New legislation on online shopping proposed by FTC

Parcels are loaded on trucks at a logistics center in Seoul on Sept. 13. [NEWS1]

The antitrust agency announced new legislation to make online retail more accountable after online transactions surged during the global coronavirus pandemic.

Some worry about excessive regulation of online shopping, which already have to comply with the Fair Transaction in Large Retail Business Act as well as the Electronic Transactions Act.

According to the Fair Trade Commission, the government-proposed legislation will affect companies with annual revenue exceeding 1 billion won ($852,000) and who mediate transactions between merchants and customers worth at least 100 billion won.

The new legislation is expected to affect leading big online search engines such as Naver and Google, e-commerce platforms like Coupang and online delivery platforms like Baedal Minjok (Baemin).

While the Fair Trade Commission (FTC) did not name the companies that would be affected, it said at least eight e-commerce platforms, two lodging platforms and at least four food delivery platforms will be subjected to the enhanced accountability.

Some 1.4 million merchants sell products and services via online platforms.

Under the legislation, a contract between an online platform and a merchant must have 14 points of agreement on things like rates of commission, the contract period and detailed terms for cancelation of the contract.

The online platform operator has to alert a merchant to changes to a contract at least 15 days in advance. If the operator plans to suspend a service, it has to warn the merchant seven days in advance. If it plans to shut down a service permanently, it needs to warn the merchant 30 days earlier.

Platform operators that violate the law will face fines that are double the amount of the violation. The maximum fine is 1 billion won.

The antitrust agency said it will actively encourage online platform operators to commit to voluntary changes to unfair business practices like raising commissions or forcing merchants to charge the same service charges on all online platforms.

In June, Apple agreed to change a business practice that charged Korean telecommunication companies for marketing and repair costs.

FTC Chairwoman Joh Sung-wook said the agency hopes companies will adopt fairer business practices ahead of legislation.

The bill will be sent to the National Assembly after a legislative notice period ends in November. The FTC hopes it will pass in the first half of next year.

The FTC said it was speeding up the legislation after a surge in online shopping due to the coronavirus pandemic.

According to the government, online shopping has been growing at a fast rate: from 25.2 trillion won in 2010 to 135.3 trillion won in 2019. In the first half of 2020, online shopping purchases amounted to 74.3 trillion won.

Online shopping in July hit a monthly record of almost 13 trillion won, 15 percent more than a year earlier.

That figure is expected to rise in August due to the government's toughened social distancing measures.

If the legislation passes the National Assembly, it will likely go into effect in the first half of next year.

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