In 2018, Korea amended its product liability law to allow among other things, punitive damages. These changes should be on the radar of every multinational manufacturer and supplier, selling or distributing products in Korea. A short summary of the changes is as follows:
1. Introduction of punitive damages
The current product liability law limits the claim for the damages to actual damages incurred and does not include punitive damages. The new amendment will provide for punitive damages (up to three times the actual damages or treble damages) if (i) the manufacturer knew about the defect of the product and failed to take necessary measures and (ii) the defect resulted in significant harm to a consumer’s life or body. The claimant has the burden of proving the fact that the manufacturer knew about the defect of the product and failed to take necessary measures.
2. Lessening of the claimant’s burden of proof
The amendment provides that if the claimant proves that (i) the claimant incurred damages while the product is used in the ordinary course of use, (ii) the damage was caused by a cause which is under de facto control of the manufacturer, and (iii) the damage does not customarily occur without the relevant defect of the product, it shall be presumed that the product was defective (existence of defect) and the damages are caused by the defect in the product (the causality between the defect and damages).
3. Shifting of the claimant’s burden of proof in case where the manufacturer is unknown
Under the current product liability law, in order for a claimant to seek compensation from the distributor in case where the manufacturer is unknown, the claimant had to prove that the distributor knew or could have known the manufacturer. Under the amended law, , if the manufacturer is unknown to the claimant, the claimant may seek compensation from the distributor regardless of whether the distributor knew or could have known the manufacturer.
With introduction of the punitive damages, manufacturers doing business in Korea should review their internal procedures regarding the handling of product defects. Distributors also should review processes on handling information on the manufacturers and distributors who supply the products. Companies are also advised to establish internal procedures for taking appropriate measures in case of consumer complaints in order to minimize product liability risks such as (i) immediate suspension of sales or recalls, or (ii) adding additional or appropriate warnings in the label for the product.