1. Consumer Policy in Korea and the Role of the KFTC
April, 2011
Sung Kyung Je
e-Commerce Protection Division

2. Contents Overview of Consumer Policy in Korea
Introduction
Inseparability of Consumer Policy and Competition Policy
Consumer Policy of the KFTC
Organization of Consumer Protection Bureau
Major Works

3. Overview of Consumer Policy in Korea

4. Ⅰ. Introduction

5. 1. History ~ 1970’s : Consumer protection was substantially ignored
1980’s : Consumer policies sprouted up
※ Enacting the Consumer Protection Act(1980), Monopoly Regulation & Fair Trade Act(1980) and Adhesion Contracts Act(1986) and establishing the Consumer Protection Board(1986)
1990’s : Consumer policies were more vitalized and matured in both quality and quantity than before
※ Enacting the Door-to-Door Sales Act(1991), Installment Transactions Act(1991) and Fair Labeling & Advertising Act(1999) and establishing the KFDA(1996) and Consumer Protection Bureau in the KFTC(1996)
2000’s : Consumer sovereignty has been upgraded continuously
※ Enacting the Product Liability Act(2000) and Consumer Protection Act on E-commer ce(2002) x

6. 2. Administrative System
MOFE : Coordinating consumer policies (Consumer Policy
Deliberative Commettee)
※ Consumer Protection Board(non-governmental, supervised by MOFE) : Handling consumer complaints and research
KFTC : Protecting consumers from deceptive &
unfair business practices and frauds
Other respective central ministries(KFDA): Enhancing consumer safety
Local Government x

7. Other Ministries and Agencies
(KFDA etc)
CPDC
MOFE
KFTC
Local Gov.
C P B
Business & Consumer

8. 3. Substance Past & Present Future
guardianship to vulnerable consumers ≥ creating environment where consumers can exercise their rights
guardianship to vulnerable consumers ＜ creating environment where consumers can exercise their rights

9. Ⅱ. Inseparability of Consumer Policy and Competition Policy

10. Competition Consumer Policy
1. From the Viewpoint of Market Failures
Competition
Consumer Policy
Cure of external factors to the consumer, making the market unable to provide sufficient options
Cure of internal factors to the consumer, making the consumer unable to effectively choose among the available options

11. 2. Competition Policy ⇒ Consumer Policy
Regulation on an undue price increase of a monopoly
Regulation on cartel among oligopolies
Regulation on merger between consumer- goods manufacturers that could potentially create monopoly
Regulation on unfair method of competition

12. 3. Consumer Policy ⇒ Competition Policy
Regulation on unfair business practice to consumers.
Regulation on unfair labling and advertising : enhancing the effectiveness of competition

13. Consumer Policy of the KFTC

14. Ⅰ. Organization of Consumer Protection Bureau
Director General
Consumer Policy
Div.
Consumer
Information
Div.
Contract Terms
Policy Div.
E-commerce
Protection
Div.
Direct Sales
Protection
Div.

15. 1. Consumer Policy division
Establish and implement consumer protection policy
Exchange information with consumer groups
Cooperate on consumer problems internationally
Operate the Consumer Gateway website, and the Consumer Ombudsman
Operate monitoring staffs system
Lead collective redemption of consumer damage
Conduct education and PR activities to consumers and businesses

16. 2. Consumer Information Division
Enforce the Fair Labeling and Advertising Act
Facilitate favorable access to consumer information
Prevent and correct unfair labeling and advertising
3. Contract Terms Policy Division
Enforce the Adhesion Contracts Act
Review and correct unfair adhesion contracts
Approve and distribute standard adhesion contracts

17. 4. E-commerce Protection Division
Enforce the Consumer Protection Act on E-commerce and investigate and correct undue/unfair trade practices
Prevent unsolicited mails (Spam mail)
5. Direct Sales Protection Division
Enforce the Door-to-Door Sales Act and investigate and correct undue/unfair trade practices
Approve and monitor mutual aid association
Establish the policies related to the Installment Transactions Act

18. Ⅱ. Major Works

19. 1. Facilitation of Providing Consumers with Useful Information & Regulation on Undue/Unfair Labeling and Advertising

20. (1) Enforcement of the Fair Labeling and Advertising Act
Facilitation of favorable access to consumer information
Designation system of critical information to be included in labeling and advertising
Guideline for comparative labeling and advertising
Others : disclosure system of substantiating documents, prohibition of trade associations’ restricting labeling and advertising activities by members, etc.

