Chinese e-commerce platforms to face tighter antitrust scrutiny

Regulator will revise e-commerce act, require foreign operators to designate domestic agents to take responsibility for customer services

Fair Trade Commission Chairman Han Ki-jeong delivers remarks at an emergency economic-related ministers’ meeting held in Seoul, Wednesday. (Yonhap)

With increasing complaints from Korean consumers regarding the quality of products and the prevalence of knock-off items they purchased from Chinese e-commerce platforms, the country’s antitrust regulator vowed to strengthen the monitoring of foreign operators’ unfair business practices and uphold stern punishments for any illegal activities under relevant domestic laws.

The Fair Trade Commission on Wednesday rolled out a set of comprehensive measures that aim to better protect local consumers while eliminating reverse discrimination against domestic platform operators. This comes as Chinese e-commerce platform operators such as AliExpress, Temu and Shein have been rapidly expanding their shares of the e-commerce market here.

“As the use of foreign online platforms increased rapidly in a short period, the number of consumer complaints has also increased. There is a growing need for the government to respond actively,” FTC Chairman Han Ki-jeong said in his remarks during an emergency economic-related ministers’ meeting held in Seoul earlier in the day.

According to data provided by the state-run Statistics Korea, the value of overseas direct shopping has increased every year from 5.1 trillion won ($3.9 billion) in 2021 to 5.3 trillion won in 2022 and 6.8 trillion won in 2023. The number of consumer consultations for overseas transactions also increased from 2,677 in 2021 to 3,569 in 2022.

Under the plan, the regulator will enhance the monitoring of foreign online platform operators to see whether they violate Korea’s electronic commerce regulations and regulate their monopolistic practices in the domestic market on their possible market power abuses against smaller local businesses.

At the same time, it will revise the e-commerce act, requiring foreign online platform operators to designate a domestic agent to be responsible for consumer damage compensation and dispute resolution and investigations under related domestic laws. The legislation is set to be announced within the month.

The move came as the watchdog sought ways to better resolve local consumer complaints, as it was difficult to handle the issues brought to their attention, especially when foreign business operators did not have an office here or a local address to contact.

To prevent consumer damage linked to various issues, the regulator chief urged joint inspection and responses among related government agencies. He also promised to regularly check and supplement the measures through the overseas direct purchase comprehensive measures task force in the future.

The watchdog will push to launch a hotline with foreign online retailers to address consumer complaints and provide guidelines that include ways to ask for refunds in different languages for overseas direct shoppers.

The FTC also seeks to sign an agreement with the major Chinese e-commerce operators and other entities that calls for cooperation and voluntary efforts to better ensure the rights of consumers as it did with major open market operators and online flea market platform operators here.

A day earlier at the Sejong Government complex in Sejong, Park Se-min, an official in charge of consumer policy at the commission, told reporters that there have been limitations regarding its inspection and crackdown on foreign online platforms, although they are subject to domestic laws.

"It has never been easy to investigate and sanction compliance on their acts that cause harm to customers with domestic laws due to physical limitations and other causes. However, we'll put all-out efforts to faithfully carry out our roles to ease reverse discrimination concerns," he said.

According to industry sources, the FTC recently launched a probe into the alleged violation of consumer protection obligations by AliExpress Korea. The number of complaints filed against the retailer and submitted to the Consumers Union of Korea jumped rapidly to 465 cases last year, compared to the previous year's 93.

Park also drew a line between the watchdog's push for the anti-monopoly platform bill and the recent announcement on measures, while the regulator chief highlighted the regulator's key policies for this year, including the platform act, at a conference hosted by the American Chamber of Commerce in Korea last week.

By Jie Ye-eun(yeeun@heraldcorp.com)