The Hidden Side of Class Actions: Regulatory Overlap and Excessive Liability

1. Introduction: The Push to Expand Class Actions and the Key Issues

The National Assembly and the Ministry of Justice are pushing to expand the class action system. Multiple class action bills are pending before the Legislation and Judiciary Committee of the National Assembly, ranging from bills focused on consumer harm to bills extending coverage to damages claims in general. In April 2026, bill review by the subcommittee and a public hearing on enactment followed in succession. The Ministry of Justice also officially presented the expansion of the class action system for relief of small-amount and numerous victims as a policy task in its second-half work plan announced on August 5.(Korea Legislation Research Institute? No, 법제처 국민참여입법센터, 2026; Yonhap News, 2026.4.22.; Ministry of Justice, 2026.8.5)

The concern that individual lawsuits alone cannot provide sufficient relief in cases where identical or similar small-scale harm occurs to many people is valid. Class actions can lower litigation costs and aggregate dispersed harm, thereby increasing the practical possibility of compensation. However, the effectiveness of the system varies greatly depending on its scope of application, the method of participation in litigation, whether it applies to cases arising before enforcement, the procedures for evidence collection, and its relationship with the existing sanctions framework.

In particular, the core of the current debate lies not so much in whether to introduce class actions as in “what kind of class action system to introduce.” The bill proposed by Rep. Park Kyuntaek expands the scope of application to damages claims in general, adopts an opt-out structure under which the judgment binds all members who do not file for exclusion, and includes a supplementary provision applying the new procedure even to damages claims arising from causes that occurred before the law takes effect. It also includes mechanisms allowing the court to investigate evidence ex officio or order the submission of documents.(National Legislation Participation Center, 2026)

Major Class Action Bills in the National Assembly and the Government’s Policy Direction

Category	Proposal / Promotion	Scope of application / Key contents	Status
Rep. Park Jumin bill (2206276)	2024.12.6.	Focused on consumer damages under the Framework Act on Consumers, the Product Liability Act, the Monopoly Regulation and Fair Trade Act, the Personal Information Protection Act, etc.	Under review by the Legislation and Judiciary Committee subcommittee
Rep. Cha Gyugeun bill (2210550)	2025.5.19.	Introduction of representative party class actions, general relief for mass harm	Under review by the Legislation and Judiciary Committee subcommittee
Rep. Park Kyuntaek bill (2217322) · Ministry of Justice	2026.3.9. / August	Expansion to damages claims in general, opt-out, application to pre-enforcement causes / Ministry of Justice promoting expansion of general class actions	Under review by the Legislation and Judiciary Committee subcommittee · government promotion

Source: Compiled based on the National Legislation Participation Center (each bill) and the Ministry of Justice (2026.8.5.).

2. Major Changes in the Class Action Expansion Proposal

◩ Rep. Park Kyuntaek bill: Expansion to damages claims in general + opt-out + retroactive application

The “Class Action Bill” (Bill No. 2217322), introduced on March 9, 2026 by Rep. Park Kyuntaek and 32 others, expands the current class action system, which is limited to the securities sector, to damages claims in general. The bill provides that where harm is suffered by many people from the same or similar cause, one or more members may file suit and the court shall appoint a representative party, with the rights of the entire class to be handled in a single procedure after certification of the class action.(National Legislation Participation Center, 2026)

The effect of the judgment follows an opt-out model, binding all members except those who file for exclusion. In addition, the court may investigate evidence ex officio and may order the submission or transmittal of relevant documents, while the supplementary provisions stipulate that the new law also applies to damages claims arising from causes that occurred before the law takes effect. These three elements are key mechanisms that improve access to relief while also potentially altering corporate exposure and litigation costs significantly.(National Legislation Participation Center, 2026)

Major Institutional Changes in Rep. Park Kyuntaek’s Bill

Category	Current system	Rep. Park Kyuntaek bill
Scope of application	Mainly securities-related class actions	All damages claims litigation
Conduct of litigation	Representative party litigation in the securities sector	Filed by one or more members, with the court appointing a representative party
Effect of judgment	Limited to securities class actions	Effective as to all members who do not file for exclusion (opt-out)
Evidence collection	General civil procedure and individual special rules	Court’s ex officio evidence investigation · document production orders available
Pre-enforcement cases	No new general class action procedure	Also applies to damages claims arising from causes occurring before enforcement

Source: National Legislation Participation Center, “Class Action Bill” (Rep. Park Kyuntaek and 32 others, Bill No. 2217322, 2026.3.9.).

