The amended Regulation of Standardized Contracts Act (the “Amended Act”), together with the amended Enforcement Decree and Regulations of the same Act, became effective as of August 18, 2012. Based on the Amended Act, the Korea Fair Trade Mediation Agency (the “KFTMA”) has commenced mediating disputes involving standardized contractual terms which allow enterprises that suffered damages due to unfair standardized contractual terms to directly request mediation to the KFTMA.
Key Contents of the Amended Act
- The Korea Fair Trade Commission may decide to examine the revised standardized contractual terms if the standardized contractual terms that were previously requested to be examined are subsequently revised.
Prior to the above amendment, a claimant that requested examination of standardized contractual terms had to file a new request for examination if the standardized contractual terms that were previously requested to be examined were subsequently revised. This was the case since the Korea Fair Trade Commission (the “KFTC”) would decline to conduct such review based on the rationale that such standardized contractual terms are deemed to no longer exist. However, under the Amended Act, the KFTC, regardless of whether a claimant has made a request for examination, may decide to examine the revised standardized contractual terms if the standardized contractual terms that were previously requested to be examined are subsequently revised (Article 19-2 of the Act).
- Introduction of a Dispute Mediation System
Pursuant to the Amended Act, the Committee for Mediation of Disputes Involving Standardized Contracts (the “Committee”) was established within the KFTMA for the purpose of mediating disputes involving unfair standardized contractual terms (Article 24 of the Amended Act).
“Customers” that suffered damages by unfair standardized contractual terms or “similar types of contractual terms” may request mediation to the Committee by filing an application (Article 27 of the Amended Act). The term “customers” above not only includes consumers but also includes enterprises and, the phrase “similar types of contractual terms” above refers to those standardized contractual terms which involve the same legal issues that are applicable to the standardized contractual terms that are subject to the request for mediation regardless of, among others, who drafted the terms and the title or wording of such terms. (Article 8-4 of the Enforcement Decree of the Amended Act).
The Committee may make a recommendation to the parties to the mediation to voluntarily resolve the matters in dispute or suggest a proposal to resolve the matter to the parties. Additionally, the Committee may initiate an investigation, require the parties to the mediation to submit relevant materials and/or require such parties to appear before the Committee for fact finding of the matters in dispute if deemed necessary (Article 27(2) of the Amended Act).
In the event that the matters in dispute are resolved through mediation, the Committee will draft an official mediation report where each party to the dispute and a representative of the Committee who participated in the mediation will affix their respective signatures/seals. In such case, it will be deemed that a settlement as stated in the official mediation report was reached between the parties to the dispute (Article 28 of the Amended Act). Additionally, the Committee may implement a collective mediation process in order to provide effective remedies when it is highly likely that numerous enterprises will be subject to damages from the same (or similar) unfair standardized contractual terms (Article 28-2 of the Amended Act).
Implications of the Amended Act for Companies
Prior to the above amendment, an enterprise that suffered damages due to unfair standardized contractual terms was not permitted to make a request for mediation and only consumers that suffered such damages were permitted to request mediation through the Korea Consumer Agency. However, under the Amended Act, an enterprise is now permitted to make a request for mediation to the KFTMA.
Additionally, under the Amended Act, the scope of mediation was expanded to include, not only the standardized contractual terms which were found to be unfair, but also other similar types of standardized contractual terms. Moreover, the Amended Act introduced a collective mediation process which can be implemented if the Committee determines that damages due to the same (or similar) unfair standardized contractual terms might occur to numerous enterprises. Therefore, it is advisable for companies to pay close attention to their standardized contractual terms in order to avoid including unfair terms when drafting or revising their standardized contracts that involve numerous enterprises such as dealers or franchisees.