UPDATE 2-S.Korea watchdog faults 3 foreign e-commerce sites for sale of unsafe products

(Adds companies' responses in paragraph 5; details from agency's statement in paragraphs 6-8; background in paragraphs 10-15)

By Joyce Lee

SEOUL, June 14 (Reuters) - South Korea's consumer safety agency said on Friday that nearly a third of tested products, including children's toys, sold on foreign e-commerce platforms AliExpress, Temu and Qoo10 did not meet domestic safety standards.

The world's fourth-largest e-commerce market has increased regulatory scrutiny on foreign shopping platforms, with Alibaba's AliExpress and PDD Holdings' Temu signing an agreement in May to promote product safety.

In May, the Korea Consumer Agency began safety tests for motorcycle helmets, children's toys, colour cosmetics and air fresheners being sold on the three platforms.

It tested 88 products in all sold on the three platforms, out of which 27 failed the standards, the agency said in a statement.

AliExpress, Temu and Qoo10 did not have an immediate comment when contacted by Reuters.

Out of 10 motorcycle helmets tested for shock absorption, nine did not meet South Korean safety standards, including eight that were "unable to absorb shock at all", the agency said.

Out of 28 children's toys tested, 11 contained harmful materials exceeding regulations, including pool toys containing cadmium, finger paints containing banned preservatives, and race car toys containing lead.

Out of 40 colour cosmetics applied directly to the skin, nine contained harmful heavy metals or tar pigments barred from domestic use, while all 10 air fresheners passed tests, the agency said.

All three platforms have currently blocked the sale of the problematic products according to the agency's recommendation, it said.

AliExpress had 8.3 million monthly active users in South Korea in May, while Temu had 7.97 million according to data provider WiseApp & WiseRetail, ahead of domestic shopping platforms such as 11st.

The growth rate has been especially fast for Temu which entered the South Korean market in July last year, although both AliExpress and Temu saw monthly active user data fall slightly in May compared to March.

South Korea's e-commerce market was worth $151.8 billion as of 2023, according to Euromonitor.

With growing activity in the nation's e-commerce market, the government is leaning toward tougher regulations for online shopping platforms.

South Korea's Fair Trade Commission fined Coupang, the country's biggest e-commerce player, 140 billion won ($101.63 million) on Thursday saying Coupang favoured its own brand products by manipulating search ranking algorithms and mobilising employee reviews.

Coupang said its directly purchased products allowed fast delivery and guaranteed free returns, adding it will fight the fine in court. (Reporting by Joyce Lee; Editing by Michael Perry and Muralikumar Anantharaman)