◩ Ministry of Justice: Officially formalizing “expansion of class actions for small-amount and numerous victims”

In its second-half work plan announced on August 5, 2026, the Ministry of Justice presented “expansion of the class action system for small-amount and numerous victims” as part of its state normalization agenda, and it later reaffirmed class action expansion in its publicly released second-half policy direction. Accordingly, class actions have moved beyond individual members’ bills and become a government-level institutional reform agenda.(Ministry of Justice, 2026.8.5.; Ministry of Justice, 2026.8.11)

If the policy goal is stronger victim relief, institutional design should be proportionate to that goal. When expansion of damages coverage, opt-out, retroactive application, and enhanced evidence collection are combined at once, the total legal risk perceived by businesses may become far greater than the effect of each component viewed separately.

3. Retroactive Application: Problems of Legal Stability and Predictability

◩ Applying a new class action procedure to past cases is the first issue that should be reconsidered

The supplementary provisions of Rep. Park Kyuntaek’s bill stipulate that the new class action law also applies to damages claims arising from causes that occurred before the law takes effect. At the National Assembly public hearing in April, retroactive application was also a key issue, and expert testimony raised concerns that applying a new procedure to past cases could seriously affect the predictability of businesses and stakeholders.(National Legislation Participation Center, 2026; Yonhap News, 2026.4.22.)

Businesses set liability insurance limits, reserves, contract terms, prices, and investment plans based on the laws and litigation system in force at the time of the conduct. If a matter that had previously been calculated on the basis of individual lawsuits later becomes subject to an opt-out class action, then even if the substantive illegality is the same, the actual scale of claims and litigation costs may be completely different. This is not about exempting businesses from liability, but about expanding procedural risks after the fact in ways that could not have been predicted at the time of the conduct.

Excluding retroactive application does not eliminate remedies for past harm. Existing systems—such as damages claims under the Civil Act, sector-specific damages systems, dispute mediation, and administrative sanctions—would continue to operate. Applying a new general class action procedure only to causative acts occurring after enforcement would give businesses and insurance markets time to prepare, thereby preserving both legal stability and the principle of responsibility.(National Law Information Center, Personal Information Protection Act; Fair Transactions in Subcontracting Act)

Law · litigation system at the time of conduct → liability insurance · reserves · pricing · investment decisions

Retroactive application of a new general class action law → possibility of unexpectedly large-scale class claims

Combined with opt-out · enhanced evidence collection → expanded total potential liability · higher litigation costs

Reduced predictability for long-term investment · contracts → concerns over damage to legal stability

Source: Prepared by the Center for Free Enterprise (CFE) based on the supplementary provisions of Rep. Park Kyuntaek’s bill and discussions at the National Assembly public hearing.

4. Opt-Out: Victim Relief and Automatic Expansion of Liability

◩ Opt-out lowers participation costs but is a powerful mechanism that rapidly expands the scale of potential liability

Rep. Park Kyuntaek’s bill provides that a final judgment shall bind the entire class, except for members who file for exclusion within a prescribed period. Unlike opt-in, which binds only those who actively express an intention to participate, opt-out automatically includes all potential victims in the class unless they separately withdraw.(National Legislation Participation Center, 2026)

This method has the advantage of allowing small-claim victims to obtain relief without having to go through litigation participation procedures. On the other hand, in industries such as platforms, telecommunications, finance, and travel, where a single incident may affect hundreds of thousands or even millions of victims, a company’s total liability may rise sharply even if the amount of compensation per person is small. It also warrants caution that the size of the class may expand first, before sufficient confirmation of commonality of harm and causation.

