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/LG Uplus

LG Uplus has completely banned its retail outlets from using customer protection measures for marketing purposes.

The move follows controversy over alleged mis-selling practices at some retail outlets, which reportedly used the process of updating or replacing subscribers' universal subscriber identity modules (USIMs) as an opportunity to encourage customers to replace their mobile devices or sign up for additional services.

However, critics say the company's headquarters was slow to respond, given that the USIM update and replacement process has been underway for several months.

According to industry sources on Wednesday, LG Uplus sent an internal directive titled "Prohibition of Marketing Activities and Practices Causing Customer Inconvenience Related to SIM Updates and Replacements" to retail outlets nationwide on Nov. 2, ordering its immediate implementation.

The directive aims to prevent inappropriate marketing practices, such as encouraging customers to replace their devices or sign up for products while being informed about or undergoing USIM updates and replacements, as well as practices that cause customer inconvenience.

It prohibits retail outlets from presenting or recommending device replacements, upgrades to more expensive mobile plans or subscriptions to additional services as if they were mandatory conditions for USIM updates or replacements.

The company also restricted the creation of promotional materials targeting affected customers, the sending of promotional text messages, and marketing through online posts and social media platforms such as KakaoTalk. Sales practices that exploit customer anxiety or distort the purpose of customer protection measures were also strictly prohibited.

As a follow-up to a personal data leak last year, LG Uplus introduced a new security system in April this year that applies random numbers to the International Mobile Subscriber Identity (IMSI) system. The company has since been updating and replacing USIMs to reflect the new system. According to LG Uplus, more than 7 million customers have completed the protection measures so far.

The controversy arose after some retail outlets began attempting to make additional sales to customers who visited stores for security-related measures. They used the customer protection process of updating or replacing USIMs as an opportunity to sell mobile devices or additional services.

In September, independent lawmaker Choi Hyuck-jin, a member of the National Assembly's Science, ICT, Broadcasting and Communications Committee, said that the Consumer Complaint Center had received complaints about LG Uplus retail outlets encouraging customers to activate expensive mobile phones and subscribe to additional products.

According to one complaint, a customer who visited a store to replace a USIM was persuaded by an employee to change the family's mobile plan and sign up for door lock and door camera products.

The customer subsequently incurred costs exceeding 140,000 won while canceling the services and was found not to have received sufficient information about the relevant terms at the time of subscription.

There were also allegations that elderly customers had been encouraged to purchase mobile phones through installment plans with three-year contracts under the promise of receiving free phones.

"If USIM replacements were used as an opportunity for retail outlets to boost sales, it would constitute a highly inappropriate sales practice," Choi said. "Rather than dismissing this as misconduct by individual dealers, the company headquarters should thoroughly examine sales practices during the USIM replacement process and establish meaningful compensation measures for customers affected by confirmed mis-selling, along with measures to prevent recurrence."

Attention is also being drawn to the Korea Media and Communications Commission's recent launch of a fact-finding investigation into unfair sales practices in the mobile telecommunications distribution market.

With the relevant regulatory authority also conducting on-site inspections, some observers suggest that LG Uplus may have belatedly moved to strengthen oversight of its retail network.

"If even security measures that should prioritize customer protection above all else are exploited for sales, customer trust in telecommunications companies will inevitably be fundamentally undermined," a telecommunications industry official said.

                                                                                                            Yeon Chan-mo