Overview

What is an electronic commerce transaction?

• The term "electronic commerce transaction" means commercial activity in the trade of goods or services, fully or partially conducted by means of electronic documents. The term "electronic documents" means information prepared, received or transmitted, or stored in electronic form through an information processing system such as a computer.
• An electronic commerce transaction is constituted if an electronic documents is used in any phase of ordering, making payment, or performance.

What is a mail order?

The term "mail order" means the activity of selling goods, etc. upon consumers' orders after providing consumers with information on the sale of goods, etc. by non face-to-face means, such as telecommunications (including telephone). Examples: Internet shopping, TV home shopping, catalog shopping, adult shopping sites, online language institutes, and Internet games

Relations between electronic commerce transactions and mail orders

• Electronic commerce usually refers to Internet shopping, and the term may be used more widely to include telemarketing in some cases.
• The term "Internet shopping" corresponds to electronic commerce as well as telemarketing, but TV home shopping, catalog shopping, and the like are, strictly speaking, types of telemarketing but cannot be called electronic commerce.

What is the Act on the Consumer Protection in the Electronic Commerce Transactions, etc.?

The Act on the Consumer Protection in Electronic Commerce, etc. is an Act enacted to protect the rights and interests of consumers and to enhance market confidence by regulating matters relating to fair trade in goods and services by means of electronic commerce transaction, mail order, etc.

Reasons for regulating electronic commerce transactions

• Frequent conflicts occur due to the difference between expected and real commodities because of non face-to-face remote trading, and difficulties exist in identifying the source of responsibility due to the use of electronic documents, etc. and the possibility, etc. of fabricating records.
• It is highly likely to cause late delivery, delivery of goods different from the terms of the contract, and other incidents, as the goods are delivered after the payment is made.
• It makes it possible to identity theft incurring from leakage of private information, as the transactions are made non face-to-face.

Details

Subject-matter of Application of the Act

• The Act is applicable to all trade of goods or services between business operators and consumers (B2C) conducted by means of electronic commerce or mail order.
  • However, an exclusion from the application of the Act is granted by prescribing the provisions on exemption from the application of the provisions on obligations in trading specific goods by specific business operators. (Article 3 of the Act) Trades of securities by securities companies, trades of financial instruments dealt in directly by financial institutions, trades of daily necessities, foods, beverages, etc. for neighboring areas shall be excluded from the application of Article 12 (Reporting, etc. by Mail Order Distributors) through Article 20 (Obligations and Liabilities of Mail Order Brokers) of the Act.
• Typical business operators subject to the application of the Act are electronic commerce business operators, mail order distributors, and mail order brokers. The term "mail order broker" means a business operator who engages in intermediating mail orders between both parties of a transaction by allowing the use of a cyber-mall or by providing advertising means or the like (open markets, for example).

Obligations of Business Operators by Stage of Transaction

Pre-Business Stage

Responsibility of a mail order distributor to file a report

Each mail order distributor shall file a report on the trade name, address, telephone number, e-mail address, domain name, location of the host server, etc. with the KFTC (in the case of a foreign business operator), or the Special Metropolitan City Mayor, Metropolitan City Mayor or Governor of the Province (delegated to the head of each Si/Gun/Gu in the enforcement decree). (Article 12 (1) of the Act)

Contract, etc. of consumer damage compensation insurance

• If requested by a consumer, a prepaid mail order distributor shall allow the consumer to use an escrow system, or shall enter a contract for consumer damage compensation insurance, the beneficiary of which shall be the consumer. (Article 24 (2) of the Act)
• However, transactions of goods, etc. which are paid by using credit cards, or transactions of buying goods, etc. which do not require delivery (for example, games, registration for lectures at online institutes), and small-amount transactions of goods, etc. which is less than 100,000 KRW shall be excluded from the application of the above obligation. The term "escrow system" means a transaction safety system under which a reliable independent party, such as a bank, deposits the amount paid by a consumer and pays it to the mail order distributor after the goods are delivered. The term "consumer damage compensation insurance" means insurance for the compensation for the damage suffered by a consumer, when he/she becomes unable to receive the goods or suffers other damage despite the payment has been made by the consumer to the mail order distributor.

