Revision of Consumer Dispute Resolution Standards
Free Legal Consultations to Begin Next Year
The government has revised relevant regulations to allow businesses to charge consumers up to 40% in penalties for no-shows. From next year, follow-up support measures will also be strengthened, including free legal consultations for affected establishments.
On January 1, the Ministry of SMEs and Startups announced the results of a survey on no-shows affecting small business owners and introduced support measures to prevent such damages. According to the survey, 'phone reservations' accounted for an overwhelming 95% of all reservation methods at dining establishments. Reservations made through Naver or Kakao accounted for 18%, while restaurant reservation applications (apps) accounted for 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. For 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 stated that they had pursued legal action, such as claiming damages or filing lawsuits, after suffering no-show damages, indicating that the legal burden of such disputes is significant.
In response, the Fair Trade Commission has revised and enacted the 'Consumer Dispute Resolution Standards' (FTC Notice) and decided to raise the penalty standards for no-shows. The penalty for no-shows, previously capped at 10% of the total amount, has been increased to up to 20% for general restaurants and up to 40% for reservation-based restaurants.
Reservation-based restaurants refer to establishments such as omakase and fine dining venues that accept advance reservations and provide customized dishes for each customer. These restaurants suffer relatively greater losses from reservation cancellations, as ingredients prepared for the day must be discarded if there is a no-show.
However, to apply the revised penalty standards, business owners must notify customers of the standards in an easily understandable manner, such as via text message.
Free legal consultations for affected establishments will also be implemented. Starting next year, the Ministry of SMEs and Startups will expand the scope of its 'Unfair Trade Damage Counseling Center for Small Business Owners' to include no-show damages and provide legal consultations.
In addition, the government plans to conduct regular annual surveys on no-show damages among small business owners to continuously monitor characteristics by industry and region.
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