21. (1) Enforcement of the Fair Labeling and Advertising Act (continued)
Prevention of unfair labeling and advertising
Substantiation system of labels and ads
Temporary cease and desist order system
Review of the voluntary code of labeling and advertising

22. (1) Enforcement of the Fair Labeling and Advertising Act (continued)
Corrective measures on unfair labeling and advertising
Prohibited unfair label and ad false or exaggerative/ deceptive/ unduly comparative/
slanderous labeling and advertising
Administrative measures cease and desist order/public notification on the fact of receiving a administrative order for law violation/ corrective ads/ surcharge(not exceeding 2% of turnover or 500 million won)

23. (2) Others
Operation of the Consumer Gateway website
Operation of the Consumer Ombudsman system
Education and PR activeties to consumers and businesses

24. 2. Promotion of Using Adhesion Contracts containing Fair Terms and Conditions

25. major unfair clauses in adhesion contract
(1) Enforcement of the Adhesion Contracts Act and correction of unfair adhesion contracts
major unfair clauses in adhesion contract
Provision that goes against principle of good faith
Provision that gives immunity
Restriction of cancellation, termination rights by consumer
Restriction of consumer rights including right to refute, right to offset loss

26. (2) Approval and distribution of standard adhesion contracts
Upon request by business or business association, the KFTC approves a standard adhesion contract that will serve as an example.

27. 3. Consumer Protection in E-commerce

28. (1) Overview
Characteristic of E-commerce:non face-to-face transaction, simultaneous advertisement and transaction
With rapid development of E-commerce, various consumer protection issues have risen
The “Consumer Protection Act on E-commerce” enacted July

29. (2) Enforcement of the Consumer Protection Act on E-commerce
Major contents of the Act
Businesses’ obligation to preserve transaction records for a considerable period of time
Businesses’ responsibility for arranging some measures to prevent consumer damage from consumer’s operational mistake
Businesses’ obligation to disclose their identification, information, and terms of transaction on their internet shopping mall

30. (2) Enforcement of the Consumer Protection Act on E-commerce (continued)
Consumers’ unconditional right to revoke their contract within 7 days. Credit card enterprises should help consumers to realize this right, if necessary
Electronic payment issuers’ obligation to subscribe to consumer damage compensation insurance or payment guarantee contract with financial institutions
Prohibition of businesses’ unfair and fraudulent behavior
Introduction of the Escrow System

31. (3) Prevention of unsolicited mails
Launch and reconstructure of the ‘No Spam’ site,
(4) The KFTC’s investigation into illegal practices and administrative measures such as corrective measures, surcharge, and suspension of business

32. 4. Consumer Protection in Special Types of Transactions

33. (1) Overview
Characteristic : Salesman’s persuasion and temptation of benefit by direct marketng can cause impulsive buying
Revised “Door-to-Door Sales Act ” in force as of July 2002.

34. (2) Enforcement of the Door-to-Door Sales Act
Major contents of the act
Regulation scope : door-to-door sales, multilevel sales, telemarketing by phone, continual transaction, business-inducing transaction
Consumers, unconditional right to revoke their contract within 14 days. Credit card enterprises should help consumers to realize this right, if necessary
Prohibition of providing false information on incomers to be earned to potential multilevel marketers by multilevel marketing businesses

35. (2) Enforcement of the Door-to-Door Sales Act (continued)
Multilevel marketing businesses’ obligation to disclose information on support allowance to candidate marketers
Multilevel marketing businesses’ obligation to subscribe to consumer damage compensation insurance, payment guarantee contract with financial institutions, or mutual aid contract with mutual aid association
Prohibition of businesses’ unfair and fraudulent behavior

36. (3) Others
Approval and supervision of mutual aid association for consumer damage compensation
Operation of a database to enable information on door- to-door sales, multilevel marketing and distant selling businesses to exchange online
The KFTC’s investigation into illegal practices and administrative measures such as corrective measures, surcharge, and suspension of business

37. 5. Fairness in the Transactions based on Installment Contracts

38. (1) Overview
Characteristic : “Credit” has become a new form of purchasing power which can cause impulsive purchase.
Significant increase in consumer issues with rise in use of credit cards.
The KFTC considers to revise the “Installment Transactions Act” to protect consumers more comprehensively

39. (2) Major contents of the Act
Principle of executing installment contract in writing
Consumers’ unconditional right to revoke their contract within 7 days
Consumers’ right to refuse the payment of installment to a seller or a credit provider
Prohibition of contract unfavorable to consumers