Korea puts brakes on Tesla’s unfair terms

South Korea’s antitrust watchdog has ordered the world’s No. 1 electric vehicle maker Tesla to correct unfair terms and conditions related to automobile sales here, officials said Tuesday.

They included Tesla having buyers fully responsible for picking up the vehicle or for any damage inflicted on the vehicle during the purchase.

Tesla, which entered Korea in 2017 with premium electric vehicles, Model S and Model X, has seen its sales surge since the launch of entry-level Model 3 in November last year.

The US automaker held a 43 percent share in Korea’s EV market in the first half of this year by competing with local EV models, such as Hyundai Motor Ioniq and Kia Motors Soul. During the period, it sold 7,078 units, up from 283 units in 2017.

“As EV sales rise, we have checked the terms and conditions of car sales of Tesla to prevent consumer damage. During the process,” said Lee Tae-hwi, head of the Fair Trade Commission’s terms and conditions examination division.

Tesla has voluntarily corrected all unfair terms and conditions, and implemented them as of Friday, Lee said.

The FTC had looked into Tesla’s sales terms upon reports of unfair contracts in March by consumers.

Through the revisions, customers will be able to be awarded damages when they have trouble in purchasing a car.

Previously, if damages occur while buying a vehicle, Tesla simply returned 100,000 won ($84) of the “order fee” to customers. Now, the automaker should compensate for the loss if the damages are caused by the firm intentionally or by negligence.

The US automaker will also be liable if damages occur in the process of delivering a car to a customer.

Tesla did not bear the responsibility for any damage after the designated period of a car delivery. Under the revision, it should take the responsibility even after the designated period is passed if the damages are caused by the firm intentionally or by negligence.

The EV maker is not allowed to cancel an order from a customer simply because the customer is considered “maliciously ordering or acting maliciously.” It can cancel an order only when the car is used for illegal purposes, such as resale or crime.

In addition, Tesla will not transfer the contract made with consumers to its affiliate at its discretion. The transfer should be made in accordance with the nation’s relevant statutes.

“By correcting unfair terms and conditions of Tesla, customers’ rights will be guaranteed institutionally,” FTC official Lee said.

Tesla is also expected to start delivering the vehicle to a location preferred by customers for an additional fee, instead of only having them come to take the car.

The FTC said that not only Tesla but also other foreign automakers, Renault, Volkswagen and Mercedes-Benz could be recommended for correction if they implement unfair terms and conditions like Tesla. 

By Shin Ji-hye (shinjh@heraldcorp.com)