[Counterfeit Onslaught]⑨US Trade Tensions Stall 'Counterfeit Blocking Law' in National Assembly

Fair Trade Commission’s ‘Platform Local Agent Designation System’ Stalled in National Assembly
Wave of Bills to Strengthen E-Commerce Platform Accountability
Brand Companies: "Welcome" ... E-Commerce Platforms: "Excessive"

Editor's NoteThe global counterfeit market is worth 2,000 trillion won. Fake products have become more sophisticated, and their distribution is bolder than ever. It is not only high-end luxury brands that suffer. While consumers remain silent about counterfeit goods, K-brands expanding into global markets are being copied in the same way. Local brokers are preemptively registering trademarks, blocking market entry, and companies are being frustrated by enormous legal costs. In the borderless online marketplace, there are clear limits to crackdowns and monitoring. Asia Economy investigated the reality of the counterfeit market, which has grown explosively since the COVID-19 pandemic, and explored countermeasures to prevent copycat products of K-brands that have made waves in the global market.

Institutional reforms aimed at eradicating the cross-border online counterfeit market have stalled one after another. Legislation to strengthen the responsibility of e-commerce platforms, which have become the main channels for counterfeit sales in recent years, has been pursued, but key government measures such as the mandatory appointment of local agents for overseas online sellers have faced pressure from the United States under the Trump administration's "Make America Great Again" (MAGA) policy.

Several bills have also been introduced to impose joint liability on counterfeit-selling intermediary platforms, targeting Chinese e-commerce (C-commerce) platforms such as Aliexpress and Temu, which are expanding their presence in the Korean market. However, these bills remain pending in the National Assembly. Industry stakeholders are urging an urgent amendment to the Trademark Act to require e-commerce platforms distributing counterfeit goods to block them swiftly.

The 'Local Agent Appointment System' Bill Stalled in the National Assembly

According to the National Assembly's legislative information system on September 12, the amendment to the Electronic Commerce Act submitted by the Fair Trade Commission in August last year has not been discussed even once since it was referred to the second bill review subcommittee of the National Assembly's Political Affairs Committee in December last year.

The core of the amendment is the introduction of a local agent appointment system for overseas sellers. This system would require overseas e-commerce platforms without a domestic address or business office to appoint a local agent in Korea, who would be compelled to take necessary actions to resolve consumer complaints or disputes. If violated, a fine of up to 10 million won would be imposed. Overseas e-commerce companies such as Aliexpress, Temu, and Shein would be subject to this regulation.

The Fair Trade Commission believes that if the local agent appointment system is implemented, it will enable more proactive remedies and smoother investigations for disputes and consumer damages arising from transactions on overseas platforms. Until now, the number of complaints has increased every year due to inadequate consumer protection policies by overseas e-commerce platforms. According to the Korea Consumer Agency, the number of international transaction consumer consultations reached 22,816 last year, up about 18% from 19,418 the previous year. Compared to 14,000 cases in 2021, this is nearly a twofold increase.

At the bill review subcommittee of the National Assembly's Political Affairs Committee held on December 3 last year, the then-ruling People Power Party called for the local agent appointment system to be handled as a single issue, but Democratic Party lawmakers insisted on processing the comprehensive amendment to the Electronic Commerce Act as a whole, resulting in the postponement of discussions. No concrete discussions took place at the bill review subcommittee held in February this year either.

It appears that the United States' initiation of tariff wars with countries around the world following the launch of the Trump administration has also hindered the progress of this bill. According to the review report on the amendment submitted by the government, the American Chamber of Commerce in Korea (AMCHAM) expressed opposition, stating that the amendment requires local agents to fulfill not only procedural obligations but also substantive obligations as telecommunication sellers or intermediaries, effectively forcing foreign businesses to establish a real business presence in Korea.

There was also an opinion that it is highly likely to violate the "prohibition of local presence requirements" principle under the Korea-US Free Trade Agreement (FTA). Article 12, Paragraph 5 of the Korea-US FTA stipulates, "Neither Party may require a service supplier of the other Party to establish or maintain a representative office or any form of enterprise, or to be resident in its territory, as a condition for the cross-border supply of a service."

Wave of Laws to Strengthen E-Commerce Platform Liability

In the National Assembly, several bills have been submitted to strengthen the liability of e-commerce platforms for counterfeit sales, including the local agent appointment system.

Since the start of the 22nd National Assembly, seven amendments to the Electronic Commerce Act have been introduced to strengthen the liability of e-commerce companies for the distribution of counterfeit goods, and three amendments to the Trademark Act have been proposed to require e-commerce companies to take active measures to prevent the sale of counterfeit goods.

Assemblyman Choo Kyungho of the People Power Party sponsored an amendment to the Electronic Commerce Act last month, C2C(consumer-to-consumer) transactions, which would require e-commerce platforms acting as intermediaries to verify identities, cooperate in disputes, and notify consumers. The idea is that even if counterfeit goods are distributed by individual sellers on the platform, the platform must not neglect its management and supervision responsibilities.

Assemblyman Song Jaebong of the Democratic Party also introduced an amendment to the Electronic Commerce Act, imposing obligations on e-commerce platforms to monitor for counterfeit sales and stipulating that platforms should be jointly liable for damages to consumers caused by sellers' deceptive acts. A staff member from Song's office said, "After the TMON and Wemakeprice (Timapeu) incidents, there was a consensus on the need to reduce consumer damage related to e-commerce, and we believe legal measures are necessary for consumer protection, as self-regulation has been insufficient so far."

Assemblyman Lee Cheolkyu of the People Power Party and Assemblyman Kim Jeongho of the Democratic Party, among others, have proposed amendments to the Trademark Act to define e-commerce platforms as online service providers and hold them liable for trademark infringement. This is to strengthen the protection of rights such as trademarks. The bill is based on a 2012 Supreme Court precedent, which states that if the illegality of a trademark-infringing post is clear, the operator of an open market has been requested by the victim to delete or block the post, or if the existence of the post is clearly recognizable, the product must not be sold.

The e-commerce platform industry is pushing back, calling the regulations excessive. They claim that they are already using their own artificial intelligence (AI) systems to strengthen monitoring and are actively taking measures such as suspending sellers who distribute counterfeit products, but it is still not enough to eradicate the vast number of counterfeits. An e-commerce industry official said, "We are using AI 24/7, 365 days a year and mobilizing every possible means to block counterfeits, but counterfeit sellers simply obtain new business registrations and return to the platform," adding, "If platforms are held jointly liable for the actions of a small number of counterfeit sellers, it will inevitably shrink the business."

K-brand companies argue that platform liability must be strengthened. They emphasize that even small and medium-sized K-brands are seeing their products counterfeited and distributed through e-commerce, so more proactive measures are necessary. A representative from a brand, who requested anonymity, said, "Monitoring for counterfeits is a role that e-commerce platforms should naturally fulfill," adding, "Since platforms also have information on sellers, when problems arise due to counterfeits, there needs to be strengthened liability so that consumers and brands can resolve and address issues immediately."

<End of the Counterfeit Invasion>