[News Terms] The 'Lemon Law' You Need When Your New Car Breaks Down Immediately After Purchase

1975 Enacted US Consumer Protection Act
Domestic Cases Take Time Until Final Judgment and Content Is Confidential

[Asia Economy Reporter Jo In-kyung] The government has decided to revise the 'Korean-style Lemon Law,' a car exchange and refund mediation system that has been criticized as virtually ineffective. Although the number of mediation applications has surged three years after the system's introduction, it is still judged that improvements are needed as only a very small number of consumers benefit from it.

The 'Lemon Law' was first introduced as a federal law in the United States in 1975. The term originated from calling defective cars or motorcycles 'lemons.' It means that what was thought to be a sweet orange (a normal vehicle) turned out to be a sour lemon (a defective vehicle).

The official name is the 'Magnuson-Moss Warranty Act,' named after Senators Warren Magnuson and John Moss who proposed the bill. It stipulates that if a consumer experiences repeated defects within the warranty period after purchasing a vehicle or electronic product, the manufacturer must provide exchange, refund, or compensation. Specific details vary slightly by state.

In South Korea, the 'Korean-style Lemon Law (Article 47, Paragraph 2 of the Automobile Management Act)' was introduced on January 1, 2019, under the revised 'Automobile Management Act' of 2017. If repeated defects occur within one year (or within 20,000 km) after purchasing a new car, consumers can request an exchange or refund from the manufacturer, and disputes are resolved through mediation. For defects occurring within six months after delivery, the manufacturer bears the burden of proof; thereafter, the vehicle owner (consumer) is responsible for proving the defect.

The application requirements are: ▶ signing a written contract including guarantees for new car exchange or refund ▶ occurrence of safety concerns, economic value deterioration, or usability difficulties due to defects ▶ within one year from the vehicle delivery date, major defects (engine, power transmission device, braking system, etc.) must have been repaired twice, or general defects three times without resolution, or total repair days exceeding 30 days ▶ the vehicle owner must notify the manufacturer of major defects after one repair or general defects after two repairs.

If the consumer's application is accepted, the exchange or refund mediation is decided by the 'Automobile Safety and Defect Deliberation Committee' under the Ministry of Land, Infrastructure and Transport. The committee consists of up to 50 members, including one chairperson, appointed by the Minister of Land, Infrastructure and Transport from experts in law, automobiles, and consumer protection agencies. The mediation decision has the same effect as a final court judgment, and manufacturers must comply with exchange or refund rulings.

However, this law only applies within one year after receiving a new car, which poses a problem as manufacturers can deliberately delay, leaving consumers without proper remedies. Additionally, many consumers struggle to confirm whether they meet the mediation requirements, resulting in 48% (858 cases) of all closed cases being dismissed or rejected due to failure to meet exchange or refund conditions. Furthermore, the content of the final mediation decisions has not been disclosed, raising concerns about consumer rights violations.

Accordingly, on the 26th, the Ministry of Land, Infrastructure and Transport announced that it analyzed the operational performance of the Korean-style Lemon Law over three years and plans to improve the system by introducing a conciliation system from next year based on the results. The number of mediation cases has increased annually from 79 in 2019, the first year of enforcement, to 668 in 2020, and 707 in 2021.

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