The Fair Trade Commission (FTC) In South Korea, four major entertainment companies were fined for violating consumer protection laws related to e-commerce.
On August 11, KST, the FTC announced that it would issue remedial measures and fine the four major K-pop agencies a total of 10.5 million KRW (approximately 7,700 USD) for violating the “Law on Electronic Commerce‘ – Weverse Companies (HYBE), YG Plus (YG), SM Brand Marketing (SM), And JYP Three Sixty (JYP).
The companies were found to have set overly strict terms for refunds of idol-related merchandise (such as albums and official merchandise), which the FTC deemed to be unfair business practices. These companies had shortened the legally required refund period and imposed unreasonable requirements, such as requiring consumers to film the unboxing of products to be eligible for refunds when items were missing.
Weverse Company was fined 3 million KRW, while SM, YG and JYP were each fined 2.5 million KRW.
Examples of such violations include SM’s policy that all products returned due to a simple change of mind must arrive at their fulfillment center within seven business days of the original delivery date. However, the law requires consumers to have seven days from the date of receiving the item to decide whether to return. In addition, both SM and JYP required customers to submit claims for defective or incorrect items within seven days of delivery, which violates the law that allows returns within three months from the date of receipt or 30 days from the time the defect is discovered.
Weverse, SM and JYP also stated that they would not provide replacements for lost items after a certain period of time (30 days after shipment for SM and JYP and one month after shipment for Weverse), while the law allows for claims within three months of receipt.
In addition, Weverse and SM enforced policies that prevented returns if the product packaging was opened or damaged. This is illegal under the law as returns are allowed even if the packaging is damaged as long as the contents are inspected.
SM and JYP also required customers to provide a video recording of the unpacking as evidence in case of missing items, which contradicts the law that places the burden of proof on the seller, not the consumer.
YG also had restrictive policies on event-related purchases, such as signing events, stating that cancellations or refunds were not allowed after the registration period ended. However, under the law, consumers still have the right to cancel before the winners of such events are announced, as the opportunity to participate is tied to the purchase.
In response to the FTC’s investigation, all four companies voluntarily corrected their policies, resulting in lower fines than originally proposed.
