KFTC Begins to Enforce the Amended Consumer Dispute Resolution Standard to Reinforce Consumer Protection
On October 26, 2016, the Korea Fair Trade Commission (the “KFTC”) announced that it would enforce its amendment to the Consumer Dispute Resolution Standard (the “Standard” or such amendment the “Amendment”).
The Standard provides the criteria for the resolution of disputes between consumers and enterprises for each product / service and/or type of such dispute¹. Unless the parties expressly agreed otherwise, the Standard served as the basis for a consensus on – or recommendation for – dispute resolution.
We include below the key aspects of the Amended Standard.
Relaxed Standards on Replacing or Refunding a Motor Vehicle:
Prior to the Amendment, it was difficult to meet the standards on replacing or refunding a motor vehicle.
However, under the Amendment, the bar has been lowered to as much as foreign standards (including those of the US), so as to reinforce consumer protection.
1) Duration for replacement or refund
- The Standard as-is:
(i) The date the vehicle is first registered; or
(ii) Within 12 months from the last date of the year when the vehicle is manufactured
- The Amendment:
Within 12 months from the date the vehicle is delivered
2) When a vehicle can be replaced or refunded
- The Standard as-is:
Where a vehicle’s defect affects driving and/or safety, and is significant:
(i) The same defect recurs after three times repair work for the same defect; or
(ii) A repair takes more than an aggregate period of 30 days (actual days in which repair is done)
- The Amendment:
Where a vehicle’s defect is: (i) not significant;² but (ii) recurs after three times repair work for the same defect
Where a vehicle’s defect: (i) affects driving and/or safety and is significant; and (ii) recurs after twice repair work for the same defect
Either significant or not, where a defect³ takes more than an aggregate period of 30 days (actual days in which repair is done)
New Standard for Disputes Involving New Types of Gift Certificates
Increasing number of consumers are using new types of gift certificates that are being widely issued (e.g., e-cards and online/mobile gift coupons), and thus, the need for standards in dealing with disputes involving such gift certificates has been identified. As such, the Amendment newly provides for the criteria regulating the terms or conditions for redeeming gift certificates:
1) Full amount may be refunded if the purchase is cancelled within 7 days from the date of such a purchase.
2) Whether a gift certificate with a face value⁴ is redeemable (for cash) should be indicated:
- A gift certificate with a face value of more than KRW 10,000 will be redeemable if 60% of such amount is used.
- Otherwise (KRW 10,000 or less), a gift certificate is redeemable if 80% or more of its face value is used.
- If multiple gift certificates are used at the same time, an aggregate amount will be the basis for determining redeemability.
Amendments Concerning Product Components
Prior to the Amendment, the Standard provided that the clock for maintaining product components would start ticking from the moment the manufacturing of the relevant product is discontinued.
Now, considering the consumers’ improved predictability of continuance/discontinuance of such a product, as well as greater convenience to be made available for manufacturers in terms of their management of components, the Amendment allows the clock to start running from the completion date of the product’s manufacturing.
On balance, manufacturers are required to maintain product components one more year under the Amendment, if they manufacture products that are both widely used by consumers and also are often subjects of dispute (e.g., televisions, refrigerators, air conditioners, washing machines, boilers). The extension has been included in the Amendment, because the clock starts running earlier. Thus, the Amendment imposes a lower burden on manufacturers to maintain the components.
Also, the Amendment adds clarifications on what to do if a finished product’s warranty period is over while its key component has a valid warranty. In such a case, under the Amendment, free repair is the only available option (and not the replacement or refund of a finished product).
¹ As set forth under Article 16, Paragraph 2 of the Framework Act on Consumers
² A defect not significant refers to a technical or functional defect that may lead to practical damage to the use, value or safety of a vehicle, which requires repair, and not a simple defect to the exterior or interior finishers of a vehicle.
³ A significant defect refers to a defect that may relate to a vehicle’s engine, power transmission system, brake, steering mechanism, and other equivalent defect that affects such a vehicle’s driving and/or safety.
⁴ A gift certificate with a face value refers to an e-payment tool with an amount either chargeable or pre-determined. During the period before the expiration, such certificate holder may use it when purchasing a product or service within the amount available.