Law Firm Cheongchul (Attorneys in Charge: Eom Sang-yoon, Lee Young-kyung) is a business entity (the plaintiff) engaged in housing construction and sales, which received a warning from the Fair Trade Commission (hereinafter referred to as "FTC") for violating the Act on Fair Indication and Advertising (hereinafter referred to as "the Indication and Advertising Act") by making deceptive advertisements. The plaintiff then filed a lawsuit to annul this warning decision, and the defendant FTC successfully led a judgment to dismiss the plaintiff's claims.

The plaintiff operated a model house for the sale of officetels and indicated on the uppermost floor of the model's attic area that "the dotted floor area is constructed of wood and can be removed after completion" (hereinafter referred to as "this advertisement"). However, in order to remove that part, consent from all separate owners must be obtained and an administrative office's permission for expansion must be acquired, so the purchasers could not freely remove it. The FTC deemed that this advertisement constituted a deceptive advertisement that could mislead consumers (Article 3, Paragraph 1, Item 2 of the Indication and Advertising Act) and warned the plaintiff accordingly.

Subsequently, the plaintiff claimed that the FTC's warning was unlawful and filed a lawsuit to annul the decision.

This case primarily focused on the meaning and scope of deceptive indications and advertisements under the Indication and Advertising Act. Additionally, as the plaintiff had delegated the officetel sales work to an agency, it was questioned whether the agency, rather than the plaintiff, could be seen as the subject of this advertisement.

In response, Law Firm Cheongchul emphasized, presenting precedents related to determining unjust indications and advertisements, that this advertisement was sufficient to cause consumer confusion and argued that the plaintiff ultimately benefits from the advertisement, thus cannot regard the agency as the advertising subject.

According to precedent, the consumer misperception regarding indications and advertisements must be judged objectively based on the overall and ultimate impression received by an average consumer with ordinary caution (Supreme Court decision 2017Du60109, etc.), and the necessity for consent from all separate owners and expansion permits to remove the attic was sufficient to induce consumer misperception. Moreover, the subject of legal responsibility for the advertisement must be assessed comprehensively, considering roles, actual involvement, etc. (Supreme Court decision 2003Du8296, etc.), and Cheongchul argued that since this advertisement was affixed to the model house operated by the plaintiff, it is difficult to say that the plaintiff had no involvement.

This case relates to the issue of the propriety of housing sales advertisements, with the FTC pointing out the illegality of numerous sales advertisements and taking punitive measures. This incident also raised issues concerning the violation of the Indication and Advertising Act in sales advertisements, and the legality of the decision was recognized based on existing precedents. However, this case differs from typical cases since it is a request for cancellation of a warning decision, which results in a lower degree of disadvantage than a corrective order or penalty. Considering that lawsuits for damages from interested parties may arise based on the FTC's decision, it is expected that there will be an increase in cancellation lawsuits against warning decisions in the future.

If you need a clear solution for disputes similar to this case, please feel free to contact Law Firm Cheongchul.