E-Commerce in the Republic of Korea
1. Introduction to E-Commerce and Its Legalization in the Republic of Korea
1.2. Impact and Issues
1.3. International Discussion and Legalization in Korea
2. Current State of E-Commerce in the ROK
3. Process of Establishing E-Commerce Infrastructure in the ROK
3.1. Broadband Networks
Electronic Authentication Policy in the ROK
1. Public Authentication
1.2. Means of Promoting Public Authentication
2. Other Policies on Authentication
2.1. I-Pin and My-Pin
Consumer Protection Policy in the Republic of Korea
1. Importance of Consumer Protection in E-Commerce
2. Consumer Protection Laws in the Republic of Korea
2.1. Consumer Basic Law
2.2. Act on the Regulation of Terms and Conditions
2.3. Act on the Consumer Protection in Electronic Commerce, ETC.
3. Act on the Consumer Protection in Electronic Commerce
3.1. Purchase Safety Service
3.2. Guidelines for Online Vendors on the Provision of Product Information
3.3. eTrust Certification System
3.4. Consumer Damage Relief System
3.5. E-Commerce Mediation Committee
The exponential growth of Internet users has led to the emergence of a new Sale and Purchase structure known as “e-commerce.” E-commerce refers to buying and selling carried out in virtual markets via the Internet. As there are no time constraints, spatial restrictions, or additional fixed costs incurred from the operation of physical stores, e-commerce expanded rapidly in major developed countries throughout the 1990s. In addition, the massive production of smartphones has enabled e-commerce to expand significantly in developing countries as well.
One of the many advantages of e-commerce is that buyers face no time constraints or spatial restrictions in making purchases. Additionally, in the process of making a purchase decision, a buyer can easily obtain information on alternative products and prices offered by various sellers. Sellers also face no time constraints on their sales activities, nor do they require any physical space for displaying their products, incurring lower distribution
and advertising costs as a result. Such benefits of e-commerce have been highlighted in several studies. Brown and Goolsbee (2002) and Baye et al. (2005) state that by reducing the asymmetry in information and the cost of searching for information, e-commerce increases the efficiency of the market, ultimately bringing prices down. Furthermore, Goldmanis et al. (2010) conclude that e-commerce not only reduces market prices but also encourages competition among firms in the market, thereby increasing economic efficiency and influencing the industrial structure.
To ensure the vitalization of the e-commerce industry, balanced development of infrastructure, social and institutional systems, and other infrastructures is necessary. Yet, the mass distribution of smartphones has dramatically decreased the need for new infrastructure and other infrastructure. With the advent of smartphones, the need for wired high-speed Internet networks in e-commerce has decreased drastically, and with the expansion of various mobile payment apps such as AliPay, it has become possible to build low-cost electronic payment systems. In this way, the distribution of smartphones has given developing countries greater opportunity to share in the benefits of e-commerce. In this respect, e-commerce vitalization policies in developing countries should prioritize the institutional systems that help build trust between buyers and sellers.
E-commerce is characterized by non-face-to-face transactions, making it difficult for consumers and sellers to establish trust early on. Due to this particular characteristic of e-commerce, it is of utmost importance to confirm the identities of the parties to transactions; thus, electronic authentication is a key factor in ensuring the reliability of e-commerce. In addition, consumers, who play a crucial role in vitalizing the e-commerce industry, face reliability issues that arise from purchasing products online, where the transactions are non-face-to-face, and security problems, such as leakages of personal information. In e-commerce, consumers make purchases without directly identifying the products they are buying. Therefore, e-commerce can never be vitalized unless the credibility of purchases is ensured. In order to establish an institutional system to accomplish this, developing countries should prioritize e-authentication and consumer protection measures so as to foster trust between consumers and sellers.
The e-commerce industry of the Republic of Korea (ROK) has expanded rapidly since the 2000s, growing to KRW 1.204 quadrillion annually by 2013. The purpose of this study is to provide a systematic summary of the policies of the Korean government, which have paved the way for the rapid vitalization of e-commerce in Korea since 2000, as a means of assisting policymakers in creating effective e-commerce vitalization policy measures. This paper focuses mainly on the ROK’s policies on electronic authentication (e-authentication) and consumer protection.
In terms of e-authentication, the ROK has introduced policies, including certifications, i-PIN/My-PIN, and OTP, which require the government to certify e-authentication or enforce other specific measures. As the government of the ROK has ensured the credibility of e-authentication, the ROK’s e-authentication policy, in particular, is believed to have played an important role in expanding e-commerce in the country in the early 2000s. However, under its e-authentication policy, the government made the use of specific technologies, such as PKI and OTP, mandatory, which created various problems. The consequences of making the use of such specific technologies mandatory were that it: disincentivized investment in technological development, thereby hindering the invention of new technologies; shifted the burden of responsibility for issues arising during e-commerce transactions to consumers; and, created security problems in e-authentication, as the Internet environment as a whole relies heavily on ActiveX technology. The biggest problem with the ROK’s e-authentication policy is the mandatory use of specific technologies, which serves to hinder the development of new technologies and the growth of the industry in general. Therefore, to secure a foundation for their e-authentication policies, developing countries should maintain technology neutrality and the dynamicity of their private sectors, even when government intervention is necessary to establish trust between consumers and sellers early on. In addition, they should focus on customer convenience, as the failures of the i-PIN and My-PIN systems have demonstrated.
To promote consumer protection in the ROK’s e-commerce industry, the government enacted Act on the Consumer Protection in Electronic Commerce, ETC. in 2002. Consumers who purchase goods online are becoming increasingly concerned with the preservation of relevant electronic records, misuse of electronic documents due to the lack of experience of those involved, and newly emerging issues in relation to advertising, shipping, prepayment,
and so on. Regarding such issues, the Act on the Consumer Protection in Electronic Commerce, ETC. provides institutional tools to prevent potential harm to consumers. In order to promote consumers’ trust in e-commerce, developing countries should also adopt a subscription withdrawal measure and an escrow system and establish organizations, such as an electronic trade dispute settlement committee, to mitigate consumer harm in e-commerce.
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