Overview

Distinguishing between Labeling and Advertising

• The term "labeling" means characters or figures that are written or affixed on a container, package, or a printed matter posted in a place of business with regard to the contents of a commodity or service or a container or package representing features of a commodity.
• The term "advertising" means activities that are conducted to widely publicize the contents of a commodity, terms and conditions of transactions, etc. to consumers through newspapers, broadcasting, magazines, samples, Internet, or signboards.

The Act on Fair Labeling and Advertising

The Act that is enacted to protect consumers by preventing unfair labeling or advertising of a product or service, which is likely to deceive or mislead consumers, and by ensuring the provision of correct and useful information to consumers.

The reasons for regulating unfair Labeling and Advertising

• An asymmetry in information arises between business operators and consumers, because business operators can obtain not only information about their own products but also various kinds of information, while individual consumers are unable to access adequate information necessary for making wise decisions in terms of economy.
• Under such asymmetry, business operators tend to fabricate and exaggerate information which is advantageous to them, and conceal or whitewash information which is disadvantageous to them, providing distorted information, thereby inflicting damage to consumers.
• Futhermore, business operators are apt to concentrate on misleading consumers with unfair advertising, rather than fairly competing with one another, only to create a problem of disturbing the operation of market economy.

Details

Prohibition of Unfair Labeling or Advertising

Prohibited unfair labeling or advertising are classified into four types: (1) False or exaggerated labeling or advertising; (2) deceptive labeling or advertising; (3) unfairly comparative labeling or advertising; (4) slanderous labeling or advertising.

• False or exaggerated labeling or advertising
  • Untrue labeling or advertising or excessively exaggerated labeling or advertising (Article 3 (1) 1 of the Act on Fair
    Labeling and Advertising) Labeling or advertising a computer which is made in China as a product made in Korea.
• Deceptive labeling or advertising
  • Concealing or whitewashing any fact in labeling or advertising a commodity or service (Article 3 (1) 2 of the Act on Fair Labeling and Advertising).
    Labeling or advertising that is likely to mislead consumers, such as labeling or advertising a used or defective product as a normal product without any explanation about the condition of the product just to sell the product.
• Unfairly comparative labeling or advertising
  • Labeling or advertising a business operator's product as better or more advantageous than any other business operator's product without clearly specifying the standard of such comparison or without any objective ground therefor (Article 3 (1) 3 of the Act on Fair Labeling and Advertising).
    Labeling or advertising the fuel efficiency of a vehicle by comparing the fuel efficiency of a vehicle with a manual transmission with that of a vehicle with an automatic transmission, without providing any information about the compared vehicles.
• Slanderous labeling or advertising:
  • Putting the contents without objective grounds about other business entities or other business entities' products, or only facts unfavorable to other business entities or other entities' products, in a label or advertisement for the purpose of slander (Article 3 (1) 4 of the Act on Fair Labeling and Advertising). Advertising that a vehicle supplied by a competitor is not safe on the ground that the data from investigations into traffic accidents show the accident rate of vehicles supplied by the competitor is high, ignoring the fact that there are various causes of traffic accidents.
  • The ordinance on the determination of the types of, and the criteria for, unfair labeling and advertising was publicly notified to prevent unfair labeling and advertising in advance, and ensure the objectiveness and transparency in the law enforcement against unfair labeling and advertising, by specifying the types of unfair labeling and advertising under the provisions of the Act on Fair Labeling and Advertising and the Enforcement Decree of said Act.

