"Making Car Exchange and Refunds More Effective"… Revising the 'Korean-Style Lemon Law'

Analysis of Operational Performance Over 3 Years Since Lemon Law Introduction
Promotion of Institutional Improvements Including Adjustment System Implementation

[Asia Economy Reporter Cha Wanyong] The government is set to revise the automobile exchange and refund mediation system, known as the ‘Korean-style Lemon Law,’ which has been criticized as virtually ineffective. As three years have passed since the introduction of the Korean-style Lemon Law, the number of mediation applications has surged, but only a very small number of consumers have benefited, prompting the need for improvements.

A Seoul auto repair service center crowded with vehicles seeking recalls and safety inspections. [Image source=Yonhap News]

On the 26th, the Ministry of Land, Infrastructure and Transport announced that it analyzed the operational performance of the Korean-style Lemon Law over the past three years and plans to promote institutional improvements, including the introduction of a conciliation system, starting next year based on the results.

The Korean-style Lemon Law, introduced and implemented on January 1, 2019, allows consumers to request an exchange or refund from manufacturers if repeated defects occur within one year (or within 20,000 km) after purchasing a new car, and to resolve disputes through mediation if conflicts arise with manufacturers. The number of mediation cases increased from 79 in 2019, the first year, to 668 in 2020, and 707 in 2021.

However, the mediation system only allows the mediation panel to decide on exchanges or refunds, and the final decision takes a long time, making it impossible to actively propose settlement offers. This has led to growing calls for system improvements.

Accordingly, the Ministry of Land, Infrastructure and Transport plans to introduce a conciliation system in the first half of next year to quickly resolve disputes through conciliation procedures before mediation, and to allow decisions on compensation and repairs in addition to exchange and refund rulings. Legislative action will follow after preparing the introduction plan.

Furthermore, there is concern that by accepting the mediation regulations without confirming specific details about exchanges and refunds at the time of signing the automobile sales contract, opportunities to protect rights through the courts may be fundamentally blocked. Therefore, the ministry plans to unify the timing of accepting mediation regulations to ‘when applying for mediation’ through legal amendments in the second half of next year.

In addition, the ministry is promoting the establishment of a ‘self-diagnosis system’ that allows consumers to easily check whether they meet the conditions for exchange or refund before applying for mediation. Since the 11th, the Automobile Management Act has been amended to introduce a mediation procedure representative system, improving consumer accessibility.

Park Jihong, Director of Automobile Policy at the Ministry of Land, Infrastructure and Transport, said, “Through this system improvement, we expect consumers’ understanding and accessibility to the system to improve, and consumer rights to be more robustly protected. We will continue to actively pursue policies so that the automobile exchange and refund mediation system can effectively protect the practical rights of automobile consumers.”

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