Order-attracting Stage

Indication of information on identity

• The operator of a cybermall shall indicate on the initial screen the trade name, name of the representative, business address, telephone number, e-mail address, business registration number, contractual terms and conditions of service of the cybermall, and other matters, which are necessary for consumer protection, so that consumers can easily identify the business operator's identity, etc. (Article 10 (1) of the Act)
• Where a mail order distributor indicates or advertises for the purpose of taking orders for transaction of goods, etc., he/she shall indicate the identity of his/her own including the trade name, name of the representative, address, telephone number, e-mail address, the serial number of a report on mail order distribution business, and the agency to which such report is made. (Article 13 (1) of the Act)

Obligation for preservation of records on indications and advertisements

A business operator shall preserve records on transactions such as marks, advertisements, and terms of contracts and execution thereof, in the electronic commerce transactions and mail orders, for a considerable period of time (from six months up to five years). (Article 6 of the Act)

Ordering Stage

Indication, advertisement and notification relating to goods, etc.

A mail order distributor shall make indications, advertisement, or notification in a proper manner so that consumers can understand the terms of transaction of goods, etc. accurately before signing a contract and make such a transaction without any blunder or discrepancy. (Article 13 (2) of the Act)

Preparation of appropriate procedures for confirmation of orders and prevention of errors in manipulation

A mail order distributor shall prepare appropriate procedures that enable each consumer to confirm, correct or cancel the details of an order before confirming the receipt of the declaration of intent of order, before charging transaction amount, or before concluding the contract, in order to prevent loss occurring due to consumer's error in manipulation, etc., when an order for the transaction of goods, etc. is received from the consumer. (Articles 7 and 14 of the Act)

Notification without delay, if the ordered goods, etc. are impracticable to provide

When finding difficulties in the supply of ordered goods, etc., the mail order distributor shall inform the consumer of the reason without delay. (Article 15 (2) of the Act)

Forwarding of a contract

A mail order distributor shall forward documents (including electronic documents, such as e-mails or text documentss) concerning the terms of a contract to the consumer who has concluded the contract before supplying the goods, etc. (Article 13 (2) of the Act)

Goods Supplying Stage

Measures necessary for supplying goods, etc. within the fixed period

• A mail order distributor shall take measures necessary for the supply of goods, etc. within seven days from the date a consumer makes an order (within three business days from the date on which the payment is received, in cases of a prepaid mail order for which a consumer has paid all or part of the price of such goods, etc.). However, this does not apply if any separate agreement exists. (Article 15 (1) of the Act)
• "Measures necessary for the supply" does not necessarily mean that delivery of the goods must be completed within the period, but means the necessary measures to be taken for the supply such as the taking the goods, etc. out from a warehouse, or delivery.

Measures to confirm the supply procedure and the status of process

A mail order distributor shall take adequate measures so that consumers can confirm the supply procedure of goods, etc. and the status of process. (Article 15 (3) of the Act)

Notification and perusal of data on completion of electronic payment

Where an electronic payment has been made, the business operator, electronic payment business operator, etc. shall notify the consumer of the fact by such means as transmission of an electronic documents, and make the data related to the electronic payment available for consumer's perusal at any time. (Article 8 (3) of the Act)

Cancellation and Effect of an Order

Cancellation of an order within a statutory period

• A consumer who has concluded a contract with the mail order distributor on the purchase of goods, etc. may cancel the order within seven days from the date the document on the terms of the contract is handed over (from the date the supply is commenced, if the supply of goods, etc. is performed later than the delivery of document). (Article 17 (1) of the Act)
• Where the content of goods, etc. are different from the content of indication or advertisement, or have been performed in breach of the contract, the consumer may cancel the order, etc. within three months from the date the goods, etc. are supplied, or within 30 days he/she knew or could have known of such breach, even though the goods, etc. have been destroyed or damaged or their value has been decreased due to a cause ascribable to the consumer. (Article 17 (3) of the Act)
• Where a dispute arises as to when goods, etc. were supplied, etc., the mail order distributor shall testify it. (Article 17 (5) of the Act)

Refund of payment

• Where any goods, etc. are returned to a mail order distributor following cancellation of an order by a consumer, he/she shall refund the money paid thereof, which has been already paid, within three business days from the date he/she receives the returned goods, etc. If the mail order distributor delays the refund, he/she shall be liable to pay interest on the delay calculated by multiplying the delayed period by the interest rate publicly notified by the KFTC (24% per annum). (Article 18 (2) of the Act)
• When a consumer has paid the price of goods, etc. with a credit card, the mail order distributor shall request, without delay, the business operator who supplied the relevant means of settlement (settlement business operator) to halt or cancel the request for payment, and shall refund the payment to the settlement business operator, if the mail order distributor has already received the payment. (Article 18 (3) of the Act)
• Where a mail order distributor fails to refund the payment to a settlement business operator without any justifiable ground, a consumer may request the settlement business operator to offset the amount to be refunded by other debt owing to the relevant mail order distributor. (Article 18 (6) of the Act)
• Where a mail order distributor who has entered into a mail order contract with a consumer and a person who has received the payment (such as a mail order broker) are not the same person, each of them shall be liable jointly and severally to the fulfillment of obligation. (Article 18 (11) of the Act)

Responsibility for expense of returning goods, etc.

