Chinese e-commerce platforms such as AliExpress, Temu, and Shein, collectively known as “C-commerce,” a blend of China and e-commerce, have been rapidly expanding their market share in South Korea. With their accelerated encroachment on the market, consumer complaints are rising, and the domestic retail industry is voicing concerns about the relatively lax regulations their Chinese counterparts enjoy. In response, the South Korean government has launched a comprehensive crackdown on these platforms.
The Korea Fair Trade Commission (KFTC) was the first to take action. Last week, the KFTC sent investigators to the Seoul office of AliKorea, the South Korean subsidiary of AliExpress, to conduct an on-site investigation. A written investigation will reportedly be conducted on Temu, which does not have a domestic subsidiary.
The KFTC will primarily examine violations of the Act on the Consumer Protection in Electronic Commerce and the Act on Fair Labeling and Advertising. The Electronic Commerce Act stipulates that “in order to resolve complaints or disputes... a mail order broker shall find out the cause thereof, assess damage, and take other necessary measures without delay.” The KFTC is expected to review whether proper customer service (CS) operations have been maintained, including having the appropriate personnel and facilities to receive and handle consumer complaints and notifying consumers of related standards.
Violations of the Act on Fair Labeling and Advertising could also be an issue. The platforms can be held accountable for receiving money from vendors to prominently display their products or for failing to clearly mark advertisements as “advertisements.”
The recent controversy over counterfeit (fake) products is somewhat tricky for the KFTC to address with current laws, as these platforms are considered “mail order brokers.” The KFTC can sanction false or exaggerated advertising of counterfeit sales, but only if the party involved is a “mail order distributor.”
A retail industry official said, “While AliExpress does directly sell some products, it mostly acts as an intermediary,” adding that “In such cases, it is difficult to directly hold Ali responsible.” The insider continued, “The problematic sellers are mostly small vendors located in China, and it is realistically difficult for South Korean administrative power to reach them.”
If the investigation reveals that AliExpress or Temu engaged in illegal activities, minor cases might result in fines. For more serious violations, hefty fines, site closures, or business suspension orders could be issued.
