Fair Trade Commission Corrects Unfair Terms in Penalty Ban Companies Contracting with Competitors

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Unfair terms and conditions of value-added telecommunications service providers (VAN companies), such as restricting contracts with competitors or imposing excessive compensation liabilities, have been improved.

On the 31st, the Korea Fair Trade Commission announced that it reviewed the terms and conditions in agency contracts and special agreements of 13 domestic VAN companies and corrected seven types of unfair terms.

The representative type of unfair terms was clauses restricting transactions with other VAN companies. The review found that nine VAN companies' terms restricted agencies and their executives and employees from entering into contracts with other VAN companies.

There were also clauses imposing penalties such as contract termination, compensation claims, or agency sanctions if these provisions were violated. Some VAN companies included "joint liability" clauses that made agencies responsible for actions of non-executives, such as joint guarantors or related parties.

The Fair Trade Commission regarded these terms as unfair because they significantly restrict freedom of business and other transactional activities, and ordered their complete removal.

Many clauses imposing excessive compensation liabilities were also found. Numerous VAN company contracts included provisions requiring full repayment of advance support funds upon early contract termination or claims for transaction fees that could have been earned during the remaining contract period.

The Fair Trade Commission considered the uniform imposition of compensation without considering the contract fulfillment period as unfair terms and requested corrections. Reflecting this, VAN companies revised their terms so that compensation amounts decrease as the contract fulfillment period lengthens.

In addition, the following were identified as unfair terms and improved: unilateral clauses favoring the business operator on important contract matters such as fees and costs; clauses allowing contract termination at the operator’s arbitrary discretion; clauses prohibiting objections to disadvantageous measures such as contract termination or forbidding civil and criminal lawsuits; clauses designating the VAN company headquarters’ location as the jurisdiction for lawsuits, causing inconvenience to agencies; and clauses automatically renewing contracts under the same conditions if the agency does not express intent in writing upon contract expiration.

Credit card VAN services build communication networks between credit card companies and merchants, acting as intermediaries for credit card inquiries, transaction approvals, and settlement processes. Currently, 27 VAN companies operate, and the 13 companies subject to this inspection hold about 98% of the domestic market share.

The Fair Trade Commission stated, "We will continue to focus on inspecting unfair terms in sectors related to small business owners and other livelihood industries to protect the rights and interests of economically vulnerable parties."

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