[Law & Story] Class Actions: Victim Relief vs. Corporate Accountability

Debate on Class Action System Reignited by Coupang Incident
Strengthening Corporate Accountability vs. Increasing Corporate Burden
Need to Consider Compromise Solutions Such as Opt-In System

Seokjin Choi, Law & Biz Specialist

The introduction of a class action system is being reignited in light of the "Coupang incident," in which the personal information of over 33 million customer accounts was leaked.

A class action is a system in which, if some victims among a large group who suffered damages from the same cause file a lawsuit and win, the effect of the ruling applies to all victims. In South Korea, the class action law has been in effect since 2005, but only in the securities sector. However, due to strict requirements and complicated procedures, it has not been actively utilized.

Among the 38 member countries of the Organisation for Economic Co-operation and Development (OECD), only South Korea, Switzerland, and T?rkiye do not have a collective monetary compensation system. However, Switzerland allows the transfer of claims for monetary compensation, which effectively achieves the effect of class actions, and T?rkiye allows a wide range of injunctions, including confirmation of illegality and prevention of future violations, in addition to cessation of infringement. In contrast, under South Korea's Consumer Protection Act and Personal Information Protection Act, group litigation only allows for claims to prohibit or suspend illegal acts. This is why South Korea is often referred to as "last place" among OECD countries in this regard.

The discussion on introducing a class action system in South Korea has been ongoing for a long time. After former President Moon Jae-in, who had pledged to introduce class actions during the 2017 presidential election, was elected, then-Fair Trade Commission Chairman Kim Sang-jo announced plans to actively pursue its introduction. More than ten bills were proposed in the 21st National Assembly but were discarded upon expiration of the term. In the 22nd National Assembly, five class action bills have already been proposed. In 2020, the Ministry of Justice also issued a legislative notice for a class action law. President Lee Jaemyung has also recently stated, "We should consider introducing class actions."

Despite being an efficient system for remedying small-scale and large-scale damages, class actions have not materialized in South Korea because they could impose a significant burden on companies.

For example, in the current Coupang incident, about ten law firms are recruiting plaintiffs while only charging legal fees at the level of litigation costs, but the number of participants is only a tiny fraction of the total affected customers. Most victims hesitate, weighing the opportunity cost of participating in a lawsuit. If class actions were possible, once some victims filed and won a lawsuit, all of the approximately 33.7 million victims-except those who opted out through a declaration of "not being bound by the court's decision"-would have been eligible for compensation. Even if the compensation per person were recognized as only 100,000 won, Coupang would have to pay several trillion won in total.

At a seminar on class actions held on December 15, a dispute mediation committee member said, "A class action system must be in place for dispute mediation to proceed properly." This means that companies, which have so far rejected mediation proposals and been passive in remedying damages because they expected lawsuits, would fundamentally change their attitude.

While there is optimism that introducing a class action system can strengthen corporate accountability and prevent recurrence, it is also understandable that companies have a phobia that "if an American-style class action system with opt-out and punitive damages is introduced, companies could go bankrupt."

The National Assembly Research Service, in an issue analysis report published at the end of last month, cited "coordination with already existing various sanctions and remedies" as a prerequisite for introducing a class action system. Considering the excessive burden on companies, it is necessary to coordinate so that, in cases where private enforcement through civil damages is more appropriate than public sanctions such as fines, fines are not imposed.

Just as one meal does not fill you up, it may be worth considering the adoption of an opt-in method, allowing remaining victims to participate when the trial reaches a certain stage or after a ruling is rendered. The important thing is to find a balance between prompt relief for victims and corporate accountability.