The Honest Commerce Fee is shifting ahead with introducing a brand new authorized framework focusing on digital subscription companies equivalent to over-the-top (OTT) video companies and music streaming platforms. The evaluation is that the present Door-to-Door Gross sales Act framework, which has been utilized to control companies like newspaper subscriptions, doesn’t align with the truth of on-line platforms.
By this initiative, the federal government is predicted to start complete institutional reforms geared toward displaying whole subscription service prices, establishing easy cancellation procedures, and mandating prior consent when making contract adjustments unfavorable to customers. The coverage is to strengthen client safety throughout the subscription economic system via market monitoring and guideline institution.
The Honest Commerce Fee collectively printed a coverage report titled “Subscription Economic system and Client Points” with the Korea Client Company on December 29. The report famous that as subscription service utilization has quickly elevated following the enlargement of non-contact transactions after COVID-19 and digital expertise development, info asymmetry between customers and companies has grown, and problematic behaviors equivalent to darkish patterns have elevated.
Survey outcomes confirmed that the issues customers most steadily encounter are ▲variations between displayed charges and precise cost quantities ▲insufficient notification of necessary contract content material adjustments ▲difficult cancellation procedures. Notably, complaints have been best relating to constructions that make cancellation troublesome, equivalent to hiding cancellation buttons or permitting cancellation solely via PCs through the cancellation course of.
The Honest Commerce Fee identified that whereas digital subscription companies fall beneath persevering with transactions within the Door-to-Door Gross sales Act, their precise transaction construction differs significantly from the format presupposed by that legislation.
It’s because persevering with transactions within the Door-to-Door Gross sales Act have been designed with conventional subscription companies in thoughts, equivalent to newspaper and milk supply or gymnasium memberships, the place the variety of service provisions per unit interval is restricted.
OTT, music streaming, cloud, and software program subscriptions function on a construction that grants entry rights for a sure interval no matter utilization quantity, making it troublesome to use the Door-to-Door Gross sales Act framework of calculating remaining interval worth for refunds upon mid-term cancellation.
In observe, calculating ‘remaining worth’ is just about unattainable for companies the place the identical price is charged whether or not used as soon as a day or all day lengthy.
Internationally, judgments on refunds for mid-term cancellation of digital subscriptions are additionally divided.
The European Union explicitly addresses cancellation and refunds for remaining durations via the Digital Content material Directive (2019/770) specialised for digital content material and companies.
In distinction, Canada permits cancellation however doesn’t mandate refunds for remaining durations.
America and Japan haven’t established separate associated legal guidelines or methods, so phrases are decided by contract contents equivalent to phrases of service, with refunds for remaining durations not often applied.
These structural limitations have emerged as contentious points in Korea’s precise legislation enforcement course of.
Final 12 months, the Honest Commerce Fee deliberated on whether or not OTT, music streaming, and on-line shopping center subscription service operators’ failure to determine mid-term cancellation methods violated customers’ cancellation rights.
Common cancellation is a kind of cancellation the place, even when a cancellation request is made, the contract is maintained and repair continues for use till the utilization interval expires, with already paid utilization charges not refunded.
In distinction, mid-term cancellation is a kind the place the contract is straight away terminated upon cancellation request, utilization ends, and amongst already paid utilization charges, the rest is refunded after deducting sure quantities equivalent to penalties.
The assessment concluded deliberation on grounds that it was troublesome to find out which technique—mid-term cancellation or basic cancellation—was extra advantageous to customers.
This case is interpreted as acknowledging that it was troublesome to determine judgment standards itself with the present authorized framework, even earlier than figuring out legislation violations.
By the report, the Honest Commerce Fee explicitly famous that the persevering with transaction idea within the Door-to-Door Gross sales Act is a regulation launched within the early 2000s, with limitations in equally regulating digital subscription companies.
Nonetheless, if mid-term cancellation and proportional refunds for remaining durations are utilized as-is to digital subscription companies, there are considerations about ‘cherry-picking’ habits the place customers eat content material inside the service in a short while after which cancel subscriptions.
Accordingly, the Honest Commerce Fee emphasised that “it’s mandatory to determine a balanced system that forestalls client harm whereas enabling companies to offer companies stably.”
The truth that subscription companies are performed via e-commerce whereas laws on cancellation and withdrawal are blended between the Door-to-Door Gross sales Act and the Digital Commerce Act can also be cited as an issue.
The Honest Commerce Fee defined that “the persevering with transaction idea within the Door-to-Door Gross sales Act was launched assuming conventional types of subscription companies, making it troublesome to replicate the traits of digital subscription companies like OTT or cloud that enable limitless entry inside the utilization interval.”
It continued, “In the long run, it’s mandatory to think about establishing persevering with transaction-related provisions inside the Digital Commerce Act or enacting separate standalone laws reflecting the specificity of digital subscription companies.”
The Honest Commerce Fee additionally identified that practices of displaying costs excluding extra prices past primary charges or value-added tax trigger client misunderstanding. It additionally seen client notification as inadequate when contract circumstances equivalent to account sharing scope limitations are modified. Within the cancellation stage, constructions requiring a number of procedures together with identification verification and surveys have been cited as consultant issues.
Such behaviors are included as darkish sample regulation targets beneath the revised Digital Commerce Act that took impact in February this 12 months. Nonetheless, the Honest Commerce Fee defined that because the survey timing was through the early implementation of the legislation, there have been limitations for customers to really feel the regulatory results.
The Honest Commerce Fee plans to strengthen market monitoring for darkish patterns whereas making ready simply comprehensible pointers for companies relating to whole quantity show and easy cancellation procedures, together with parallel schooling and promotion. It significantly acknowledged that institutional enhancements are essential to require prior consent for contract adjustments unfavorable to customers.