Comparison of Opt-in and Opt-out

Category	Opt-in	Opt-out
Method of participation	Victims expressly indicate their intention to participate	Automatically included unless they indicate an intention to exclude themselves
Access to relief	Requires participation procedures, so some victims may be left out	Can broadly include even small-claim victims
Scale of litigation	Formed around actual participants	Can quickly expand to all potential victims
Corporate predictability	Relatively higher	Potential liability may expand significantly from the certification stage onward

Source: Compiled based on the National Legislation Participation Center (2026) and Nagy (2019).

◩ In large-scale personal information cases, even small compensation per person can reach a level that determines a company’s survival

Asia Economy analyzed the Modetour personal information leak case, in which the personal data of approximately 3.06 million customers were leaked and the court in the first and second instances awarded KRW 100,000 in慰? no, non-pecuniary damages per person to some plaintiffs. It noted that if the same amount were simply applied to 3.06 million people, the total would expand to KRW 306.0 billion. At the time of the report, that amounted to about 41.4 times Modetour’s operating profit of KRW 7.4 billion from the previous year and about 3.3 times its equity capital of KRW 92.5 billion.(Asia Economy, 2026.8.12.)

Of course, the actual damages awarded in a class action would vary depending on illegality, negligence, the extent of harm, secondary harm, certification, and the method of calculating damages. This example should be understood not as a basis for reducing a particular company’s liability, but as a simple comparison showing the nonlinear effect that the number of victims can have on total liability under an opt-out structure.

5. The Regulatory Environments of the United States and Korea Are Different

◩ The United States has placed relatively greater weight on ex post, judicial private enforcement than on dense ex ante administrative control

When transplanting U.S.-style class actions directly into Korea, it is necessary to examine not only litigation procedures but the regulatory system as a whole. Compared with Korea’s broad ex ante administrative controls, the United States has given an important role to “private enforcement,” under which private parties file lawsuits after unlawful conduct occurs to obtain compensation and deterrence. Class actions, broad pretrial discovery, contingency fees, and punitive or treble damages developed together with the institutional environment supporting this ex post judicial control.(Rathod & Veheesan, 2016; Nagy, 2019)

Comparative law research explains that U.S. private litigation serves not only to compensate individual victims but also to supplement public enforcement through a “private attorney general” function. Accordingly, class actions in the United States should be understood not simply as an additional litigation tool layered on top of unchanged prior government regulation, but as part of an institutional environment in which ex post private enforcement plays a major role in disciplining corporate conduct.(Nagy, 2019)

◩ Korea already operates dense ex ante regulation and strong administrative sanctions from the front end of business activity

In Korea, a wide range of ex ante regulations applies in the course of market entry and business operations, including licensing and reporting requirements, regulation of business conduct, supervision and inspection, and obligations relating to information protection and fair trade. When violations occur, surcharges, corrective orders, administrative fines, and criminal sanctions may follow. In civil liability as well, the Personal Information Protection Act allows damages of up to 5 times the amount of loss for personal information leaks caused intentionally or by gross negligence, and the Fair Transactions in Subcontracting Act provides for compensation of up to 3 or 5 times the amount of loss depending on the type of violation.(National Law Information Center, Personal Information Protection Act, Article 39; Fair Transactions in Subcontracting Act, Article 35)

If a strong ex post liability mechanism such as U.S.-style class actions is added to this framework, the result may be less the filling of a regulatory gap than the layering of ex ante regulation, administrative sanctions, multiple damages, and class actions. This is why, rather than transplanting only part of a foreign system, Korea must adjust the total volume of its existing regulation and the combination of ex ante and ex post controls together.

