South Korea’s FTC targets subscription practices of streaming giants including Spotify

South Korea’s Fair Trade Commission (FTC) is tightening its grip on the subscription practices of major streaming companies, including Spotify, as part of a broader effort to enhance consumer protection.

That’s according to The Korea Economic Daily, which recently reported that the FTC sent examination reports to five major OTT and music streaming platforms, alleging that they have not provided users with the ability to terminate their subscriptions mid-billing cycle, or have failed to inform consumers of their refund rights.

These companies include Netflix‘s Korean affiliate and Spotify Korea, as well as local video streaming platforms Wavve and Watcha Inc., and music streaming platform NHN Bugs Corp.

The FTC’s investigation follows complaints from consumers who have found it difficult to cancel their subscriptions without incurring charges for the remaining subscription period, KED reported.

The agency argues that subscription services fall under the purview of the “Act On Door-To-Door Sales,” which allows consumers to terminate contracts in the middle of a billing cycle, similar to gym memberships.

Streaming service providers, however, argue that requiring them to allow cancellations in the middle of a subscription period is unfair. They claim that consumers could exploit this by binge-watching content for a few days and then canceling their subscriptions, the report noted.

Meanwhile, a tech industry source told KED that if authorities require companies to permit subscription cancellations mid-billing cycle, these firms might respond by increasing subscription fees, ultimately harming consumers.

The FTC is reportedly expected to implement even stricter regulations than those introduced in previous years. Back in 2021, the antitrust agency ruled that consumers should be eligible for a refund if they canceled within seven days of the billing date, provided they had not used the service or if there was a service-related reason for cancellation.

The FTC’s recent action comes five months after the commission revealed its plan to include music streaming services in the proposed “Platform Competition Promotion Act” (PCPA). The regulatory body has reportedly launched investigations of major international platforms, such as Google and Meta from the US and AliExpress and Temu from China, for potential unfair business practices.

“The FTC is eyeing music streaming services to be included in this bill, as such platforms have infiltrated deep into people’s lives,” FTC Chairman Han Ki-jeong was quoted by Korea JoongAng Daily as saying at the time.

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