Ordinance and guidelines for labeling and advertising in each business sector

• Guidelines for examinations on labeling and advertising of housing projects
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to the supplier of houses for sale or lease, the area and features of each housing unit, are illustrated with cases where a housing supplier labels or advertises a housing project for sale or for lease.
• Guidelines for examination on labeling and advertising of commercial buildings for sale or for lease
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to the name of a commercial building, the project implementor, contractor, sales agent, the permissible type of business, commercial district, profitability, sale prices, building permit, building approval, etc., are illustrated with cases where a business operator labels or advertises a commercial building, office building, studio-type apartment building, or condominium for sale or for lease.
• Guidelines for examination on labeling and advertising of environmental facts
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to the raw materials, ingredients, quality, performance, manufacturing process, price, warranty or other terms and conditions of a transaction of a commodity or service supplied by a business operator or by its competitor of such commodity or service, are illustrated with cases where a business operator labels or advertises any fact concerning an environmental issue.
• Guidelines for examination on labeling and advertising of financial products offered by banks, etc.
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to the interest rate, the earning rate, the method of calculating interest or earnings, the qualification for borrowing a loan, etc., are illustrated with cases where a bank or any other financial company labels or advertises terms and conditions of transactions of a financial product supplied by it in the domestic market.
• Guidelines for examination of labeling and advertising insurance products
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to insurance premium, insurance benefits, surrender value, maturity value, etc. of an insurance product sold by an insurance company, are illustrated with cases where an insurance company labels or advertises an insurance product sold in the domestic market.
• Guidelines for examinations on labeling and advertising of awards, certifications, etc.
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to an award, certification, selection, patent, or such, the meaning of such award, certification, selection, or patent, or the value of accreditation, are illustrated with cases where a business operator labels or advertises any award, certification, selection, patent, or such.
• Guidelines for examination on labeling and advertising of mail-order sales
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to the information about a mail-order distributor, such as address and telephone number, the description or price of a commodity, the terms and conditions of transactions, etc., are illustrated with cases where a mail-order distributor labels or advertises the sale of any commodity or the provision of any service.
• Guidelines for examination on labeling and advertising of recommendation, guarantee, etc.
  • The types of unfair labeling and advertising that cause damage to consumers are illustrated with personal experiences or in the context of recommendation or guarantee by an expert or organization.
• Guidelines for examination on labeling and advertising of consumer safety
  • The types of unfair labeling and advertising, which are likely to mislead consumers with respect to consumer safety, are illustrated by general guidelines and guidelines for each type of business in labeling and advertising commodities or services.

Disclosure of Material Facts

• The system under which public notice of the material facts that shall be disclosed in labeling or advertising and of the methods of labeling and advertising which may affect consumers' choice of purchase shall be made for each type of business, and such material facts and methods in labeling and advertising be mandatorily included in the business operator's labeling and advertising, so as to expand the scope of information that will be provided to consumers for reasonable selection of commodities (Article 4 of the Act on Fair Labeling and Advertising).
• The major material facts that shall be disclosed are the facts the omission of which in labeling or advertising have frequently caused damage to consumers, likely to decisively affect consumers' choice of purchase or likely to be harmful to human life or body, or other facts that are likely to severely interfere with consumers' reasonable choice or severely disturb the order of fair trade. However, the facts that shall be included in labeling and advertising under any other Act or subordinate statute shall be excluded herefrom (Article 4 (1) 1 and 2 of the Act on Fair Labeling and Advertising).

Verification of Facts in Labeling and Advertising

• The facts represented by a business operator in a label or advertisement shall be verifiable; the KFTC may request a business operator to submit relevant materials for verification; and materials for verification shall be submitted within 15 days (Article 5 (1), (2), and (3) of the Act on Fair Labeling and Advertising).
• The major facts for which materials for verification are requested are mainly the ones that seriously affect consumers' choice of purchase, such as the facts that allegedly affect human body directly, the facts concerning safety or environment, and the facts concerning the performance, efficacy, and quality of a commodity.

Temporary Suspension Order

• The KFTC is authorized to temporarily suspend unfair labeling or advertising, if it is urgently required to take a corrective measure in order to prevent unrecoverable damage to consumers, competitors, or any other person (Article 8 of the Act on Fair Labeling and Advertising).
• A temporary suspension order may be issued upon the request of a consumer association, the Korea Internet Safety Commission, the Korea Publication Ethics Commission, the Korea Consumer Agency, the Korea Press Ethics Commission, the Korea Advertising Review Board, or an institution or organization established under any other Act or subordinate statute for the purpose of reviewing labels and advertisements.

Administrative Sanctions

• Corrective measures: An obligation to take necessary corrective measures, such as the discontinuance of relevant offenses, the disclosure of the fact that an order of corrective measures has been issued, and the publication of corrective advertisements (Article 7 of the Act on Fair Labeling and Advertising).
• Penalty surcharge: A penalty surcharge not exceeding 2% of the relevant turnover may be imposed; a penalty surcharge not exceeding 500 million KRW may be imposed where there is no relevant turnover or where it is impracticable to calculate the penalty surcharge (Article 4 (1) 1 and 2 of the Act on Fair Labeling and Advertising).

Penalty Provisions

• Punishment: An offender may be punished by imprisonment for up to two years or by a fine up to 150 million KRW, depending on the type of offense (Article 17 of the Act on Fair Labeling and Advertising).
• Administrative fine: An offender may be punished by an administrative fine not exceeding 100 million KRW, depending upon the type of offense (Article 17 of the Act on Fair Labeling and Advertising).