On March 5, 2021, the Korea Fair Trade Commission (the “KFTC”) announced an overall amendment of the Act on the Consumer Protection in Electronic Commerce, Etc. (the “E-Commerce Act”). Enacted in 2002, the current E-Commerce Act focused on traditional mail order transactions. The proposed amendment to the E-Commerce Act (the “Proposed Amendment”) aims to shift the focus to online platform transactions and strengthen consumer protection in e-commerce.
Main elements of the Proposed Amendment are set out below.
1. Reclassification of businesses subject to the E-Commerce Act (Article 2): introduction of the term “online sellers” replacing previous “mail order sellers”
The classification of businesses subject to the current E-Commerce Act will no longer be used. Rather, the Proposed Amendment classifies relevant businesses into (i) platform operators (e.g., social network services, C2C used goods markets, open markets, delivery applications, etc.) (ii) platform-using business operators (e.g., vendors using open markets and other sellers using social network service platforms), and (iii) independent online mall operators (e.g., operators of home shopping web sites, online shopping malls and individual shopping malls). Platform-using business operators and independent online mall operators are collectively referred to as “online sellers” (Subparagraph 1 of Article 6).
Under this new classification, online sellers are defined as those who sell goods, etc. to consumers by entering into sale agreements “directly” with such consumers, and platform operators are those that serve as intermediary brokers between platform-using business operators and consumers. The Proposed Amendment reorganizes the E-Commerce Act from mail order transaction basis to non-contact e-commerce transactions basis, and recognizes platform brokerage transactions as the main transaction subject to the E-Commerce Act.
2. Enhancing information access for consumers (Articles 16 and 18): a variety of disclosure obligations
3. Making platform operators actually responsible (Article 25): joint and several liabilities of platform operators
Under the Proposed Amendment, a platform operator who (i) causes consumers to misunderstand that it is a party to relevant transactions or (ii) inflicts damages upon consumers in connection with the platform operation, such platform operator may become jointly and severally liable with the platform-using business operator. Consumers may choose to seek indemnification against either the platform operator or platform-using business operator.
4. Consumer protection in e-commerce transactions between individuals (Article 29): potential risk of violating privacy
Under the Proposed Amendment, when the seller is not a business but a natural person, the relevant platform operator must confirm the seller’s personal information (e.g., the name, phone number, address, etc.), and in the event of any dispute between the seller and the buyer, the platform operator must provide its support to resolve such dispute by making the seller’s personal information available to the buyer (Paragraph 1 of Article 29).
Considering the global regulatory trend of reinforcing regulation of online platforms and a proposed bill for Fair Online Platform Intermediary Transactions Act endorsed by the Presidential Cabinet, it is likely that these main features of the Proposed Amendment will remain unchanged.
However, the Proposed Amendment has also faced criticism. Pundits say certain provisions of the Proposed Amendment are unrealistic and that there are potential risks of privacy violation. It will be noteworthy to observe how the Proposed Amendment, its enforcement decree and relevant agency guidelines will ultimately pan out in response to such criticism.
