Korea needs to introduce a "systemic and sophisticated" e-commerce-related regulatory framework, like the ones implemented by the European Union (EU), as the lack of a legal basis here delays the timely checks needed concerning emerging threats posed by AliExpress and Temu to Korean e-commerce companies, experts said.

This suggestion came in reaction to unceasing controversies surrounding the rapid inroads made by the two Chinese companies due to their alleged weak customer protections and inappropriate sales methods.

Korea's regulatory authorities have so far failed to slap any strict regulations against them, mostly due to the absence of necessary legal grounds.

The situation has sparked growing calls for the government to follow in similar footsteps to those of the EU, whose regulatory framework is stronger and tighter than most other countries, particularly against foreign platform firms, according to professors from Korea's major law schools.

"When it comes to regulations on every corner of the industry, the EU can be a good exemplary model for Korea to follow, as Europe focuses on building a strong legal framework with in-depth studies," Song Se-ryeon, a professor of law at Kyung Hee University, said. "This enables them to take a systemic approach when confronting any controversies and regulating certain companies."

A cross-border e-commerce warehouse of AliExpress in Dongguan, China's Guangdong Province, is seen in this Nov. 10, 2023 photo. Xinhua-Yonhap

For instance, the EU launched an investigation to look into whether AliExpress violated the EU's Digital Services Act (DSA) with the suspected sale of illegal content there last month. The Chinese firm may be subject to fines of up to 6 percent of its global turnover for the possible violation of the DSA.

AliExpress faced a similar kind of controversy in Korea for its sale of melatonin capsules on its platform, but Korea's regulatory authorities have displayed a much lighter regulatory touch than its European counterpart due largely to the weak legal basis regulating foreign firms. The sleep supplement is classified as a prescription-based medicine and is not allowed to be sold online here.

"The point is that Korea's regulatory framework remains ambiguous compared with those in Europe, the United States and other developed nations," the professor said. "For this reason, Korea cannot take any stern and timely regulatory actions against influential foreign platform firms."

Song added, "But we need to build a long-term plan to introduce a detailed regulatory basis at a time when domestic firms face and abide by strict local regulations, which is not the case for Chinese firms. This keeps raising woes on reverse discrimination on homegrown firms."

Fair Trade Commission Chairman Han Ki-jeong speaks during a meeting with economy-related ministers to share its plans to protect customers from foreign online platform firms, at the Government Complex in Seoul, March 13. Yonhap

The EU is also stepping up regulatory pressure against big tech firms, such as Apple, Google and Amazon, under its Digital Markets Act (DMA).

The act is aimed at ensuring fair digital competition in the territory. Any firms violating the DMA can be subject to fines of up to 10 percent of their global revenue, meaning companies of such a size could pay tens of billions of dollars in fines as a result of violating the act.

Compared to such an act and the regulatory framework of the EU, the levels of Korea's regulations against such influential foreign firms end up delivering nothing more than a slap on the wrist.

In 2021, Korea's Fair Trade Commission (FTC) imposed fines of 224.9 billion won ($165.9 million) on Google for its unfair business practices, saying the search engine giant abused its market-dominant position against smartphone manufacturers here, such as Samsung Electronics.

The FTC recently launched a probe into Temu to monitor whether the firm has engaged in false and exaggerated advertisement activities here. Temu was mired in a series of controversies for distributing cash coupons to lure more customers, which the authority viewed as an unfair business act.

Experts say such a probe is not enough. They say the government should focus more on adopting an EU-like regulatory model by setting up a more concrete legal framework to regulate foreign firms rather than giving such an intermittent regulatory signal.

"One characteristic of the EU's regulation is its harsh extraterritorial application, so it can exude strong regulatory pressure against foreign firms," Choi Joon-seon, professor emeritus of law at the Sungkyunkwan University Law School, said. "But under Korea's legal system, we cannot slap any influential sanctions on Chinese e-commerce firms."

He advised the Korean government to start in-depth talks on establishing a sophisticated legal framework as soon as possible.

"Even if we may not be able to collect fines or execute penalties against such Chinese firms, the government can make an official complaint to China if we present relevant data that shows Chinese firms do not abide by Korea's legal framework," he said. "For now, in reality, it appears tough for Korea to slap a similar level of strict sanctions against foreign firms on par with that of the EU, but we still have to follow a similar footstep by drawing a long-term roadmap for protecting local firms and customers."