• In cases of cancellation, etc. of an order due to a consumer's change of mind as prescribed in Article 17 (1), the expense incurred in returning supplied goods, etc. shall be borne by a consumer. (Article 18 (9) of the Act)
• However, if an order is cancelled where the content of goods, etc. are different from the content of indication or advertisement or have been performed contrary to the terms of the contract as prescribed in Article 17 (3), the expense incurred in returning the goods, etc. shall be borne by a mail order distributor. (Article 18 (10) of the Act)

Restrictions on the request for penalty, compensation for damage, etc.

• In cases of cancellation, etc. of an order due to a consumer's change of mind, the mail order distributor shall not request the consumer to pay the penalty for breach of contract, nor compensation for damage. (Article 18 (9) of the Act)
• However, where a contract has been cancelled due to a cause ascribable to the consumer, the compensation for damage may be claimed against the consumer, and the amount of compensation for damage shall not exceed the amount obtained by adding the compensation for delay following the nonpayment to the unpaid amount. (Article 19 of the Act)

Restrictions on cancellation of orders by consumers For the safety of a transaction, no consumer shall be entitled to cancel the order, etc. in the following cases contrary to the will of the mail order distributor for reason of his/her change of mind. However, in cases falling under subparagraphs 2 to 4, the same shall apply only if a sample has been provided or if such fact has been indicated. (Article 17 (2) of the Act):

1. Where the goods, etc. have been destroyed or damaged due to a cause ascribable to the consumer (However, this shall not apply where the damage to package, etc. was to confirm the contents of the goods, etc.);
2. Where the value of the goods, etc. has remarkably decreased due to the consumer's use or partial consumption thereof;
3. Where the value of the goods, etc. has remarkably decreased so as to cause difficulty in resale due to the elapse of time;
4. Where the package of reproducible goods, etc. has been destroyed;
5. Where prior consent is received from the consumer, because, as in the cases of goods, etc. produced individually for each order, unrecoverable damage to the seller is expected if the order is cancelled.

Responsibilities of Mail Order Brokers (Article 20 of the Act)

• Where a mail order broker has not agreed or announced in advance that he/she should not be responsible for the sale of the goods, etc., and has conducted the brokerage of a mail order, the mail order broker together with the person who requested the brokerage, shall be jointly and severally responsible for the deliberate or accidental damage, inflicted by the person who requested the mail order brokerage, to the consumer's property regarding the relevant mail order. (Article 20 (1) of the Act)
• A mail order broker shall provide the consumer with a method of perusing the information on the identity of the business operator who has requested brokerage of a mail order, and if the person who has requested the brokerage of the mail order is not a business operator, he/she shall provide the parties to the transaction with a method of perusing the information on the other party to the transaction, including address and telephone number. (Article 20 (4) of the Act)

Prohibited Conduct of Electronic Commerce Business Operators or Mail Order Distributors (Article 21 of the Act)

No electronic commerce business operator or a mail order distributor shall engage in any of the following conducts: (Article 21 (1) of the Act)

1. Inducing consumers or making a transaction using deceptive methods, or interfering with cancellation, etc. of an order or termination of a contract by misrepresentation or exaggeration;
2. Changing or closing down the address, telephone number, Internet domain name, etc. with the purpose of interfering with cancellation, etc. of an order;
3. Letting deficiency of manpower needed to solve disputes or complaints, or lack of facilities as it stands for a considerable time, thus inflicting damage on consumers;
4. Unilaterally supplying goods, etc. without any consumer's order and requesting the payment therefor, or requesting a payment without supplying goods, etc.;
5. Forcing any consumer to buy goods or to receive services through telephone, facsimile, computer communications, etc. even though the consumer has made it clear that he/she had no intention to buy the goods or receive the services;
6. Using information on a consumer without obtaining consent from the relevant person, or beyond the extent of such consent. However, this shall not apply where it is inevitable for the execution of the contract entered into with the consumer such as delivery of the goods, or where it is necessary for the settlement of accounts or for the confirmation of the person himself/herself to prevent surreptitious use.