(1) Reasons for Proposal
With a COVID-19-fueled explosive growth in contact-free transactions added to an already rapidly growing online distribution market, the influence of online platforms is quickly expanding across industries, which sharply increases stores’ dependence on online platforms for transactions.
Accordingly, there are growing concerns about potential harm to micro enterprises highly reliant on online platforms, and it was actually found that online platform providers committed some unfair business practices as they interfered with the stores on their online platforms including selling prices or business partners and unilaterally passed damages arising from transactions on to the stores.
However, online platforms are intermediaries who do not directly take part in transactions and are not subject to the Act on Fair Transactions in Large Retail Business, which applies to business entities doing retail business under their name, and the Monopoly Regulation and Fair Trade Act has no provision to prevent a dispute beforehand and improve transaction practices such as obligations to prepare and distribute a contract, a standard contract template, and collaborative agreement. As such, the above makes it difficult to effectively respond to unfair practices.
It is becoming a policy task around the world to prevent unfair practices against stores on online platforms, which have the upper hand, and establish transparent and fair order in transactions. The EU and Japan already enacted laws to improve transparency and fairness in online platforms.
In this regard, this Act aims to define procedures to improve transparency and fairness in online platform intermediary transactions, specify banned practices, and legislate institutional instruments to prevent and resolve a dispute in an effort to lay the institutional foundation to establish sound order in transactions where online platform providers and stores supplement each other and grow together.
(2) Major Provisions
A. Define obligations to prepare and distribute a contract and required information (Article 6 paragraphs 1 and 2)
- Impose obligations on any business entity with the upper hand to specify major transaction terms and conditions and dispute prevention clauses in a contract and distribute the contract.
B. Establish and provide a standard contract template (Article 6 paragraph 3)
- Require the Fair Trade Commission to prepare a standard contract template and recommend using the template to establish sound order in online platform intermediary transactions and prevent any unfair intermediary contracts.
C. Require that a prior notice be sent for any change in an intermediary contract (Article 7)
- Impose obligations on any online platform provider to send a notice at least 15 days prior to any change in a contract in the method as prescribed by Presidential Decree and render any change in the contract invalid if such notice has not been sent.
D. Define a prior notice for any restriction in online platform intermediary services (Article 8)
- Require any online platform service provider to notify any online platform user of any partial restriction or suspension of the service at least 7 days before and a contract’s termination at least 30 days before, and render the contract’s termination invalid if such notice has not been sent.
E. Ban unfair transaction practices by online platform intermediaries (Article 9)
1) Ban any practice that unfairly forces any online platform user to buy a product or service it does not want to purchase.
2) Ban any practice that unfairly forces any online platform user to provide money, goods, services, and/or other financial gains to the intermediary.
3) Ban any practice that passes damages arising from transactions on to any online platform user.
4) Ban any practice that sets or changes transaction conditions to the disadvantage of any online platform user or puts the user at a disadvantage in the process.
5) Ban any practice that unfairly interferes with any online platform user’s business activities.
F. Ban retaliation by online platform intermediaries (Article 10)
- Ban any disadvantage given to any online platform user for filing for dispute resolution, reporting, submitting data in a written fact-finding investigation, and cooperating with an investigation.
G. Enter into a collaborative agreement between online platform intermediaries and online platform users (Article 11)
- Allow the Fair Trade Commission to recommend entering into a collaborative agreement, and prepare and enforce support measures if the agreement is entered into voluntarily.
H. Establish and organize an Online Platform Dispute Resolution Committee (Article 12)
- Establish an Online Platform Dispute Resolution Committee under the Korea Fair Trade Mediation Agency and appoint its members to mediate disputes between online platform intermediaries and online platform users.
I. Written fact-finding investigation (Article 23)
- Require the Fair Trade Commission to conduct a written fact-finding investigation on transactions between online platform intermediaries and online platform users and make the investigation’s results public.
J. Corrective order (Article 25)
- Order the stop of any law violation, the prevention of any recurring violation in the future, the disclosure of any received corrective order, and other corrective actions to correct violations from any online platform intermediary who violates obligations to distribute and seal or sign a written contract with required information, a ban on unfair practices, and a ban on retaliation.
K. Consent resolution (Article 27)
- Allow any business entity subject to investigation (review) to prepare a corrective action plan to resolve unfair practices, actively improve order in transactions, remedy and prevent damages to stores, and file for consent resolution.
L. Penalty Surcharges (Article 29)
- Impose fines up to 2 times the amount arising from a law violation as prescribed by Presidential Decree on any online platform intermediary who violates obligations to distribute and seal or sign a written contract with required information, a ban on unfair practices, and a ban on retaliation, and impose a fine of up to 1 billion won when unable to calculate the exact amount.
M. Penalties (Article 33)
1) Impose up to 2 years in prison or 150 million won in fines on those who has given any disadvantage in violation of Article 10 and those who have not followed a corrective order issued under Article 25.
2) Impose up to 100 million won in fines on those who have falsified an appraisal.
3) Impose up to 2 years in prison or 2 million won in fines on those who have leaked any secret or used the secret for other purposes than the enforcement of this Act.
N. Specify administrative fines (Article 35)
1) Impose up to 200 million won in fines on any online platform intermediary who has refused, interfered with, or avoided an investigation without justifiable reason (up to 50 million won in fines on any officer, employee, or other stakeholder of the online platform intermediary).
2) Impose up to 100 million won in fines on any online platform intermediary who has refused to attend without justifiable reason, failed to submit required reports, data or objects, submitted false reports, data or objects, refused any request to submit data for a written fact-finding investigation, or submitted false data (up to 10 million won in fines on any officer, employee, or other stakeholder of the online platform intermediary).
3) Impose up to 100 million won in fines on any online platform intermediary who has demanded any online platform user to not submit data or submit false data (up to 5 million won in fines on any officer, employee, or other stakeholder of the online platform intermediary).
4) Impose up to 10 million won in fines on any online platform intermediary who has not notified when restricting or suspending some part of its service or failed to store documentation prescribed by Presidential Decree.
5) Impose up to 1 million won in fines on those who have not followed the tribunal’s order to maintain order.
