Business, finance circles express woe over class actions, punitive damages

26-Sep-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

The nation’s business and finance circles are expressing some concerns over the justice ministry’s plan to introduce two customer protection bills, which they say may burden corporate activities due to the possibility of raising the number of bad consumers, industry officials said Friday.

The core consideration of the introduction of the bills on class actions and punitive damages is aimed at protecting the best interests of local consumers. However, it’s been expected the bill, if passed, may negatively affect not just conglomerates, but also small and medium-sized companies.

The Ministry of Justice plans to submit the bills to the National Assembly by the end of this year. The bills call for strengthening punitive damages against companies and allowing class actions to be expanded in all incidents with more than 50 victims. This was in response to growing calls that the class action-related legal system should be established beyond the securities market.

“We are concerned that the vitality of the entire industrial ecosystem may be cut due to the introduction of the two bills, as more and more bad consumers will seek to find legal loopholes by possibly abusing the laws,” an official from one of the nation’s top conglomerates said.

“For instance, companies in the business-to-consumer (B2C) area will be even busier dealing with a surging number of such consumers, and chances will become larger that the companies will end up spending more on handling legal disputes and compensation for bad consumers,” the official said.

This also goes the same for the B2B sector.

“When a subcontractor of a conglomerate files a lawsuit against the latter, the conglomerate will cut business ties immediately and find another subcontractor,” the official said. “This is a lose-lose game for both sides.”

Another official from the finance industry also said more financial players will be affected by the law. He took the recent redemption fiasco by Lime Asset Management as an example. Lime suspended 1.6 trillion won worth of fund redemption, leading to hundreds of victims suffering losses.

“Each of the customers signed the fund product under different terms, so some of them can be complete victims, while others cannot be,” the official said. “A growing number of customers will likely abuse the new law, but financial firms will suffer more damages by handling a possible increase in lawsuits from customers.”

“We hope the ministry will present additional legal measures to prevent industrial and financial circles from receiving unwanted damages from bad consumers,” he said.

Another local financial official said the intention of the bills is a step in the right direction, as companies will be more cautious when manufacturing and selling products.

“Given a series of social disputes surrounding customer damages ? such as carmakers’ involvement in emission fraud scandals ? consumers will definitely welcome the bills,” the official said.

“But the justice authority should also consider any potential side effects from the bills, and hear the voices from the industry side.”


Category: Korea

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