Chanel, Hermes, Nike rectify customer policies after FTC warning

A pedestrian walks past the logo of Chanel in Seoul in this undated photo. Yonhap

Hermes Korea CEO Han Seung-hun, left, and Nike Korea General Manager Kimberlee Lynn Chang Mendes / Korea Times file

Chanel, Hermes and Nike have corrected what were cited as unfair business practices regarding a number of terms concerning customers and posted the changes on their brand websites following a review by the nation’s antitrust agency.

According to the Fair Trade Commission (FTC), Wednesday, the brands had some controversial terms concerning the resale of their products by customers.

Earlier, Chanel Korea announced that customers may be deprived of their memberships if their shopping patterns are presumed to be aimed at reselling. Nike Korea also said it has the authority to restrict orders or cancel contracts with customers if the shoemaker believes the purpose of a customer is to resell them, according to the authority.

The brands argued that the act of resale might cause damage to other customers, as they end up buying luxury or limited items at a higher price.

But the FTC did not accept the claim, saying that customers have the right to decide whether to resell the products. According to the watchdog, the restriction of resale by the brands is “unconditional” and goes against local laws on contract terms.

The authority also took issue with what it cited as a lack of objective criteria by the brands on how to discern the purpose of a customer's order.

“Customers have the right to determine whether to keep possessing certain products or sell them in second-hand markets,” the watchdog said. “The brands should not force buyers not to sell their products to a third-party in an unconditional manner.”

In response, the three companies corrected a total of 10 unfair terms concerning customers.

The FTC also ordered the brands to correct other unjust terms.

For example, Chanel said it retains the right to edit customers’ online product reviews, and Nike also stated it possesses the rights to reviews posted by customers.

The watchdog argued that such terms possibly infringe on the copyrights held by customers.

“The brands should receive permission from copyright holders when using their comments,” the FTC said. “Even if they authorize the use of their online comments, the usage should be limited. The companies should also stop using them when customers do not utilize their service any longer.”

Following the order, the brands rectified the terms to make it mandatory to receive consent from customers when using their online reviews. The brands also decided to delete certain terms that gave them the right to permanently use the online comments posted by customers.

“We will keep stepping up our monitoring of unfair terms at other companies in line with customers’ changing consumption patterns,” the watchdog said.