1.

Platforms Regulated Under Proposed Large Retail Business Act Amendment

The KFTC’s plan specifies that qualifying online sales brokerage platforms – that is, online platforms that meet a certain size criteria and intermediate the sale or subscription of goods (including gift vouchers) and services between third-party sellers and consumers – will be regulated as “large-scale distributors” under the proposed Large Retail Business Act amendment.

Under the KFTC’s proposal, online platforms meeting the following thresholds will be subject to the Large Retail Business Act: a domestic sales revenue of at least KRW 10 billion from intermediating transactions (e.g., from sellers, advertisers) or intermediated transactions worth at least KRW 100 billion in total during the previous year. Online sales brokerage platforms include those engaged in open markets, hotel booking apps, delivery apps, app markets and mobility apps. Platforms that merely provide information without requiring subscription by or payment from consumers are excluded. This definition of an online sales brokerage platform is consistent with the definition provided for e-commerce sales brokers in the Act on Consumer Protection in Electronic Commerce (the “E-Commerce Act”).
 

2.

Separate Settlement Deadline for Online Platforms

The planned proposal would require regulated platforms, which either directly receive and manage payments from consumers or hire a payment gateway (“PG”) company to receive and manage such payments, to settle the sales proceeds with third-party sellers within 20 days of the purchase confirmation date. However, the proposal sets forth certain exceptions, given that the payment flow varies depending on the products or services provided and payment methods. For example, for services that are to be provided at a set date in the future (e.g., hotel booking, travel package, concert tickets), the KFTC’s plan would allow regulated platforms to settle payments within ten days from the date the consumer actually uses the service. If a platform (or PG) does not receive payment from a consumer within three days of the settlement deadline, the platform may settle the sales proceeds with the applicable seller within three days from the date the platform receives payment from the consumer.
 

3.

Safe Management of Sales Proceeds

The planned proposal would require regulated platforms that directly receive and manage payments from consumers to safely manage 50% of the sales proceeds, separate from their other financial assets, in the form of a deposit (in a separate account) or a payment guarantee insurance. Such sales proceeds may not be set off or seized and the platform is, in principle, prohibited from transferring or using such sales proceeds as collateral. The proposed Large Retail Business Act amendment also introduces a preferential right to payment so the amount payable to the sellers is protected even if the platform goes bankrupt.
 

4.

Ensuring Fairness and Transparency in Transactions

Regulated platforms would be subjected to certain existing obligations under the Large Retail Business Act, which are designed to ensure fairness and transparency in transactions between platforms and third-party sellers. Such obligations include those regarding the drafting and provision of contracts, adoption of model contracts, execution of agreements, dispute mediation and fact-finding surveys.

In addition, regulated platforms would be prohibited from engaging in certain types of unfair trade practices that currently apply to offline transactions, including coercion to bear promotional expenses, forcing exclusive transactions, requests for provision of management information, interference in management activities, request for provision of economic benefits, imposition of disadvantages and retaliatory conduct.