On March 26, 2024, the Korea Fair Trade Commission (“KFTC”) issued a legislative notice over a partial amendment to the Act on the Protection of Consumers in Electronic Commerce (“E-Commerce Act”) to introduce the local agent system and the consent decree system (the “Proposed Amendment”). The purpose of the Proposed Amendment is to address the need to (i) protect consumers of overseas companies that do not have an address or business place in Korea, and (ii) provide timely remedies to consumers who suffered damages caused by an overseas company’s violation of the E-Commerce Act.
The KFTC has announced that it plans to collect public opinions on the Proposed Amendment until May 7, 2024, and will thereafter push forward with completing the amendment process. As the amendment process is likely to gain momentum after the 22nd parliamentary election (early April), close monitoring over the developments and progress of the Proposed Amendment is advised.
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Obligation for Overseas Entities of a Certain Size to Designate a Local Agent
According to the Proposed Amendment, an overseas entity with a size greater than a certain size (determined based on sales, number of users, etc.) is required to designate a local agent. Details of the local agent designation obligation, their duties and sanctions for violation are as follows:
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The local agent must have an address or a place of business in Korea, and its name, address, telephone number, and e-mail address must be disclosed on its website, etc.
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The local agent is responsible of being served with documents and to submit relevant materials, objects, etc., in connection with investigations by the KFTC over a violation of the E-Commerce Act.
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The local agent must to perform the consumer protection obligations imposed on online retailers and online sales brokers in relation to consumer complaints and disputes pursuant to the E-Commerce Act.
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If the local agent fails to comply with the above obligations, the overseas entity that designated the local agent may be subject to corrective measures and administrative fines for a violation of the E-Commerce Act.
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Introduction of Consent Decree System
The Proposed Amendment will introduce a consent decree system to ensure timely and effective remedies to consumers suffering damages caused by a violation of the E-Commerce Act.
According to the Proposed Amendment, an entity that is being reviewed by the KFTC for a violation of the E-Commerce Act may apply for consent decree and propose its own corrective measures. In this instance, the KFTC may approve the application and suspend its review if it is recognized that (i) there is an appropriate balance between the applicant’s obligations under the proposed corrective measures and the anticipated sanctions that could be imposed on the applicant (if the KFTC were to impose sanctions for a legal violation), and (ii) such corrective measures are expected to bring about consumer protection-related effects. However, if the applicant fails to implement the terms of the consent decree within a reasonable period without justifiable reason, the KFTC may impose a separate “non-performance penalty.”
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In light of the recent emphasis and drive on the need to strengthen protection for users of overseas online platforms, various Korean regulatory agencies, including the KFTC, have expressed their intent to strengthen regulations and engage in active enforcement over overseas entities, and the Proposed Amendment could be said to be one of such policy directives. If implemented, the local agent designation obligation under the Proposed Amendment is expected to have a particularly substantial impact on overseas online service providers operating in Korea, as it could create an avenue for domestic regulators to more easily investigate overseas online platforms and could also increase the likelihood for regulators to directly impose legal liability on overseas online service providers. To that end, overseas online service providers are advised to closely monitor the legislative and regulatory developments.
[Korean Version]
