Regulations on Shopping Malls Operating Return Policies 'At Will' Under the Act on Fair Transactions in Online Shopping

Sanctions against online shopping platforms that arbitrarily refuse consumer refund requests and fail to comply with the Electronic Commerce Act (Act on Consumer Protection in Electronic Commerce, etc.) will be strengthened.

According to the Fair Trade Commission (FTC) on the 29th, the FTC is promoting amendments to the Electronic Commerce Act reflecting these measures. The FTC determined that the penalty levels stipulated in the Act are excessively low, resulting in insufficient legal deterrence.

Under the Electronic Commerce Act, consumers can withdraw their subscription within three months or within 30 days from the date they became aware of defects such as damage or poor quality. While withdrawal is restricted if the product is damaged, the burden of proof lies with the business operator.

However, many shopping malls are found not to comply with these provisions of the Act. Some companies arbitrarily set refund periods and refuse consumer refunds or require consumers to prove product damage themselves.

This appears to be because the penalty levels are set relatively low. In most cases, penalties for violations of the Act are imposed around 5 million KRW. Unlike fines aimed at recovering illegal profits in cases of major violations, penalty provisions are fines for rule violations. An FTC official explained, “Considering that most online shopping mall operators are small-scale businesses, imposing excessively high penalties could accelerate their bankruptcy.”

However, the FTC has decided to raise the penalty levels following criticism that the current penalties are too low. An FTC official stated, “At the time, the penalty levels were criticized for being too low and lacking legal deterrence. Accordingly, the FTC has reviewed raising penalty levels through research projects.” It is highly likely that the maximum penalty will be set at 10 million KRW, about twice the current maximum of 5 million KRW.

Additionally, the FTC will impose penalties on platforms that fail to provide information about tenant businesses to consumers as required by the Act. Article 20 of the Electronic Commerce Act requires platforms to provide consumers with the address, phone number, and other information if the seller is a corporate business.

This mandates the provision of seller information to secure consumer trust. However, the current law does not include provisions for imposing penalties if the information provision obligation is not fulfilled. An FTC official explained, “Since there is no penalty provision, only corrective orders are possible now,” adding, “We will add penalty provisions.”

Obligations to enhance transparency in managing increasingly important consumer purchase review transparency will also be included in the Act. Telecommunication sales operators and telecommunication sales 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.