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Shopping on Instagram is a #mistake

Social media sellers are unregulated and often operate illegally
Dec 15,2017
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Handbags on sale on a private Instagram page. [JOONGANG ILBO]
A 35-year-old Instagram user surnamed Lim posted a message reading “I have sold 15,000 packs of sheet masks through Instagram and Naver in only one and a half days,” on Dec. 5.

Lim has 60,000 followers on Instagram. If the post is true, it means Lim reaped roughly 300 million won ($276,000) in less than two days, considering mask packs cost around 20,000 won.

Lim has a business license number, but on the National Tax Service (NTS) website it is registered as “out of business.” While all business operators have to register to the tax authority to report their earnings, Lim apparently wasn’t reporting any income.

Until recently, Lim even insisted that customers pay a five percent commission on card payments.

Lim’s masks often show up on other online commerce platforms. Disgruntled customers are trying to sell the products because Lim doesn’t accept returns or offer refunds.

Instagram is used by more than 10 million people in Korea, attracted to the platform’s simple and convenient system that focuses on images and videos. The problem is that independent business operators like Lim are using the platform to try and make a profit out of unfair business, and a growing number of users are being victimized.

Social commerce, which utilizes popular social networking platforms like Facebook for e-commerce transactions, has emerged as a new trend among young shoppers.

Until just a few years ago the most common marketplace for social commerce was through bloggers on Korea’s largest internet portal site Naver or on KakaoStory, a social network tied to the messenger app KakaoTalk. Independent business operators on these platforms now use Instagram accounts to market their products and attract customers.

Instagram has proven its worth as a useful marketing tool for businesses, with its image-heavy format lending itself to eye-catching ads. But problems arise when business operators try to go one step further and use Instagram not only for marketing but as an e-commerce platform - the app lacks the necessary infrastructure to operate as an online shopping mall.

For instance, customers cannot check or save their past purchase records through the mobile service. Payment is mostly done by transferring money to private accounts. Once payment is complete, the independent business operators often refuse to let customers change products or give refunds.

As Instagram doesn’t have a customer support center, commonly offered by shopping websites, customers have to request for a refund or a replacement by commenting on the seller’s original post. However, sellers can delete negative comments to stop them negatively influencing sales.

In many cases, products sold through Instagram are not even quality-approved. A seller surnamed Hong has gathered 70,000 followers in several months by selling bags with the same design as luxury handbags. Hong stressed that bags are high quality, even though they are fake. Each of Hong’s bags cost between 300,000 and 400,000 won.

Other sellers offer shampoos that are supposed to prevent hair loss or anti-wrinkle creams, but their effectiveness is often not formally approved by the relevant authorities.

Most of these sellers are technically breaking the law.

If someone operates a shop online and does not reveal their basic information - including their name, address and phone number - they are violating the law on consumer protection in electronic commerce.

If an independent seller sells more than 10 items within six months online and earns 6 million won or more, they are required by law to register as a government-approved online business operator.

If business operators sell cosmetics with exaggerated or false advertisements, the government can impose administrative measures including fines for violating the Cosmetics Act.

Still, authorities like the National Tax Service rarely go out looking for independent business operators unless a case has first been reported by a consumer. An official from the Fair Trade Commission says, “There are just too many of these sellers to regulate individually.”

According to data from the Seoul Electronic Commerce Center, most of the damages caused from social commerce are linked with sellers refusing to give refunds or change products. Other consumers also suffered from shops being closed abruptly, product defects or a delay in delivery.

Critics say these incidents have not declined as platform operators themselves are not dealing with the situation. Earlier in the month, Instagram reported that the number of business accounts on Instagram - accounts that use the platform for commercial purposes - increased from 15 million in July to 25 million in November worldwide. However, the platform still doesn’t offer a space for consumers to report complaints related to the marketplace. Even if customers want to report on a specific post, they can only do so when it includes violence, hate speech or infringes on intellectual property.

Local internet companies Naver and Kakao have started accepting complaints against sellers using their platforms. In accordance with the Electronic Commerce Consumer Protection Act, which took effect from September last year, the companies then pass the complaints on to the relevant government institutions like the Korea Consumer Agency.

“The Electronic Commerce Consumer Protection Act must be revised to make it mandatory for business operators to set up a system for consumers to more easily cancel their orders,” said Yeun Kee-yong, professor of civil law at Dongguk University. “Also, while the Fair Trade Commission is the only government authority capable of cracking down on actual business practice, local governments should also be able to start investigations at any time.”

The Seoul Electronic Commerce Center encourages consumers to be careful when shopping online. By law, any seller should have a business registration number that can be verified on the NTS website. The e-commerce watchdog also advises shoppers to always record postings and data related to purchases using screen captures.


BY HA SUN-YOUNG [kim.jeehee@joongang.co.kr]