Comparison of Corporate Regulation Structures in the United States and Korea

Regulatory stage	Relative features of the United States	Features of Korea · Issues in introducing class actions
Ex ante stage	Relatively less reliance on ex ante administrative control than Korea	Dense ex ante regulation through licensing · reporting · conduct regulation · supervision, etc.
Public ex post enforcement	Coexistence of federal · state agency enforcement and private enforcement	Public enforcement through surcharges · corrective orders · administrative fines · criminal sanctions, etc.
Private ex post enforcement	Heavy reliance on private enforcement through class actions · discovery · punitive/treble damages, etc.	Sector-specific multiple damages · eased burdens of proof · document submission systems already exist
Addition of general class actions	A core mechanism within the existing structure of private ex post enforcement	If added on top of existing ex ante · ex post regulation, concerns over regulatory overlap

Source: Prepared by the Center for Free Enterprise (CFE) based on Rathod & Veheesan (2016), Nagy (2019), and the National Law Information Center.

Note: “Relative features” does not mean that the United States lacks ex ante regulation, but rather that compared with Korea, the relative weight and mode of operation of regulatory instruments differ.

6. Economic Ripple Effects: Risks Concentrated on SMEs and Innovative Firms

◩ Even the same class action risk is not equally bearable across firms of different sizes

The burden of class actions does not end with the final damages award. From the certification stage onward, attorney fees, internal investigations, preservation and submission of materials, insurance premiums, reputational harm, and counterparties’ risk aversion can all arise together. Large companies may be able to absorb some of this through legal teams, insurance, and reserves, but small and medium-sized firms may face liquidity strain and managerial uncertainty even before the final outcome of the suit is determined.

Gaps by firm size are also evident in information security response capacity. According to the “2024 Information Security Survey,” 98.7% of firms with 250 or more employees had an information security policy, compared with only 48.9% of firms with 10 to 49 employees. The rate of having an information security organization also showed a large gap: 87.0% for firms with 250 or more employees versus 26.2% for firms with 10 to 49 employees.(Korea Information Security Industry Association, 2025)

Rates of Having Information Security Policies and Organizations by Firm Size (2024)

Firm size	Rate of having information security policy	Rate of having information security organization
10–49 employees	48.9%	26.2%
50–249 employees	58.7%	60.4%
250 or more employees	98.7%	87.0%

Source: Korea Information Security Industry Association (2025), “2024 Information Security Survey.” The rate of having an organization combines dedicated, concurrent-duty, and outsourced organizations.

◩ Excessive legal uncertainty may make innovation and market entry more conservative

Businesses such as AI, platforms, and data-based services, which are connected to many users simultaneously, are relatively more likely to see a single incident develop into large-scale collective harm. If firms must calculate not only expected returns from a new service but also worst-case legal liability, they may have incentives to reduce high-risk innovation and new entry first. This does not mean exempting liability; it means designing the scope of liability and procedures so they can be predicted in advance.

The economic costs of class actions may be reflected in part in prices and service conditions through insurance premiums, compliance and security costs, and legal expenses. Accordingly, the performance of the system should be evaluated not only by the number of lawsuits or total compensation awarded, but also by its effects on actual victim recovery, litigation duration, SME survival, new entry, innovation, and consumer prices.

◩ First, retroactive application should be excluded, and the law should apply only to causative acts occurring after enforcement

It is desirable that a new general class action system apply only to causative acts arising after enforcement. This does not restrict victims’ substantive right to seek damages; rather, it is a minimum legal stability measure that allows businesses to be informed in advance of the new procedural and economic risks of class actions and to prepare accordingly.

◩ Second, rather than full opt-out, the system should begin with opt-in or limited opt-out

Rather than applying opt-out from the outset across all areas of damages claims, it is necessary to operate it on a limited basis in areas where the commonality of harm and the shared nature of damages calculation are high, or to start with an opt-in-centered approach. A phased approach is reasonable: after implementation, disclose participation rates, actual relief amounts, litigation duration, and corporate compliance costs, and then decide whether to expand the system based on those results.

◩ Third, strict judicial control is needed at the certification and evidence collection stages

The court should strictly review commonality, representativeness, and superiority to determine whether combining the entire class into a single lawsuit is actually more efficient than individual litigation or dispute mediation. Document production and ex officio evidence investigation should also be limited to the scope necessary to resolve information asymmetry, with safeguards to protect trade secrets, personal information, and third-party materials, and to prohibit use beyond the intended purpose.

