From Timef to Alets... Controversy over solution to e-commerce ‘unsettled situation’

Government and politicians come up with a solution to ‘shorten the settlement cycle’… “There are concerns that uniform regulations may destroy the industry.”

While the aftermath of the TimePrice (Timon‧WeMakePrice) incident is still continuing, the furniture and home appliance online platform ‘ALLETS’ suddenly announced the closure of business, and the situation of non-settlement and delayed refunds is once again happening.

It is said that among the companies that have entered Allets stores, there are many who have already suffered damage from TimePro and are suffering from a double whammy as the Allets non-settlement situation breaks out again. Because Aletts was a platform that mainly sold expensive furniture and home appliances, the damage to general consumers was relatively large.

According to the distribution industry, Allets was founded in 2015 and has been conducting business by combining media content and a premium shopping platform. The problem arose after Allets posted a notice on its website on the 16th and announced, “We would like to inform you that the service will be terminated as of August 31 due to unavoidable business circumstances.”

According to sellers in Aletts stores, the 16th, when Allets posted a notice, was the interim settlement date, but the settlement money was not paid on that day. Contact with Aletts officials was also lost. Damage cases emerged one after another in which consumers were unable to contact customer service and did not receive goods after payment.

Kang Shin-wook, chairman of the Allets Damaged Seller Emergency Response Committee, told ‘Sunday Newspaper i’, “Because the shopping mall in question specializes in high-end furniture and home appliances, there are sellers who have suffered damages worth billions of dollars.” He also complained of frustration, saying, “After the announcement of the notice, Allets employees also said, ‘They didn’t know’ and ‘They can’t contact the higher-ups.’”

Currently, all 45 Aletts employees have resigned, increasing the victims' anxiety. As of the 29th, about 1,600 people are participating in two open chat rooms for victimized consumer groups, and about 800 people are participating in two open chat rooms for seller victim groups.

Since the 26th, Kiwoom Pay, Allets' payment agency (PG company), has been accepting objection applications from consumers. Even against this, only card payment consumers can raise objections, while cash payment consumers are directly filing complaints with the Korea Consumer Agency or the Financial Supervisory Service. Objections and damage relief methods are only shared between victims through information exchanged through open chat rooms. On the 12th, a consumer who paid cash for a washing machine worth 3 million won at Allets complained, “I bought a washing machine ahead of moving, but I did not receive the product and ended up losing the purchase money. I filed a complaint with the police and Korea Consumer Agency, but it was not resolved. I need a washing machine right away, so I had to buy it from an offline store, so I spent double money, which is a financial burden.”

Both the government and politicians see the misappropriation of sales proceeds due to the long settlement cycle as the key cause of the series of delayed settlements in the e-commerce industry. It was reported that Timon and WeMakePrice had a maximum settlement cycle of 70 days, and Allets had a maximum of 60 days. It is argued that because of this, the amount of damage was bound to increase.

Accordingly, the government and politicians are proposing a solution to limit the payment settlement period for e-commerce companies to within 40 days. According to the National Assembly Bill Information System on the 28th, 9 bills were proposed for partial revision of the Act on Consumer Protection in Electronic Commerce, etc. (Amendment to the Electronic Commerce Act), which sets the deadline for e-commerce sales payment settlement.

The government also jointly announced a plan to improve the system related to the Timef incident early this month with related ministries and announced that it plans to comply with sales payment settlement deadlines and impose separate management obligations.

There are also voices of concern among industry officials and experts regarding this. Not only will it be difficult to solve all problems by shortening the settlement cycle, but they are also worried that uniform regulations could kill the entire e-commerce industry.

On the 26th, the Innovative Venture Organization Council, comprised of the Venture Business Association, Korea Startup Forum, Early Investment Accelerator Association, and Korea Venture Capital Association, said in a statement, “The essential cause of this incident is the unreasonable management of e-commerce companies and the violation of electronic financial supervision regulations by PG companies and escrow operators that manage settlement payments,” and “Excessive shortening of the settlement period makes it difficult to provide various settlement methods, leading to daily settlement and “It drastically increases the cost burden of remittances,” he argued.

He also raised concerns, saying, “Liquidity secured through various methods leads to reinvestment to provide better benefits to consumers, but uniform and excessive shortening of the settlement cycle suggests ways for companies to manage and operate funds, which could ultimately weaken market competitiveness.”

At the 42nd Consumer Rights Forum held at the National Assembly Hall in Yeouido, Seoul on the 27th, Jeong Yeon-seung, Dean of Dankook University Graduate School of Business, pointed out that unreasonable shortening of the settlement period can lead to the bankruptcy of small and medium-sized businesses. “Policies are being promoted too quickly without considering the special characteristics of the distribution industry. We need measures to accurately understand the status of settlement structures by industry type and prepare for economic risks caused by liquidity crises of distribution companies.”

Bang In-tae, a lawyer at Daeryun Corporate Law Group, a law firm representing Timef victims, also argued, “Rather than reducing the settlement schedule, I think there should be a certain level of entry barrier, such as checking capital, when entering the online platform industry.”

There are also arguments that the government's responsibility should be strengthened. Seo Yong-gu, a professor of business administration at Sookmyung Women's University, said, "The key is not the settlement cycle. Pulling the settlement cycle does not mean that a failing company will not fail," and argued, "The government that allowed Q10, which acquired and integrated many companies in a short period of time through aggressive mergers and acquisitions (M&A) in the first place, is also not free from responsibility."

Kang Shin-wook, chairman of the Allets Damaged Seller Emergency Response Committee, mentioned that the Korea Development Bank, a government-run bank, invested 2 billion won in Allets in the name of venture investment in 2020, and pointed out, “Allets is a company that has never had a surplus in operating profit since its establishment, so why did the Korea Development Bank invest in such a company (questionable).” He then raised his voice, saying, “The Korea Development Bank, in which the Ministry of Strategy and Finance owns 90% of the stock, invested tax money in an insolvent company, causing damage to consumers.”

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