Airbnb’s unfair business clauses face lawsuit

An office worker named Kim Min-seong (aged 27) who recently made a reservation for an apartment in outskirt Paris, France through Airbnd, an online marketplace and homestay network, was perplexed to find out that he has to pay some 400,000 Korean won (approx. 351 U.S. dollars) of cancellation charge to cancel the reservation. “It’s unfair to charge me cancellation fee at more than 50 percent of reservation fee when the actual date of stay is more than three months away,” Kim complained.

In November 2016, the Fair Trade Commission ordered Airbnd to amend its policy that charges a whopping 50 percent of cancellation fee. Disobeying the order, the company is found on Sunday to have filed an objection. As the Commission plans not to accept its objection, a legal lawsuit seems unavoidable. Airbnb is known to have begun its preparation for administrative litigation with the counsel of Kim & Chang, one of the largest law firms in Korea. Sources in the industry expect that the results of the lawsuit will provide a legal ground to overseas websites that connect hosts and travelers, which have been considered a blind spot for consumer protection.

According to industry sources, the Fair Trade Commission has ordered Airbnb to bring down the cancellation fee that it charges up to 50 percent of accommodation fee and its current service fee at six to 12 percent. This was the first restriction that Airbnb has been faced with whose service is provided in some 190 countries.

　

Making opposition to the order, Airbnb argues that it has no right to intervene as it only mediates accommodation contracts between travelers and property owners who decide cancellation fees. The Commission, however, has decided that Airbnb should amend its business clauses since it is involved in the entire transaction processes from search, mediation and settlement. “Airbnb is contending that it can’t change globally-applied company policies only in Korea," sources from the Commission said. "But they go against domestic laws related commercial clauses and transaction practices.”

Experts see that the results of current dispute would provide a specific legal ground for global accommodation booking agency that has been the blind spot from regulations. Although reservation services for not only accommodation but also airline tickets and rental cars have widely been used, there have been no specific regulations for fees and cancellation charges, which have caused financial damages to consumers. In particular, as global firms based overseas have run their businesses in Korea only through Korean agency and websites in Korean language without establishing physical corporate entities, the Korean government has agonized over whether to apply domestic laws to such businesses. Industry sources see that the result of the current Airbnb case will greatly affect other cases that the Commission has initiated its investigation on other reservation services for hotel such as Expedia.

“As newly-introduced services such as online-to-offline are making their way to Korean market, damages done on Korean consumers have also increased due to unfair business clauses," Professor Han Sang-rin of Hanyang University noted. "The legal ground to prevent the overuse of business power by using unfair business clauses should be prepared in a timely manner.”

Ho-Sung Cheon thousand@donga.com