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A BMW service center in Seoul is overwhelmed with cars awaiting inspection following a recall provoked by a string of vehicle fires.
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MOLIT reviewing adoption of punitive damage system to improve automotive recall practices
The Fair Trade Commission (FTC) is actively pursuing the adoption of a class action system to improve the efficacy of restitution for consumers after a recent string of fires involving BMW vehicles. The Ministry of Land, Infrastructure and Transport (MOLIT) is also considering adoption of a punitive damage system as a measure to improve current automobile recall practices Speaking on Aug. 7 about plans for improving customer restitution measures after the BMW fires, an FTC senior official explained, “Restitution for damages is not easy under the current law, as the consumer [plaintiff] is responsible for proving everything including defects in the products, loss of life, injury, property damage, and the causal relationship between the product defect and damages to the consumer.” “A class action system will need to be introduced to improve the efficacy of restitution for consumer damages,” the official said. Under a class action system, a legal victory for one victim in a case involving damages to multiple people due to a company’s error entitles the other victims to restitution from the perpetrator without separate legal action. It is an efficient approach in cases that involve large numbers of victims but relatively small individual damages. It has been introduced in countries such as the US, the UK, and Canada; in South Korea, it was introduced in the area of securities in 2005 to protect the interests of small shareholders. Regarding areas where the class action system could be adopted first for consumer compensation, the FTC suggested the Product Liability Act and the Act on Fair Indication and Advertisement. Kim Gyeong-wook, director of the MOLIT transportation and distribution office, said the ministry planned to “consult with the FTC and other authorities on whether to introduce a punitive damage system for automobiles.” “If it is not possible to introduce it through the Product Liability Act regulating the general punitive damage system, we are also considering doing it through the Automobile Management Act or new legislation,” Kim added. A punitive damage system was previously introduced in April through the Product Liability Act. But with its targets restricted to “companies that ignored product defects despite being aware of them,” observers have suggested it is inadequate to apply to incidents involving automobile recalls. Under a punitive damage system, offenders are subject to far larger penalties than actual damages – up to three times in South Korea – in cases of actions deemed malicious or antisocial. MOLIT is also considering steps to establish a legal basis for penalties in cases where a manufacturer deliberately conceals or minimizes a vehicle defect that it is aware of. Under the current system, penalties of up to 1 percent of sales for the automobile in question are possible only in cases of “belated recalls,” with provisions for criminal punishment only in cases of deliberate concealment or minimization. South Korea has experienced a number of cases where manufacturers have responded halfheartedly to automobile defect issues due to the lack of an adequate system for damages in connection with them. BMW has explained that it was investigating the occurrence of fires in its diesel models in Europe in 2016 and happened to rectify the issue with improvements to its EGR model that December. In South Korea, however, it ignored the issue until nearly 30 fires had occurred this year, belatedly announcing a recall only after a recommendation from MOLIT. By Kwack Jung-soo, business correspondent, and Heo Seung, staff reporter Please direct comments or questions to [english@hani.co.kr]
