This Year's Fair Trade Commission Work Keyword is 'Platform'... "We Will Realize a Digital Fair Economy"

Fair Trade Commission, 2021 Business Report

Platform Fair Trade Act and Electronic Commerce Act Amendments
Establishment of Guidelines for Review of Unilateral Acts in the Online Platform Sector

Distribution of Standard Contracts to Protect Platform Workers
Active Correction of Influencer Undisclosed Advertising Left Unaddressed

PEF Dedicated Groups Excluded from Designation as Large Business Groups

Kim Jae-shin, Vice Chairman of the Fair Trade Commission. (File photo)
[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has decided to focus its capabilities this year on establishing fair trade in platforms. To this end, the recently subdivided ICT (Information and Communication Technology) special task force, divided into app market and O2O (online-to-offline) sectors, will strengthen monitoring of unfair practices by domestic and foreign platform operators, and also create review guidelines related to the Online Platform Fair Trade Act.

On the 22nd, the FTC announced its 2021 work plan containing these details.

The FTC set the vision of its work plan as "a vibrant and warm market economy rooted in fairness," with key strategies including ▲ embedding a fair economy throughout the entire economy and expanding it to the digital economy ▲ creating a market environment where innovative companies grow and the rights of vulnerable groups are protected ▲ establishing a fair culture that the public and consumers can feel.

The FTC presented "establishing a fair trade order in the digital economy sector" as the first task in this year's work plan. This means setting basic norms for realizing a digital fair economy. Specifically, to build a fair and innovative platform ecosystem through win-win cooperation between platform operators and tenant businesses, the FTC plans to enact the "Online Platform Fair Trade Act." Kim Jae-shin, FTC Vice Chairman, explained, "The Online Platform Act prepared by the FTC was reviewed at the vice ministerial meeting on the 21st and will be discussed at the Cabinet meeting on the 26th. The government bill is expected to be submitted to the National Assembly within this month."

The Platform Fair Trade Act regulates unfair practices between platform operators such as Google, Naver, and various delivery applications, and tenant businesses. Due to the transition to a digital economy, the surge in non-face-to-face transactions caused by COVID-19, and market concentration accelerated by network effects, unfair trade in the online platform sector has become a reality. However, existing policy tools have limitations in effectively responding, so a separate law to regulate this is deemed necessary. In fact, online platforms, as intermediaries, are not subject to the Large-Scale Distribution Business Act, and the Fair Trade Act lacks provisions requiring contract provision and standard contracts to prevent disputes and improve transaction practices.

Accordingly, the Platform Fair Trade Act obligates platform operators to prepare and provide contracts to tenant businesses, transparently disclosing transaction conditions to prevent disputes in advance, and mandates that key items be compulsorily stated in the contracts. It also concretizes and applies the prohibition of abuse of superior bargaining position under the existing Fair Trade Act to fit the characteristics of the platform industry.

Along with this, the FTC will assign consumer protection responsibilities to platform operators commensurate with their level of involvement in transactions and will push for a comprehensive revision of the "Electronic Commerce Consumer Protection Act" to strengthen damage prevention and relief.

The FTC also plans to strengthen the protection base for vulnerable groups due to the digitalization of the economy. It will establish a foundation to prevent damage and protect the rights of small business owners such as franchisees and agencies affected by online sales by franchisors and suppliers. Specifically, for franchisees, it will mandate disclosure of the proportion of online sales in the information disclosure document, grant franchisees the right to negotiate online transaction conditions, and allow closure without penalty if sales decrease due to the franchisor's online sales. Additionally, if suppliers sell online below the agency supply price, agencies will be granted the right to request price adjustments, and the FTC will closely monitor suppliers' prohibitive acts against agencies' online sales. To protect platform workers such as delivery and courier drivers, contracts will be reviewed for voluntary correction, and the distribution of standard contracts will be promoted.

The FTC will also work to create a safe non-face-to-face transaction environment. It plans to correct deceptive practices such as automatic payment without additional notice after free trials convert to paid subscriptions, undisclosed advertising using influencers, and manipulation of review boards. It will also inspect acts such as charging delivery fees for order cancellations before shipment in online malls, and correct unfair terms and conditions such as refund restrictions upon mid-term cancellation by domestic and foreign online video service (OTT) providers.

The FTC will also strive to create an inclusive market environment where the parties cooperate and coexist. To strengthen voluntary cooperation and win-win foundations between large and small-medium enterprises, it will expand fair trade agreements, which have been concentrated on large corporations, to mid-sized and small businesses. It will also launch a win-win agreement campaign based on voluntary participation involving all distribution companies in areas such as ▲ lowering sales commissions ▲ exemption of minimum guaranteed commissions and minimum rents ▲ early payment of funds ▲ advertising support. To enhance the bargaining power of the weaker party, the FTC will grant the Korea Federation of SMEs the right to negotiate payment adjustments and introduce a reporting system for franchisee groups and the right to form agency business groups. It will also mandate franchisors to have "at least one directly operated store" and "operate for more than one year," and impose obligations on small franchisors to register information disclosure documents and deposit franchise fees.

The FTC will continue monitoring to establish sound ownership and governance structures and transaction order in large business groups. It will correct unfair internal transactions mainly in sectors closely related to daily life such as catering and alcoholic beverages, and continue monitoring mid-sized business groups with competition restrictions comparable to large business groups. It will also discover new disclosure items related to governance such as executive status and operation of written and electronic voting systems, and subdivide disclosure items related to internal transactions by asset type to promote transparent ownership and governance structures. However, private equity fund (PEF) dedicated groups are considered to pose low risk of economic concentration and will, in principle, be excluded from designation as large business groups, and the requirement for independent management of executives will be relaxed.

Vice Chairman Kim said, "Over the past four years, the FTC has improved the transaction conditions and bargaining power of the weaker party in vulnerable areas such as subcontracting, franchising, distribution, and agencies to establish a warm and inclusive relationship between the stronger and weaker parties, strictly punished the tyranny of the stronger party, and worked to create a voluntary win-win culture. This year, we will further expedite and streamline case processing through improvements in the case handling system and working methods, and dramatically strengthen the functions of the Fair Trade Mediation Agency, including fair trade policy research, spreading fair trade culture, and comprehensive support for small business owners, to enhance policy quality."

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