Hello. Lawyer Lee Young-kyung of Cheongchul Law Firm.

Today, I would like to introduce the specific contents of the major cases published in the 2024 press release dated December 23, 2024, regarding the enforcement of the Fair Labeling and Advertising Act by the Fair Trade Commission.

Cheongchul Law Firm entered Tier 3 of the 2024 Fair Trade League Table selected by the legal media Legal Times just two years after its establishment, and is providing consultation and handling cases related to fair trade issues for companies of various sizes, demonstrating expertise in the field of fair trade.

The Fair Trade Commission (hereinafter referred to as 'FTC') detected and sanctioned 53 cases of violations of the Fair Labeling and Advertising Act that misled consumers with false information and hindered reasonable choices throughout 2024 (total fines of 578 million won). Let's analyze the major cases (please note that the conclusions may change based on the final judgment of the court).

I. False Advertising of Radon Reduction Effects by Paint Manufacturers

1. Facts

The FTC detected unfair labeling and advertising practices by six paint sellers, including Noroo Paint, Samhwa Paint Industrial, Chamgil, Hyunil, Pureheim, and Calico. The specific violations are as follows:

-       Noroo Paint: Advertised the 'Soon&Su Radon Guard' product with claims such as "Radon emission (Bq/m3) untreated 150.4→117.1 when applying Radon Guard, according to test results from accredited institutions"

-       Samhwa Paint Industrial: Advertised the 'Inplus Radon Guard' product stating that "Radon levels decreased by over 60% after applying the paint"

-       Chamgil: Advertised the 'Activa707' product with claims such as "Before application 80.8Bq/m3 → After 9.4Bq/m3"

According to tests conducted by the National Institute of Environmental Research, radon reduction effects were not observed in some construction materials such as concrete, and it was confirmed that the labeling and advertising content of certain products was false.

2. FTC's Judgment

The FTC determined that the actions violated Article 3, Paragraph 1, Item 1 of the Act on Fair Labeling and Advertising (false and exaggerated labeling and advertising) and took the following actions:

-       Five businesses (Noroo Paint, Samhwa Paint Industrial, Hyunil, Pureheim, Calico): Corrective orders (future prohibition orders), public notice orders (10 days)

-       Chamgil: Corrective orders (cease and desist and future prohibition orders), public notice orders (10 days) and fines (2 million won),

Reasons for the fine imposed on Chamgil: ①They continued the labeling and advertising until the review date, ②Considering that the related sales amount was relatively large.

II. Violations of Product Labeling and Advertising for Massage Chairs (related to concentration and memory enhancement effects)

1. Facts

Massage chair sellers advertised that the brain massage program improved 'concentration and memory' or had effects in 'enhancing concentration' without objective and reasonable grounds in the product user manuals around December 2024. The brain massage program refers to a massage program that combines physical massage with piano music, nature sounds, and healing music using binaural beats.

2. FTC's Judgment

The FTC judged that the action violated Article 3, Paragraph 1, Item 1 of the Act on Fair Labeling and Advertising, imposing corrective orders and a fine of 46 million won. It was particularly considered that consumers found it difficult to understand professional fields like binaural beats, leading them to trust the information provided by the business more deeply.

III. Violations of Product Labeling and Advertising for Massage Chairs (related to solid wood materials)

1. Facts

The massage chair seller advertised that the wooden parts of the products were solid wood when they were plywood in April 2024. This was considered an attempt to attract consumers by leveraging the premium image of high-priced solid wood materials.

2. FTC's Judgment

The FTC viewed this act as a violation of Article 3, Paragraph 1, Item 1 of the Act on Fair Labeling and Advertising, imposing corrective orders and a fine of 128 million won. The relatively high amount of the fine was determined because the distortion of materials directly affected product value evaluation.

IV. Improper Advertising Related to SNS Reviews

1. Facts

The FTC detected that two companies engaged in advertising agency operations (MarketIt Inc. and Flow Marketing) conducted the following actions from October 15, 2022, to October 3, 2023:

-       Recruited influencers to post a total of 3,944 promotional advertisements for 267 advertisers' products on Instagram

-       Did not clearly disclose economic compensation

-       Wrote false reviews without actual experience

2. FTC's Judgment

The FTC judged the acts as violations of Article 3, Paragraph 1 of the Act on Fair Labeling and Advertising. Considering the period of violations, scale, and impact on the market, the following sanctions were imposed:

-       MarketIt Inc: Corrective orders, public notice orders

-       Flow Marketing: Corrective orders, public notice orders, and a fine of 1 million won.

V. Improper Advertising Incident of Global Accommodation Booking Platforms

1. Facts

Booking.com conducted a promotion for free airport taxi services worldwide on its PC website from April 12, 2022, yet continued advertising even though the promotion for domestic consumers had been suspended.

-       June 27, 2022: Suspension of the promotion for domestic consumers

-       June 27, 2022, to September 20, 2023: Continued advertising despite inability to provide the service

-       November 28, 2022: Complete blocking of access to the free airport taxi usage page

2. FTC's Judgment

The FTC imposed corrective orders (including public notice orders) and a fine of 195 million won, based on the violation of Article 3, Paragraph 1, Item 1 of the Act on Fair Labeling and Advertising.

VI. Overall Implications of All Cases

The 2024 cases of sanctions for violations of the Fair Labeling and Advertising Act by the FTC well demonstrate the direction of the FTC's law enforcement aimed at consumer protection and establishing fair market order. In particular, these cases present the following important implications.

First, the FTC applies stricter law enforcement standards for labeling and advertising related to consumer health and safety. As seen in the false advertising cases of radon reduction effects by paint companies or the false functional labeling of massage chairs, advertising without objective and scientific evidence for labeling and advertising that can directly impact consumer health and safety is strictly restricted.

Second, the monitoring and sanctioning of improper labeling and advertising practices in markets with significant information asymmetry are being strengthened. Particularly for products or services that require professional knowledge, considering that consumers will inevitably depend more on the information presented by businesses, the obligations for business information provision are being demanded more strictly.

Third, the law is applied to global companies under the same standards as domestic companies to ensure equity in regulation. As seen in the Booking.com case, it makes clear that the same legal standards apply to advertising aimed at domestic consumers, even if the businesses are foreign.

Fourth, regulations on new forms of advertising methods are also being strengthened. In the case of advertising through SNS influencers, the FTC aims to ensure consumers' rational choices by requiring clear disclosures of economic interests and the existence of actual experience.

In light of these trends in FTC law enforcement, businesses may need to respond in the following ways. First, when advertising the effects or performance of products or services, objective and scientific evidence must be secured. Additionally, when conducting promotions or events, prompt actions such as immediate modification or cessation of relevant advertisements upon changes or suspensions in content are necessary. Especially when utilizing influencer marketing, it must be managed to ensure that clear disclosures of economic interests and genuine reviews based on actual experiences can be made.

Cheongchul Law Firm has rich experience and expertise in criminal cases. If you are considering a related case, please feel free to contact us.