◩ Fourth, principles should be established to adjust overlap with existing surcharges, multiple damages, and criminal sanctions

If administrative surcharges, criminal liability, multiple damages, and class actions all apply simultaneously to the same conduct, the proportionality of the overall sanctions should be assessed. It is worth considering measures such as allowing courts, when determining damages, to take into account sanctions already imposed and efforts made toward victim relief, or clarifying standards for adjustment of overlap under relevant laws.

◩ Fifth, prior impact assessment and sufficient preparation time are needed for SMEs and innovative firms

Exempting class action liability itself based on firm size could undermine fairness in victim protection. Instead, a more realistic approach is to analyze compliance costs and insurability by firm size through regulatory impact assessment before implementation, and to give SMEs time to adapt to the new system by improving liability insurance and mutual aid markets and establishing standard security and compliance guidelines.

◩ Conclusion: Strengthening Corporate Accountability Is Not the Same as Excessive Liability

The class action system should not be approached through the binary of whether to eliminate or strengthen corporate liability. Even in a market economy, a business that unlawfully causes harm to others must bear corresponding responsibility, and there is also a need for mechanisms that can effectively provide relief for small-amount, numerous victims for whom individual lawsuits are practically difficult.

However, strengthening victim relief does not justify retroactive liability, automatic expansion of the scale of liability, or overlap with existing regulation. In particular, unlike the United States—where class actions developed as an important means of ex post, judicial private enforcement—Korea already has dense ex ante regulation at the front end of business activity and, at the back end, administrative sanctions and sector-specific multiple damages. Rather than simply adding a U.S.-style ex post liability mechanism, the overall regulatory framework should be adjusted together.(Rathod & Veheesan, 2016; Nagy, 2019)

The National Assembly and the government should widen access to victim relief, but exclude retroactive application, take a phased approach to opt-out, and design the system in a way that reduces overlap with existing sanctions. Corporate liability must be clear, but the scope of that liability must also be clear and predictable. Institutional balance should come before legislative speed.

◩ References

• Ministry of Justice (2026.8.5.), “'Making Everyday Life Safer, Making Change Certain’ - Ministry of Justice Report on the 2026 Second-Half Work Plan.”

• Ministry of Justice (2026.8.11.), “Ministry of Justice’s Policy Direction for the Second Half of 2026.”

• National Legislation Participation Center (2024), “Class Action Bill for the Protection of Consumers’ Rights and Interests,” Rep. Park Jumin and 14 others, Bill No. 2206276.

• National Legislation Participation Center (2025), “Class Action Bill,” Rep. Cha Gyugeun and 13 others, Bill No. 2210550.

• National Legislation Participation Center (2026), “Class Action Bill,” Rep. Park Kyuntaek and 32 others, Bill No. 2217322.

• National Law Information Center, Personal Information Protection Act, Article 39.

• National Law Information Center, Fair Transactions in Subcontracting Act, Article 35.

• Korea Information Security Industry Association (2025), “2024 Information Security Survey.”

• Yonhap News (2026.4.22.), “Debate Over Class Actions in the National Assembly… 'Essential for Victim Relief’ vs. 'Concerns Over Frivolous Litigation.’”

• Asia Economy (2026.8.12.), “[Class Actions, the Trap of Excessive Relief] ① One Incident Can Threaten the Survival of SMEs, and the 'Excavation Law’ Summoning the Past Is Coming.”

• Nagy, C. I. (2019), “Transatlantic Perspectives: Comparative Law Framing,” Collective Actions in Europe, Springer, pp. 45-70.

• Rathod, J. & Veheesan, S. (2016), “The Arc and Architecture of Private Enforcement Regimes in the United States and Europe: A View Across the Atlantic,” University of New Hampshire Law Review, 14(2), 303-362.

※ This report was prepared based on bills, government materials, and public literature available as of August 26, 2026, and the contents and application of the bills may change during the National Assembly’s review process.

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Original title: 집단소송제의 이면, 규제 중첩과 과잉책임

Author: Center for Free Enterprise (CFE)

Date: 2026-08-26

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=issue&pn=1&idx=29417