On September 28, 2020, the Korea Fair Trade Commission (the “KFTC”) introduced a proposed bill titled the Fair Online Platform Intermediary Transactions Act (the “Proposed Bill”).  The Proposed Bill is intended to address the growing concern that the existing legal framework under the Monopoly Regulation and Fair Trade Law (the “FTL”) may be inadequate to tackle competition issues arising in the online platform sector, in light of the growing prominence of the digital economy and e-commerce.  

The Proposed Bill will undergo a 40-day public comment period from September 28, 2020 to November 9, 2020.  Subsequently, the KFTC will review the comments received, amend the Proposed Bill as necessary, and submit it to the legislature for deliberation and voting.  Below is a summary of the key contents of the Proposed Bill.  

Subject Companies 

• Scope of services: The Proposed Bill will apply to “services intermediated by online platforms,” which it further defines as “services intermediating the initiation of exchanges of services and products between platform users and consumers.”  The specific types of intermediary services to be regulated are to be set forth in the Presidential Decree for the new statute. 

• Revenue/transaction threshold: The Proposed Bill will apply to online platform operators of a certain size.  The threshold amount, within the range of KRW 10 billion in total annual revenues or KRW 100 billion in total intermediary transaction amount, is to be set forth in the Presidential Decree. 

• Local nexus: Given the cross-border nature of online platform services, the Proposed Bill explicitly provides for extraterritorial application of the law regardless of where the operator is located or incorporated, as long as the operator intermediates transactions between Korean sellers using the online platform and consumers in Korea. 

Requirements 

• Written contract: Online platform operators subject to the Proposed Bill must provide to the sellers and execute a written contract containing the key contract terms (including, but not limited to, any exclusivity or other provision that restrict a seller’s ability to use other platforms, terms governing price, volume, delivery, sales and payment methods, and terms that address the scope and method of sharing information with the sellers generated during the use of the online platform). 

• Notice obligation: Subject online platform companies must provide notice to the sellers before amending any contract terms or restricting, suspending, or terminating any of their services. 

• Prohibition of unfair trade practices: The Proposed Bill has incorporated certain FTL provisions regarding prohibited conduct under abuse of superior bargaining position.  Such forms of prohibited conduct against the counterparty include forcing purchase of unwanted goods/services, demanding economic benefits, imposing economic disadvantages or unfavorable contract terms, and interfering with the counterparty’s management of its business.  All other FTL provisions, including those prohibiting abuse of market dominance and unfair trade practices other than abuse of superior bargaining position, will continue to apply to online platform operators. 

Sanctions and Other Enforcement Mechanisms 

• In the spirit of not hindering innovation, the Proposed Bill provides for reduced scope of criminal penalties, but higher administrative fines. 

• The Proposed Bill provides for a consent decree system to allow companies to voluntarily address and correct any violations. 

• A dispute mediation council is to be established under the auspices of the Korea Fair Trade Mediation Agency (“KOFAIR”) which can mediate disputes between online platform operators and users. 

• The Proposed Bill provides a statutory basis to conduct written surveys of the online platform sector.  As the sector continues to grow, the KFTC will likely be conducting surveys to promptly identify and address any competition issues that may arise in the future. 

[Korean version]