Revision of Consumer Dispute Resolution Standards
Free Legal Consultations to Begin Next Year
The government has revised relevant regulations to allow for "no-show penalty fees" of up to 40%. Post-incident support measures, such as free legal consultations, have also been strengthened.
On January 1, the Ministry of SMEs and Startups announced the results of a survey on the no-show situation among small business owners and introduced support measures to prevent damages. According to the survey, "phone reservations" accounted for an overwhelming 95% of reservation methods at food service establishments. Reservations via Naver or Kakao accounted for 18%, while restaurant reservation applications (apps) made up about 5%.
Only 14% of establishments had implemented reservation deposits. In addition, 65% of respondents reported experiencing no-show damages within the past three years, and among affected establishments, the average number of no-show incidents over the past three years was 8.6. The average loss per incident was approximately 443,000 won.
Furthermore, 35% of respondents who suffered no-show damages proceeded with legal actions such as claiming compensation or filing lawsuits, indicating a significant burden of legal disputes.
In response, the Fair Trade Commission has revised and enforced the "Consumer Dispute Resolution Standards" (FTC Notice), raising the standard for no-show penalty fees. Previously, no-show penalty fees were limited to 10% or less of the total usage amount. Now, for general restaurants, the limit has been raised to 20%, and for reservation-based restaurants, up to 40% of the total usage amount.
Reservation-based restaurants refer to establishments such as omakase or fine dining restaurants that accept advance reservations and provide customized dishes for each customer. These restaurants are particularly vulnerable to no-show damages, as ingredients prepared in advance must be discarded on the day of the no-show, leading to greater losses from reservation cancellations.
However, in order to apply the revised penalty standards, business owners are required to notify customers of the standards through easily understandable means, such as text messages.
Free legal consultations will also be provided for affected establishments. The Ministry of SMEs and Startups will expand the scope of the "Unfair Trade Damage Counseling Center for Small Business Owners" to include no-show damages and will offer legal consultation services.
Additionally, the government plans to conduct regular annual surveys on no-show damages among small business owners, continuously monitoring characteristics by industry and region.
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