Sungwook Cho: "We will amend the Electronic Commerce Act to ensure consumers clearly know whether they are buying from the platform or the vendor"

"Amendment of the Electronic Commerce Act aims to modernize what was in the 'Paleolithic' era"
Require disclosure of whether search results are advertisements and the criteria for exposure ranking
The enactment and amendment of the On-Platform Fairness Act and the Electronic Commerce Act aim to create a win-win structure between platforms and tenant businesses

Chairman Seongwook Cho of the Fair Trade Commission (file photo)

[Sejong=Asia Economy Reporter Joo Sang-don] Cho Sung-wook, Chairman of the Korea Fair Trade Commission (KFTC), stated on the 5th, "We will amend the Act on Consumer Protection in Electronic Commerce, etc. so that consumers can clearly know whether they are purchasing goods from the platform or the tenant business."

On the same day, Chairman Cho appeared on TBS’s ‘Kim Eo-jun’s News Factory’ and spoke about the main contents of the proposed amendment to the Electronic Commerce Act that the Fair Trade Commission is promoting.

Chairman Cho explained the purpose of the amendment, saying, "Until now, the Electronic Commerce Act applied to communication service providers such as TV home shopping and mail order, so there was no consideration for mobile and platforms. Since platforms are responsible for order reception, payment, and delivery, consumers buy goods from tenant businesses on the platform but cannot accurately distinguish this."

He added, "The law was created in 2002 and is like being in the Paleolithic era; we want to update it to fit the modern era. Until now, there was no law regulating the transaction relationship between online platforms and tenant businesses, that is, the dominant-subordinate relationship. What the Fair Trade Commission has regulated through the Large-scale Distribution Act will now be applied online as well."

The Fair Trade Commission is promoting the amendment of the Electronic Commerce Act with these key points. After collecting industry opinions, it plans to disclose specific details soon through a legislative notice. The Commission intends to reorganize telecommunication sales under the existing legal framework into electronic commerce and newly introduce the concept of online platforms. In particular, regarding platforms, the amendment includes provisions such as: ▲when platforms operate both direct sales and intermediary transactions without distinguishing or misrepresenting this, ▲when the description of payment receipt and settlement services differs from reality, ▲supply of goods, contract issuance, and advertising under the operator’s name, ▲incurring damages during important tasks such as order reception, ▲and joint liability with tenant businesses if necessary measures are not taken for hazardous goods transactions within platforms above a certain scale.

Chairman Cho said, "We will also ensure that consumers can make rational choices by clearly indicating whether search results are advertisements," and "tenant businesses will be able to know the minimum criteria for search exposure ranking and commission determination."

The Fair Trade Commission is also promoting the enactment of the On-Platform Fairness Act (On-Platform Act) alongside the amendment of the Electronic Commerce Act. The Commission announced the legislative notice for the On-Platform Act in September last year and submitted it to the National Assembly after the Cabinet meeting at the end of last month.

Chairman Cho explained, "Until now, there was no law regulating the transaction relationship between online platforms and tenant businesses, that is, the dominant-subordinate relationship. The intention is to apply what the Fair Trade Commission has been doing through the Large-scale Distribution Act to the online environment as well."

He gave the example of the delivery application market. Chairman Cho said, "The delivery apps widely used by consumers are platforms, and the places selling various foods through them are tenant businesses. We want to regulate whether the platform-tenant business relationship is conducted according to proper rules," adding, "Without the On-Platform Act, platforms could abuse their superior position in transactions."

The On-Platform Act applies to businesses that provide services mediating transactions between tenant businesses and consumers through online platforms, with sales of 10 billion KRW or more and sales amounts of 100 billion KRW or more, as specified by enforcement ordinances. The Fair Trade Commission expects about 30 platforms including Naver and Google and 1.8 million tenant businesses to be subject to the law. The On-Platform Act mandates the preparation and delivery of contracts between platform operators and tenant businesses to prevent disputes. Contracts must include service details, compensation, service commencement, restrictions, suspension, changes, product exposure, and damage-sharing criteria. Also, when changing contract terms, tenant businesses must be notified in advance; service restrictions or suspensions require 7 days’ prior notice, and contract termination requires 30 days’ prior notice.

Chairman Cho said, "What the Fair Trade Commission pursues through the enactment and amendment of the On-Platform Act and the Electronic Commerce Act is the establishment of a fair digital economy, not just regulation," and "For the industry to grow properly in the long term, the win-win relationship between platforms and tenant businesses is important, so we aim to create this win-win structure."

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