Hello.

This is Law Firm Cheongchul, Attorney Lee Young-kyung.

In this column, we will examine the unfair labeling and advertising practices of J World Industrial Co., Ltd., which the Fair Trade Commission recently sanctioned. According to the FTC, J World (Alzip), through an advertising agency, posted 274 comments and posts disparaging its competitor Creamhouse and its children's mats on 54 websites, including mom cafes, and made them appear to be actual consumer experiences or recommendations. The FTC especially emphasized that the children's mat market is closely linked to children's safety, prevention of impact noise between floors, and parents' trust in reviews.

The press release explained word-of-mouth marketing, which formed the background of this case, as a method of causing consumers to send messages to other consumers so that positive word of mouth about the company's products or negative word of mouth about competing products is created. The problem is that this method went beyond advertising that borrows the appearance of a consumer and was used as a means to intentionally damage a competitor's reputation. In the end, this case can be said to be a representative example showing how far the Fair Labeling and Advertising Act issues can go when a "post that looks like a review" is actually an advertiser-led advertisement.

This column is based on the Fair Trade Commission's official press release, and the final legal assessment may change depending on future appeal procedures or court decisions.

[Question]

Is it a violation of the Labeling and Advertising Act to post comments on mom cafes pretending to be consumers and disparaging competitors?

[Answer]

Yes. The FTC judged J World's actions as deceptive labeling and advertising because they concealed who wrote the comments, and as disparaging labeling and advertising because they negatively evaluated competitors and their products without objective grounds. As a result, along with a corrective order, the statutory maximum fixed penalty surcharge of KRW 500 million was imposed.

1. Facts: 54 mom cafes, 274 comments, disparaging a competitor disguised as consumer reviews

According to the FTC press release, J World (Alzip), from October 30, 2017 to June 27, 2018, through an advertising agency using burner accounts and the like, wrote a total of 274 comments and posts on 54 websites (mostly mom cafes). The posts were uploaded using advertising agency accounts or company insider accounts, but outwardly were made to look like firsthand experiences left by ordinary consumers after direct use.

The problematic posts fell largely into three categories.

First, there were expressions directly disparaging the competitor Creamhouse,

second, they included false negative usage experiences such as "my child's skin turned red," and

third, as a knock-on effect, they recommended Alzip products.

According to the press release, examples such as "Isn't that really a crazy company over there...", "I was using that cream, was I the only one having all this trouble?", and "I recommend Alzip" were confirmed. It was not merely a matter of criticizing a competitor; rather, it was a flow that aroused consumers' anxieties and then presented the company's own product as an alternative.

The FTC viewed this conduct not as an independent deviation by the advertising agency, but as a systematic act carried out under J World's instructions and reporting structure. J World specifically instructed the advertising agency on the content and direction of the comments and received reports on their progress; for example, it was confirmed that there were instructions to focus publicity on the fact that DMAc, a substance prohibited under certification standards, was detected in a Creamhouse product and that its eco-certification was revoked.

In addition, this conduct continued until the police search and seizure in June 2018, and the resulting comments remained on the internet until as late as September 4, 2025. Also, former CEO of J World and others were convicted under the Criminal Act for obstruction of business and other charges, and the sentence was finalized on April 16, 2024, when the appeal was dismissed. This shows that online posts do not simply end as temporary advertisements, but can leave a lasting impact on market reputation and consumer perception.

2. Issues and law: Why hiding the author becomes deceptive advertising, and why baseless denigration becomes disparaging advertising

The key issues in this case were twofold.

One was whether hiding who wrote the post while making it look like a consumer review constituted deceptive advertising under the Labeling and Advertising Act, and

the other was whether spreading negative information about a competitor's product without objective grounds constituted disparaging advertising. The FTC recognized both issues.

