First Class-Action Suit Ends with First Consumer Compensation Order

Since the enforcement of the Basic Consumer Law, the first consumer compensation order was made regarding a sash case of Woolim 1-cha Apt. in Cheongwon-gun, Chungcheongbuk-do.

In a compensation case of 235 residents against Seonu, a sash company, the Korea Consumer Agency said at a dispute mediation committee on September 10, “The sash company should compensate part of the construction fees as it seems to have done psychological damage to residents by breaching a contract.”

The committee said in a statement, “Seonu deliberately infringed the contract to set up reinforcement beams (a structure that supports a sash) and profiteered; thus it is liable for compensation.”

However, the committee didn’t accept the dwellers’ request of the re-construction of the sash, saying, “The lack of sash beams doesn’t seem to cause safety problems.”

For the 37 households for which the company belatedly built beams, 8% of the construction fees (2.4-7 million won per pyeong) will be refunded. Those without beams will receive 10% of their fees.

Regarding the decision, the company said, “We will start the compensation process after revising our arbitration proposal.”

The class-dispute arbitration system was first introduced in the Basic Consumer Law revised in March and allows class action suits against provincial governments, the Korea Consumer Agency, and other consumer-related organizations when more than 50 consumers are damaged by the same products or services.

The residents of the Woolim 1-cha Apt filed an arbitration case with Korea Consumer Agency against the company in May, saying, “The company broke its promise to include reinforcement beams inside the sash.”

Meanwhile, the dispute mediation committee decided to open an arbitration process regarding the second class action case raised by 57 residents of the Namyang I Joeunjip Apartments in Donong-dong, Namyangju-si, Gyeonggi.

The apartment dwellers submitted a request form for construction of facilities and compensation against Nam Yang, a construction company, in July saying, “The company breached the contract to build a library and fitness club.” The committee will deliver a decision on October 28 after investigating the facts.

Meanwhile, companies are paying attention to the implications of this decision of the committee on future class actions. In particular, companies are increasingly worried that consumers, who have been ‘weak’ in disputes with companies in the past, will have bigger voices.

In some industries like mobile phones, cable broadcasting, and food, it is expected to see large lawsuits involving tens of thousands of people in the future.

wiseweb@donga.com