Hello, this is attorney Um Sang-yoon from Cheongchul Law Firm.

Recently, the Fair Trade Commission has issued corrective orders and penalties against unfair advertising practices by online lecture service providers. [In particular, practices that may violate the Fair Labeling and Advertising Act (hereinafter referred to as "the Advertising Act"), such as the commonly used 'limited time only' marketing or 'gift giveaway' events aimed at attracting consumers, have become problematic.

Today, we will examine in detail what kinds of actions have been judged as unfair advertising based on the relevant sanctions, and what the criteria for unfair advertising under the Advertising Act are.

[Advertisements Subject to the Fair Trade Commission's Sanctions]

The main content of the advertising practices targeted by the FTC is as follows.

1.       False and Exaggerated Limited Time Advertisements: In the cases subject to sanctions, online lecture providers used phrases such as "limited time special discount", "last chance! 00% discount", "this package closes D-□□" to advertise that products could be purchased at special prices or benefits only within a specific period. However, in reality, they continued to sell products with essentially the same prices, compositions, and benefits even after the advertised deadline had passed, repeatedly advertising with only the deadline or some phrases changed. This could mislead consumers into thinking that they could not purchase under favorable conditions after the period has passed.

2.       Deceptive Price Advertising ("Lowest Price Today"): Some companies raised the selling price of certain products compared to before but advertised that they were the cheapest on the day of the advertisement as "lowest price today". In some cases, they lowered the price right after making such an advertisement. This could be misleading advertising for consumers who value price information.

3.       Deceptive Disclosure of Limitations: There were cases where important limitation information like "will be resold at the same prices and benefits later" was obscured in a color similar to the background or displayed in significantly small print while emphasizing a deadline like "Sales End on Month 0, Day 0!". This could be considered deceptive advertising that obstructs consumers' rational purchasing decisions.

4.       False and Exaggerated Prize Advertising: Although advertised as giving high-value prizes (e.g., tablet PCs, wireless earphones, etc.) through a lottery, it was confirmed that the relevant prizes were neither purchased nor provided through a lottery. Since prizes can significantly affect consumers' purchasing decisions, false prize advertising could be considered as unfairly luring consumers.

[Criteria for Judging Unfair Advertising under the Advertising Act]

The FTC determined that the aforementioned practices fall under Article 3, Paragraph 1, Item 1 (false or exaggerated expressions/advertising) and Item 2 (deceptive expressions/advertising) of the Advertising Act. The main criteria for being judged as unfair advertising are as follows.

1.       Falsehood and Exaggeration: Refers to cases where the content of the advertisement is different from the facts or excessively inflated. For example, it applies to cases where they portray as having a deadline while actually selling continuously as in the 'limited time advertisement', or advertising prizes without any intention or ability to provide them as seen in 'prize advertising'.

2.       Possibility of Consumer Misunderstanding: Refers to situations where there is a concern that consumers may take the advertisement differently from the facts. If consumers with ordinary attention may have a misunderstanding regarding the product's price, transaction conditions, quality, etc., due to the advertisement contents, then misunderstanding can be recognized.

3.       Hindrance to Fair Trade: This refers to situations where the rational choices of consumers are obstructed due to unfair advertising, raising concerns that the order of fair market competition may be hindered. As prices, sales periods, and whether prizes are offered have significant impacts on consumers' purchasing decisions, false or exaggerated advertising on these matters is likely to be recognized as hindering fair trade.

[Implications and Notes]

This sanction by the FTC serves as a wake-up call against unfair advertising practices that have been traditionally occurring in competitive fields such as the online education market. In particular, some businesses repeated unfair advertising despite recognizing the issues with similar advertising practices in the past and signing voluntary compliance agreements.