The Fair Trade Commission (FTC) of South Korea announced that it had imposed fines on four major K-pop entertainment agencies for violating consumer protection laws related to e-commerce. The agencies affected include Weverse Company (HYBE), YG Plus (YG Entertainment), SM Brand Marketing (SM Entertainment), and JYP Three Sixty (JYP Entertainment).
The FTC identified that these companies had engaged in unfair practices regarding refunds and returns for idol-related merchandise such as albums and official goods. As a result, a total fine of 10.5 million KRW (approximately $7,700 USD) has been levied against them under the ‘Electronic Commerce Act.’
Details of the Violations
The violations primarily involved excessively strict refund conditions that did not comply with South Korean law. The key issues included:
1. Shortened Refund Periods:
SM Entertainment had a policy requiring returned items due to a change of mind to arrive at their logistics center within seven business days of delivery. However, according to the law, consumers are entitled to a seven-day period from the date of receipt to decide on a return.2. Unreasonable Requirements for Refunds:
SM and JYP required customers to submit claims for defective or incorrect items within seven days of delivery, while the law allows returns within three months from receipt or 30 days from discovering the defect.3. Limitations on Compensation for Lost Items:
Both SM and JYP refused to compensate for lost items if claims were made after 30 days from shipping, while Weverse Company set this limit at one month. The law permits claims within three months of receipt.4. Restrictions on Returns of Opened Products:
Weverse and SM enforced policies that prevented returns if the packaging was opened or damaged. However, the law allows returns even if the packaging is damaged, provided the product was opened to check its contents.5. Burden of Proof on Consumers:
SM and JYP required customers to provide a video recording of the unboxing as proof in cases of missing items. This practice contradicts the law, which places the burden of proof on the seller.6. Event-Related Purchase Restrictions:
YG Plus had restrictive policies regarding event-related purchases, such as for signing events, where cancellations or refunds were not allowed after the application period ended. Legally, consumers are entitled to cancel before winners are announced, as participation is tied to the purchase.
Fines and Voluntary Corrections
The fines imposed by the FTC are as follows:
- HYBE: 3 million KRW
- SM Entertainment: 2.5 million KRW
- YG Entertainment: 2.5 million KRW
- JYP Entertainment: 2.5 million KRW
All four companies have voluntarily corrected their policies following the FTC’s investigation, resulting in reduced fines. The FTC’s actions highlight the importance of adhering to consumer protection laws, especially in the rapidly growing e-commerce sector related to K-pop merchandise.
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