Rapid Growth of 'Luxury Platforms' Leads to Increased Complaints and Disputes... 4 Out of 10 Cases Involve Contract Cancellations or Returns

Different Applications of E-Commerce Law for Returns and Refunds
Must Agree to No Returns Before Purchase, Some Policies Allow Returns Only Within 24 Hours After Receiving Product
Return Eligibility and Period Vary by Product and Seller on the Same Platform, Causing Confusion

[Asia Economy Reporter Lim Cheol-young] As ‘luxury platforms’ that sell luxury goods cheaper than department stores through overseas purchasing agencies have recently gained popularity, the sales of these companies have rapidly grown, along with an increase in consumer damages and disputes. The Seoul Metropolitan Government plans to conduct consumer damage monitoring and investigations for the first time and will issue improvement recommendations and impose fines.

According to Seoul City on the 10th, the sales of four major overseas luxury purchasing platforms showed a rapid growth trend, increasing from 27.9 billion KRW in 2019 before the COVID-19 outbreak to 57 billion KRW in 2020, and 100.8 billion KRW last year.

In fact, consumer damages and disputes related to withdrawal restrictions on these luxury platforms have been steadily occurring. From April last year to March this year, a total of 813 related consultations were received (776 at the 1372 Consumer Counseling Center and 37 at the Seoul Electronic Commerce Center). The main types of damages and disputes were mostly related to ‘contract cancellation, returns, and refunds (42.8%),’ followed by product defects and faults (30.7%), and contract non-fulfillment (12.2%).

Luxury platform products are generally classified into domestic delivery and overseas delivery through purchasing agencies. Recently, luxury platforms with many consumers operate under a ‘telecommunication sales brokerage’ structure where multiple sellers enter and sell products.

According to monitoring results of major luxury purchasing platforms conducted by Seoul City, when operated as a telecommunication sales brokerage type (open market), the platform must indicate on the initial screen that the company is not a party to the telecommunication sales contract according to the Electronic Commerce Act, so that consumers can easily confirm this. However, some companies did not display that they are not a party to the transaction on the platform’s initial screen.

Also, under the Electronic Commerce Act, telecommunication sales brokers must provide consumers with the identity information (business name, representative’s name, address, phone number, business registration number) of the telecommunication sales principal (seller) for reference when purchasing. However, some platforms either did not display the seller’s business information or only partially displayed it.

According to the Electronic Commerce Act, withdrawal due to simple change of mind must be possible within 7 days, but standards varied by company. Although the terms of use stated that returns are possible within 7 days after receiving the product, FAQs or product pages indicated that certain items such as swimsuits and accessories are non-returnable, or provided guidance that shortened the return (withdrawal) period to less than the 7 days stipulated by the Electronic Commerce Act.

Meanwhile, by applying their own terms of use, some platforms informed that pre-notified or final sale products cannot be canceled after shipment, and that only some products shipped from overseas to Korea are returnable. Seoul City plans to request companies operating as telecommunication sales brokerage types (open markets) with multiple sellers to display that the Electronic Commerce Act’s 7-day return period takes precedence over sellers’ notices, as sellers’ notices of return periods shorter than 7 days cause consumer damages.

Lee Byung-wook, Director of Fair Economy at Seoul City, said, “The Electronic Commerce Act is designed to protect consumers who purchase products without seeing them in person, and refusal of returns and refunds simply because it is an online luxury purchase or overseas purchasing agency is unfair. We will prevent consumer damages that may arise from the rapidly growing online luxury purchases in various ways and provide quick solutions through the Seoul Electronic Commerce Center when damages occur.”

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