[Editorial] Expanding Class Actions: Compensation Must Not Become Overregulation

- Overengineered features such as opt-out and retroactive application should be reconsidered -

The National Assembly and the Ministry of Justice are pushing to expand the class action system. The aim of strengthening meaningful relief for small-value, large-number victims is understandable. But the pretext of victim compensation alone should not be used to expand corporate liability to levels that are difficult for businesses to foresee. What is needed now is not the swift introduction of the system, but a careful examination of the side effects that retroactive application, opt-out provisions, and overlap with existing regulations could bring.

The first issue that must be reconsidered is retroactive application. Among the class action bills under discussion in the National Assembly are provisions that would extend coverage to damages that occurred before the law takes effect. Businesses set insurance coverage and reserves, and make investment and management decisions, based on the laws and institutions in place at the time of their conduct. Applying newly created litigation procedures to past events goes beyond strengthening corporate liability after the fact; it can undermine legal stability and predictability.

The opt-out approach, which automatically includes victims in litigation, is also an excessively strong mechanism. In National Assembly discussions, a key issue is a framework in which the effect of a judgment extends to all victims unless they separately express their intention to be excluded. In cases such as personal data breaches or platform-related incidents, where potential victims may number in the hundreds of thousands or millions, even small amounts of damages for emotional distress can balloon into enormous compensation claims. Protecting victims’ rights and automatically maximizing the scale of litigation are two different things and should be treated as such.

The basic principle of damages should be liability proportionate to actual harm. If consumers suffer damage because of a company’s illegal conduct, compensation should of course be paid. But it is a different matter to expand the total amount of liability first, without sufficiently verifying the extent of harm and the intentions of individual parties. Class actions should be a means of facilitating recovery for victims, not something that degenerates into a tool for punishing companies or threatening their survival.

Above all, the U.S. class action system should not be transplanted wholesale into Korea. In the United States, rather than imposing dense ex ante regulation at the front end of business activity, a strong tradition has developed of holding firms accountable through ex post, judicial controls such as class actions and punitive damages after problems arise. Within that regulatory environment, class actions have become an important means of ex post control over corporate misconduct.

Korea, by contrast, already operates under strong ex ante regulation throughout the entry into and operation of business activities. In addition to licensing, reporting requirements, various conduct regulations, supervision, and inspections, when problems occur they are followed by administrative sanctions such as surcharges and corrective orders, and punitive damages have also been introduced in a number of fields. If the powerful ex post liability tool of a U.S.-style class action is added on top of this, the result would likely not be filling a regulatory gap, but creating excessive regulation by layering ex ante regulation with ex post sanctions.

Nor should the class action system be evaluated in isolation solely for its consumer protection effects. In its second-half policy plan, the Ministry of Justice officially presented “the expansion of the class action system for small-value, large-number victims” as a key policy task. If multiple tools for strengthening liability—such as easing the burden of proof, expanding evidence submission, punitive damages, and existing administrative sanctions—operate simultaneously, then it is necessary to examine together how far the overall regulatory cost and risk borne by businesses would rise.

Excessive litigation risk is even more fatal to small and medium-sized enterprises, mid-sized companies, and innovative firms. Unlike large corporations, companies that cannot easily maintain sufficient legal teams, insurance, and reserve capacity may have to bear enormous litigation costs and reputational damage even before final liability is determined. As risk increases, businesses will avoid legal risk rather than trying new products and services, and the result may be reduced investment, employment, and innovation.

If the purpose of the class action system is victim relief, then the system should be designed only to the extent necessary to achieve that purpose. Retroactive application to cases arising before the law takes effect should be excluded, and rather than introducing a broad opt-out system from the outset, priority should be given to methods that clearly confirm the intention of parties to participate in the litigation. Overlap with existing punitive damages and administrative sanctions should also be addressed at the same time.

Holding companies accountable and imposing excessive liability on them are entirely different matters. Consumers’ rights must be strongly protected, but corporate legal liability must also be clear and predictable. The National Assembly and the government should not take only the United States’ powerful ex post judicial control mechanisms and tack them onto Korea’s already dense ex ante regulatory system. To ensure that the class action system does not become yet another form of excessive regulation beyond a means of victim relief, legislators should prioritize institutional balance over legislative speed.

2026. 8. 24.

Center for Free Enterprise (CFE)

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Original title: [논평] 집단소송제 확대, 피해구제가 과잉규제가 되어선 안 돼

Author: Center for Free Enterprise (CFE)

Date: 2026-08-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=29408