South Korean drama series and films on Netflix (File photo, courtesy of Netflix)
South Korea’s antitrust body is slated to tighten the leash on subscription businesses of streaming service providers such as Netflix Inc. and Spotify Technology S.A. as consumers find it difficult to cancel their subscription at any time they want and have to pay for it until a renewal.
The Korea Fair Trade Commission (FTC) sent examination reports to three over-the-top (OTT) video platforms – Netflix’s Korean affiliate, Wavve and Watcha Inc. – and two music streaming services providers – Spotify’s Korean unit and NHN Bugs Corp. – on Aug. 21 as they are accused of breaking the country’s e-commerce law for consumer protection, tech industry insiders said on Thursday.
FTC said in the report that the five firms have neglected consumers as they hadn’t fully provided functions to terminate subscriptions in the middle of a billing cycle or the firms hadn’t fully notified consumers of the rights to do so.
If a consumer subscribes to a service for a month and cancels it before the period ends, the company should refund for the remaining period and notify the consumer of the refund details properly, FTC added.
The antitrust body is investigating Korea’s internet giant Naver Corp., e-commerce behemoth Coupang Inc. and online grocery shopping platform Kurly Inc. with similar allegations.
FTC sees subscriptions to streaming services as “recurring transactions” under Act On Door-To-Door Sales, which can be terminated in the middle of billing cycle like cancellation of fitness center memberships.
If a company doesn’t give consumers a refund for the remaining subscription period, this restricts consumers’ rights guaranteed by the sales law, the regulatory body noted.
Meanwhile, streaming services providers argue that it is unfair to force them to enable consumers’ cancellation in the middle of a subscription period. The companies insist that consumers may abuse the law by binge-watching videos for a day or two and terminating the subscriptions.
If authorities mandate companies to allow termination of subscriptions in the middle of a billing cycle, the firms may raise subscription fees, resulting in hurting consumer welfare, a tech industry source said.
FTC’s regulation is forecast to become stricter than the one made three years ago.
In 2021, the antitrust body ruled that consumers should be able to receive a refund if they cancel within seven days after a billing date if the consumer doesn’t use the service or there is a reason for cancellation attributable to the service operator.
By Sul-Gi Lee
surugi@hankyung.com
Jihyun Kim edited this article.
