FTC focus: Social commerce

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FTC focus: Social commerce


A housewife in her mid-30s used to be an avid user of social commerce until her doubts about the service started to grow lately.

“I used to purchase various items like clothing to restaurant coupons,” said the housewife, who wished to be identified as Kang. “It was a great way to purchase products or services at a cheaper price. But then I heard about counterfeits being sold and in some cases the products purchased through social commerce are in fact secondhand goods.

“From time to time I do check up on offers, but nowadays I hardly trust those bargain offers.”

To protect customers, the Fair Trade Commission (FTC) has asked social commerce businesses like Coupang, Ticket Monster and Groupon to refrain from exaggerating discount rates and the number of purchasers.

Social commerce has emerged as a major retail channel in the country, offering substantial for group purchases to achieve rapid growth since 2010, triggered by the introduction of smartphones to Korea in late 2009 with the sale of iPhones.

The social commerce market, which has only been 50 billion won ($46 million) in 2010, is expected to reach 3 trillion won by the end of this year.

However, some have suspected that social commerce companies have exaggerated discount rates and used counterfeit goods.

Accordingly, the state-run antitrust watchdog revised the Voluntary Compliance Guidelines for Social Commerce Businesses yesterday to require them to disclose how they calculate discounts, restrain from exaggerating the number of purchasers and adjust the 70 percent refund policy for unused coupons.

The FTC added a clause that prohibits manipulating and exaggerating the number of purchasers for products sold in a limited time.

In addition, in order to prevent counterfeit goods, the FTC suggested measures to inspect the products through third-party organizations like the Korea Association for the Protection of Intellectual Property.

Social commerce companies also will have to display the original prices of products at offline stores and department stores and how they calculate discount rates. They also should clearly state whether the price includes tax and service charges, and the use period for vouchers and coupons on the product sales page.

Under the revision, the 70 percent refund policy cannot be applied to airline tickets, concert tickets and hotel vouchers. The FTC also ordered companies to provide information about applying for refunds and when to expect to receive them.

The FTC also shortened the goal for resolving consumer complaints from 72 hours to 48 hours.

“We expect that the revision of the guidelines will contribute to the sound development of the rapidly growing social commerce market by enhancing consumer confidence and improving the reliability of information,” said an FTC spokesman. “It is also expected that voluntary compliance to the guidelines will spread to other retailers that use similar sales methods to social commerce.”

The FTC plans to sign implementing agreements for the revised guidelines with eight social commerce companies.

BY KIM JUNG-YOON [kjy@joongang.co.kr]
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