FTC permits restaurants to charge no-shows

The country’s antitrust watchdog has come up with tighter rules against no-shows and cancellations at restaurants after the owners of food and beverage stores raised the issue of guests failing to show up.

The Fair Trade Commission on Monday permitted restaurants to take a deposit when reservations are made which only has to be refunded if a customer cancels more than one hour before the reservation time. If the customer contacts the restaurant within one hour of the reservation they can’t claim the money.

As reservation deposits are not common in Korea, observers expect the new measure to prompt many restaurants to adopt the deposit system.

Restaurant owners have claimed that no-shows chip away at their profits, but there was no official mechanism in place to allow then to charge the customer for the inconvenience.

So far, the Fair Trade Commission’s no-show guideline only concerned banquet facilities typically used for special birthday parties while excluding ordinary restaurants.

The Korea Federation of Micro Enterprise, an association representing small businesses, said that cancellations of reservations - especially of large groups - erodes the profits of smaller restaurant owners.

Hyundai Research Institute estimated that no-shows generated 4.5 trillion won ($4.2 billion) of losses to restaurants, hair shops, hospitals and concert halls.

But the guideline was not all about restoring restaurant owners’ rights.

If a restaurant cancels a client’s reservation, the store should provide twice the reservation deposit to the customers.

Other measures introduced include allowing passengers who experience more than a one hour delay on domestic air lines to get a refund of 10 percent of the ticket price. Currently, the refund was only available if the delay was longer than two hours.

But if the delay stems from unexpected weather, the compensation will not be offered. Airliners must prove that the weather was unpredictable in order to avoid paying compensation.

“The reform of the guideline is aimed at preventing unnecessary complaints and tensions between consumers and shops,” said Nam Dong-il, manager at the consumer policy division at the Fair Trade Commission.

“We have revised over 39 areas including the delay on airplanes and no-shows at restaurants,” Nam said.

The revision also includes a clearer definition of terms used in contracts at gyms.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]