Specifying Reasons for Returns in Online Shopping Malls... Prohibition of Shifting Promotional Costs

Fair Trade Commission Establishes Key Review Criteria for Unfair Practices by Online Shopping Mall Operators

[Asia Economy Reporter Moon Chaeseok] The government has established guidelines to specify the criteria for determining when online shopping mall operators cannot refuse returns without justifiable reasons and to prohibit the shifting of promotional expenses onto suppliers.

On the 22nd, the Fair Trade Commission announced that it has prepared a draft of the "Guidelines for Reviewing Unfair Trade Practices by Online Shopping Mall Operators" and will open it for public comment until the 11th of next month. After gathering opinions from stakeholders during the public comment period, the guidelines will be finalized and implemented.

The draft includes ▲specifying criteria for justifiable reasons for returns ▲prohibiting the shifting of promotional expenses ▲prohibiting demands for management information such as cost from suppliers ▲prohibiting demands for monetary or other economic benefits ▲prohibiting unilateral changes to transaction conditions followed by notification.

Kwon Soon-guk, Director of the Distribution Transaction Division at the Fair Trade Commission, explained, "This draft is the first set of guidelines for reviewing unfair trade practices by distribution types since the guidelines for TV home shopping violations were established. It is expected to improve the rationality of law enforcement through criteria that reflect the characteristics of online transactions."

Source=Korea Fair Trade Commission

First, the draft specifies the criteria for determining "justifiable reasons" for returns beyond the presumed justifiable reasons stipulated by law.

Whether a reason is justifiable will be judged by considering prior agreements and their contents with suppliers, as well as the characteristics of the supply transaction. The shopping mall operator is responsible for proving this.

The draft prohibits the arbitrary shifting of promotional expenses onto suppliers.

It stipulates that a single written agreement can be made within a reasonably predictable period (for example, once per quarter). Currently, agreements are made each time a promotional event occurs, increasing transaction costs.

Promotional expenses are calculated by summing expenditures incurred during the event and lost revenue. Voluntariness is only recognized when the supplier independently plans the promotional event and requests the shopping mall operator to hold it.

The guidelines will take effect from January 1, 2022.

Source=Korea Fair Trade Commission

The draft clarifies the meaning of abstract supply conditions and cost information among management information stipulated by law.

Going forward, supply conditions must include supply price, quantity, timing, return conditions, manufacturer or supplier, and manufacturing methods.

Cost information refers to data related to the manufacturing cost (material costs, labor costs, transportation costs, etc.) or purchase cost incurred by the supplier in supplying the product.

Source=Korea Fair Trade Commission

Additionally, the draft includes subsidies, performance bonuses, donations, and other economic benefits in the scope of "economic benefits" to prevent shopping mall operators from arbitrarily requesting them from suppliers.

When assessing the "justifiable reasons" for requests to provide economic benefits, prior agreements with suppliers and the relevance between product sales and economic benefits will be comprehensively considered.

Source=Korea Fair Trade Commission

Sales incentives are only permitted when they are related to sales promotion purposes and also beneficial to suppliers.

The draft also prohibits unfair acts such as shopping mall operators unilaterally changing transaction conditions with suppliers and then notifying them afterward.

Director Kwon said, "The draft will provide shopping mall operators in the rapidly growing online market with an opportunity to voluntarily correct unfair trade practices and contribute to establishing a digital fair economy order in the future."

This content was produced with the assistance of AI translation services.