Small business owners push back against expansion of class-action system

Small business owners have pushed back against National Assembly discussions that would extend the class-action system to cover small and micro enterprises.

The Korea Federation of Micro Enterprise issued a statement Thursday saying the move would be "a harsh measure that pushes small business owners to the front lines of litigation," and said it opposes "uniformly extending the class-action system to small business owners without sufficient safeguards."

The group added that "imposing on small business owners the same level of litigation risk as large corporations clearly violates the principles of equity and proportionality."

South Korea's current class-action system operates primarily in the securities sector under the Securities-Related Class Action Act. In the 22nd National Assembly, a series of bills to extend the system to consumer harm and general damages have been introduced and are under review by the Legislation and Judiciary Committee.

The proposed bills include measures to introduce representative-party class actions for general collective harm and to apply class actions to consumer damage cases. Some bills also include provisions for damages of up to three to five times the actual harm, document production orders and discovery procedures. A bill led by Democratic Party lawmaker Park Gyun-taek would extend class actions to all damages claims and apply the law retroactively to causes that arose before its enactment.

The federation said small business owners should in principle be excluded from the scope of the class-action system. Large corporations can handle prolonged litigation through dedicated legal teams and major law firms, but most small business owners find even the cost of retaining a lawyer a significant burden.

"If even one class-action suit is filed, normal business operations will become difficult due to legal costs and consumer distrust — before any actual liability is even established," the federation said.

The federation said businesses that deal with large numbers of consumers — including restaurants, food retailers, beauty salons, lodging establishments, PC cafes and online retailers — would be particularly exposed to the risk of frivolous lawsuits, compounding the burden they already face.

The federation also opposed applying the new litigation procedures to causes that arose before the law takes effect, saying that doing so could chill investment, hiring and business expansion.

"Consumer protection and small business protection are not an either-or choice," the federation said. "What is needed is balanced legislation that provides consumers with meaningful remedies for actual harm while also guaranteeing the livelihood and normal economic activity of small business operators."