On March 5, 2021, the Korea Fair Trade Commission (the "KFTC") released its proposed bill to amend the Act on Consumer Protection in Electronic Commerce Transactions (the "E-Commerce Act").  With the release of the bill, the public comment period on the amendment bill has begun, which will end on April 14, 2021.  

The bill is the KFTC's first attempt to overhaul the E-Commerce Act since it was enacted in 2002, with the intent to better reflect the realities of the current e-commerce market in which online platforms play a central role.  Below is a summary of the bill. 

1.   Reclassification of Regulated Business Models

Under Article 2 of the amendment bill, online businesses are classified into: (i) platform operators, (ii) platform-using business operators, and (iii) independent online mall operators.  Platform operators are further classified into (a) information media platforms, (b) platforms providing connectivity, and (c) brokerage platforms.  The classifications are summarized below: 

2.   New Consumer Protection Requirements for Platform Operators and Online Sellers

The amendment bill requires platform operators and online sellers to undertake measures that are intended to prevent deceptive conduct through manipulation of search results, user reviews, online advertising, and other features that influence consumer choice.  Further, the amendment bill requires them to cooperate with product recalls to prevent distribution of harmful products.  

• Search Results (Article 16): When showing search results, platform operators and online sellers must clearly distinguish advertisements and show the key criteria for ranking the search results shown. 

• User Reviews (Article 16): Platform operators and online sellers must disclose the methodology used to collect and process user reviews if they use online boards for user reviews.  

• Notice of Targeted Advertising (Article 18): If a website or app displays advertising that targets consumers based on their preferences or other characteristics, platform operators and online sellers must notify their users in advance the substances of such targeted advertisement and how the targeted advertisement is conducted. The users must be given the option to receive or reject targeted advertising. 

• Duty to Cooperate with Product Recalls and Other Remedies (Article 20): Platform operators and online sellers must cooperate to implement any product recall order, including recovery, collection, and destruction of the recalled products in accordance with relevant regulations. 

3.   Additional Requirements for Platform Operators

• Direct Sales vs. Third-Party Sales (Article 24): Brokerage platform operators must clearly distinguish between products sold directly versus third-party sales (i.e., products sold by third-party sellers who sell on the platform).  Further, if a brokerage platform operator performs any tasks typically performed by the seller (e.g., receiving orders and payments, delivery, and processing refunds), it must notify the consumers of such. 
  
  If a brokerage platform operator fails to distinguish between direct sales and third-party sales and any consumer injury results from a seller’s misconduct or negligence, the platform operator may be held jointly and severally liable for damages.  

• Joint and Several Liability for Platform Operators (Article 25): Under the current E-Commerce Act, in principle, brokerage platform operators are exempt from liability if they clearly notify the consumers that they are not a party to the relevant e-commerce transaction.  However, under the amendment bill, even if a brokerage platform operator provided that notice, it may face joint and several liability with the seller if its actions caused a consumer to misunderstand its role and responsibilities. 
  
  Further, a brokerage platform operator may be jointly and severally liable for any consumer injury caused by a seller’s misconduct or negligence if (i) the platform operator was directly involved in the transaction (e.g., by showing, advertising, or supplying the goods or services, or issuing the purchase contract under the platform operator’s own name), or (ii) the platform operator’s own misconduct or negligence in the course of performing important tasks (e.g., receiving orders and payments and processing refunds) contributed to the consumer injury.   

4.   Others

• Extraterritoriality and Designation of Domestic Representative by Overseas Business Operators (Articles 5 and 19): The amendment bill contains a provision for extraterritorial application of the E-Commerce Act to acts that occurred overseas and affect domestic consumers.  Also, overseas business operators that meet a prescribed size threshold but do not have a local presence must designate a domestic representative to address and resolve consumer claims and complaints. 

• Cancellation of Made-to-Order Products (Article 12): Currently, the Enforcement Decree to the E-Commerce Act contains a provision for limiting consumers' right to cancel orders for made-to-order products. The amendment bill contains that same provision and further clarifies the requirements for limiting the right to cancel "where resale to other consumers is objectively impracticable because the product was clearly ordered specifically for the relevant consumer and intended for use only by the relevant consumer."  

• Duty to Provide Vendors’ Personal Information to Consumers (Article 3): Under the current E-Commerce Act, delivery app operators are exempt from the duty to provide the vendors' personal information to the consumers.  The amendment bill eliminates that exemption.  The scope of the personal information to be provided is to be set forth in the Enforcement Decree to the E-Commerce Act. 

• Duty to Provide C2C Platform Members’ Personal Information in a Dispute: C2C platform operators who act as intermediaries between individual sellers and buyers must collect their personal information and make that information available in case of a dispute between the transacting members.  

• Establishment of a Consumer Dispute Mediation Committee (Article 35 and Others): The amendment bill allows the KFTC to establish a consumer dispute mediation committee for efficient resolution of e-commerce disputes. 

• Introduction of a Consent Decree System and Industry Surveys (Articles 53 and 60 and Others): The amendment bill allows the KFTC to enter into consent decrees with infringing companies to provide prompt and effective relief to the affected consumers.  Also, the KFTC may conduct factual surveys of the e-commerce industry to identify and address any emerging issues or trends.   

• Enhancement of the Preliminary Injunction Order System (Article 64): The amendment bill relaxes the requirements for consumers to obtain a preliminary injunction order from a court and offers more varied forms of remedy (e.g., cease and desist order, business suspension, and removal of certain commercial languages from advertising materials). 

After the public comment period, the amendment bill will undergo various stages of review—including by the Regulatory Reform Committee, the Office of Legislation, Vice-Ministerial Meetings, and Cabinet Meetings—before being submitted to the National Assembly for enactment. 

[Korean version]