The FTC announced that it had scrutinized the terms of service of three renowned brands, namely Nike, Chanel, and Hermes, identifying and rectifying ten types of unfair clauses. (Image courtesy of Yonhap)
SEJONG, Nov. 30 (Korea Bizwire) – South Korea’s Fair Trade Commission (FTC) has determined that clauses in the terms of service of certain brands that prohibit individuals from reselling purchased products amount to a violation of consumer rights.
On November 29, the FTC announced that it had scrutinized the terms of service of three renowned brands, namely Nike, Chanel, and Hermes, identifying and rectifying ten types of unfair clauses. The key areas addressed included clauses prohibiting resale, copyright infringement, and business disclaimer provisions.
Examining the problematic clauses, both Nike and Chanel had provisions in their terms of service that allowed the companies to cancel contracts and revoke membership if customers were found to have purchased products for the purpose of resale.
For example, Nike explicitly stated, “If we believe that you are a reseller or that your order will be sold for resale purposes, we reserve the right to restrict, refuse, or cancel sales and orders, or revoke membership.” Chanel, on the other hand, specified, “In cases where resale purposes are reasonably presumed based on other purchase patterns, membership can be revoked.”
The FTC responded, stating, “Consumers should be able to decide whether to continue possessing their items or dispose of them through second-hand transactions. Clauses unconditionally restricting contracts with third parties after a purchase are problematic under contract law. These clauses allow the determination of ‘resale purposes’ to be subjectively applied by the business, making them unfair.”
Additionally, clauses allowing businesses to edit or widely use content created by consumers, such as customer product reviews, without the member’s consent, raised concerns. Both Nike and Chanel included provisions that enabled them to edit or modify the member’s content without consent, granting them a broad license to make use of the content and to retain exclusive rights.
Furthermore, clauses that exempted businesses from responsibility without considering the fault of the business in the event of customer harm were also addressed. For instance, Hermes had a clause stating, “The responsibility for the receipt of ordered products by a third party on behalf of the customer is entirely the customer’s (exempting the company from all liability).” The FTC asserted that businesses should bear responsibility if harm arises due to the intentional or negligent actions of the business. In cases where third parties, such as affiliates, are involved, the business should bear responsibility, and the clauses were adjusted accordingly.
The FTC also rectified clauses related to the cancellation of customer orders, limiting the scope of compensation for damages to specific losses.
J. S. Shin (js_shin@koreabizwire.com)