Article 3(1) of the Act on Fair Labeling and Advertising states that businesses must not engage in acts that may deceive consumers or cause them to misunderstand and that may harm fair trade order, and it expressly identifies deceptive labeling and advertising and disparaging labeling and advertising as examples. In other words, the law does not prohibit only false wording; it also regulates the very methods that cause consumers to misunderstand the source and nature of information.

The FTC especially considered whether the author was an ordinary consumer or a competitor/business operator to be important to consumers' purchasing and choice decisions. If people think it is a real consumer experience, they accept it as a trustworthy review, but if they learn that it was written by a competitor or advertiser, the credibility of the information changes significantly. Therefore, hiding that it is an ad and making it look like a review can be deceptive not only because of the content, but also because of the form of expression and concealment of the source.

The same is true for disparaging advertising. Under the Enforcement Decree of the Labeling and Advertising Act, disparaging labeling and advertising means disparaging by advertising with content that has no objective basis, or by advertising only unfavorable facts. In this case, many of the posts at issue specifically named Creamhouse products and contained extreme insults unsupported by objective evidence or false consumer experiences. So this was more than a mere expression of opinion; it had to be assessed as an advertising act that artificially undermined market trust in a competitor's product.

The penalty surcharge part also deserves attention. The FTC imposed the statutory maximum fixed penalty surcharge of KRW 500 million for J World's conduct. The reason was that the advertised target was not J World's own product but Creamhouse and its products, making it difficult to separate J World's relevant sales revenue. In the end, this case is significant not as a simple warning, but also because it shows that the FTC assessed the illegality of online review-style advertising quite seriously.

3. The FTC's decision and implications: the boundaries of review ads, viral marketing, and comment marketing

First, the FTC clearly recognized deceptiveness. The identity of the author of the comments in this case as either an ordinary consumer or a competitor materially affects consumers' purchase and choice decisions, yet J World did not disclose this anywhere in the comments. Moreover, because these posts were not in the form of ordinary ad copy or blog review format, but rather in the form of posts or comments as advertisements, the FTC saw a greater risk that ordinary consumers would mistake them for sincere experiences or opinions.

The FTC also recognized disparagement. Because 264 of the comments and posts in this case specifically identified Creamhouse products and contained disparaging expressions unsupported by objective grounds or false consumer experiences, disparagement was recognized. In the end, this case involved circulating content of uncertain truth in the form of consumer reviews in order to create a negative impression about the quality or safety of a competitor's product, and the FTC viewed this as conduct likely to harm fair competition order.

Another important point is consumer confusion and interference with fair trade. Premised on the fact that consumers place great importance on other consumers' personal experiences and opinions in order to reduce trial and error, the FTC saw this kind of comment-style advertising as distorting the market's informational order. In particular, in a market like children's mats, where parents are sensitive to their children's safety and health, a single review and a few comments can have a much greater impact than ordinary products. For that reason, the significance of this case lies, in the FTC's view, in detecting and sanctioning conduct that maliciously exploits parents' emotions.

From a practical standpoint, this case clearly shows what companies should check when using advertising agencies. First, if comments, reviews, or community posts are advertisements, their author or advertising nature must be managed in a way that does not mislead consumers. Second, comparisons or references to competitors' products must always be backed by objective grounds, and fabricating negative experiences is especially risky. Third, even if an outside agency is used, if there is an internal structure that instructs or receives reports on comment wording, responsibility cannot easily be separated. In the end, the problem with viral marketing depends less on whether it is "an ad" and more on who wrote it, what basis it was written on, and how consumers perceive it.

In the end, this FTC sanction shows that comment marketing on online communities and mom cafes can no longer be seen merely as a light promotional tool. Even if a post looks like a review, if in substance it is advertiser-led advertising, and furthermore was intended to disparage a competitor, it can simultaneously raise issues of deceptive advertising and disparaging advertising under the Labeling and Advertising Act. From a company's perspective, this is the time to examine not only a marketing phrase, but also review management methods, internal approval systems, and advertising agency management standards first.