Netflix contracts unfair, need to be changed: FTC

Netflix’s contract with its customers is unfair and will have to be changed, according to the antitrust agency.

It is the first regulator globally to make demands of this sort on the world’s largest video streaming service.

The Fair Trade Commission (FTC) said Wednesday that the user agreement Netflix requires subscribers to sign has six offending clauses.

Problematic wording includes language that allows Los Gatos, California-based Netflix to make amendments to billing and membership terms without the consent of customers.

“The company only sends notification on the changes to its members that take effect in the next billing cycle,” said Lee Tae-hwi, head of the FTC’s terms review department.

Although the company has not raised its pricing in Korea, it did in the United States last year.

Netflix currently charges 9,500 won ($8.20) a month for its basic service, which allows access for one device and one login. The standard service, which costs 12,000 won a month, allows for two simultaneous logins, while the premium service, at 14,500 won a month, allows for four logins.

The Korean antitrust agency is the first in the world to order Netflix to change its customer contract.

In addition to the issue of unilateral changes in terms and conditions, the FTC noted other concerns. It also said that: Netflix does not offer clarity on the cancelation of memberships, shifts the burden of costs related to damages, including those caused by hacking, to the customer; limits compensation claims; and transfers contracts to third parties.

After discussion with the FTC, Netflix has decided to change its term of service. The newly changed term of service will be applied starting Jan. 20.

The Korean antitrust agency said it expects the corrective measures will protect consumers and establish a fair and orderly market.

The FTC expects the entry of new players in the streaming market, Lee said. “We will continue to review unfair terms from the beginning stages.”

The regulator said it will also look into the service agreement of Disney Plus, which is expected to be available in Korea in the second half.

The changes to the service agreement terms are likely to be effective only in Korea.

“We have expected that Netflix would change its terms commonly offered globally,” Lee said. “But at the moment, Netflix has decided to change its term in Korea.”

Netflix, which started in January 2016 in Korea, currently has a 30 percent global market share, with over 140 million subscribers.

In Korea as of November it had roughly 2 million subscribers.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]