shopping platforms that arbitrarily refuse consumers' refund requests and fail to comply with the Electronic Commerce Act (Act on Consumer Protection in Electronic Commerce, etc.). The FTC plans to raise the level of fines through amendments to the Electronic Commerce Act this year. This decision comes from the judgment that the current fine standards stipulated in the Act are too low, resulting in insufficient deterrent effect.

According to the FTC on the 23rd, the commission is pushing for these amendments to the Electronic Commerce Act. In a major government ministry work plan report on the 8th, the FTC announced that it would begin restructuring the sanction system to strengthen deterrence against violations of the Act, considering changes in the e-commerce market environment due to the activation of platform transactions. An FTC official explained, “We plan to raise the existing fine levels and newly establish fine provisions for parts of the Act where fines are not separately stipulated.”

The FTC’s move to revise the Electronic Commerce Act was triggered by the ‘refund abuse’ incident involving the four major entertainment agencies, including HYBE, uncovered by the FTC in August last year. The official online shopping mall operators of HYBE, YG, SM, and JYP?Weverse Company, YG Plus, SM Brand Marketing, and JYP 360?restricted consumers’ rights by arbitrarily shortening the refund period set by the Act. According to the Act, consumers can withdraw their purchase within three months or within 30 days from the date they became aware of defects such as damage or faults. However, these companies notified that refunds were only possible within seven days, even for defective products.

There were also cases where exchanges and refunds were refused on the grounds of damaged packaging, and if there was no video recording of the product opening process, exchanges or refunds were denied even if components of the received product were missing. The Act limits withdrawal rights if the product is damaged but stipulates that the burden of proof lies with the business operator. Accordingly, the FTC imposed fines on these companies under Article 21 of the Act, which prohibits false or exaggerated information in electronic commerce.

The problem was the level of fines. The fines applied under this provision were only 2.5 million KRW. The maximum fine stipulated in Article 21 of the Act is only 5 million KRW, and the companies received a 50% reduction through voluntary correction. An FTC official said, “At that time, the fine level was criticized for being too low and lacking deterrent power. Therefore, the FTC decided to review raising the fine levels through research projects.”

However, it seems difficult for the FTC to significantly increase the fine levels. Unlike administrative sanctions such as surcharges (administrative dispositions) aimed at recovering illegal profits from serious violations, fines are merely penalties for rule violations. An FTC official explained, “Since many online shopping mall platform operators are small businesses, it is not realistic to raise fines significantly beyond 10 million KRW even if the fine levels are increased.” It is generally expected that the maximum fine will be set at around 10 million KRW, which is about twice the current maximum fine of 5 million KRW.

Additionally, the FTC plans to impose fines on platforms that fail to provide information about tenant sellers to consumers under the Electronic Commerce Act. Article 20 of the Act requires platforms to provide consumers with the address, phone number, and other information if the seller is a corporate business. This obligation aims to secure consumer trust by mandating the provision of seller information. However, the current law does not include provisions for imposing fines if this information provision obligation is not fulfilled. An FTC official said, “Since there is no fine provision, only corrective orders are possible now,” and added, “We will add a fine provision.”

The Act will also include obligations to enhance transparency in managing consumer purchase reviews, whose importance is growing. Telecommunication sales businesses and intermediaries will be prohibited from manipulating purchase reviews and required to retain reviews for a certain period. Disclosure of posting periods and deletion criteria will also be mandated.