Overview

The Purpose of the Act on Fair Labeling and Advertising

The purpose of this Act is to prevent unfair labels and advertisements for products and services that deceive or mislead consumers in labeling and advertising, and to promote provision of correct and useful information to consumers, thereby establishing fair trade order and protecting consumers.

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 products and services or a container or package representing features of products.
• The term “advertising” means activities that are conducted to widely publicize the contents of products and services, terms and conditions of transactions, etc. to consumers through newspapers, broadcasting, magazines, samples, Internet, or signboards.

The reasons for regulating unfair Labeling and Advertising

An asymmetry in information arises between business entities and consumers, because business entities 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 entities 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 entities 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)

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).

Unfairly comparative labeling or advertising

Labeling or advertising a business entities’ product as better or more advantageous than any other business entities’ 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).

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)

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).

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 entity 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 entity or by its competitor of such commodity or service, are illustrated with cases where a business entity 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 entity 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.

Key Tasks

Imposing Corrective Measures and Sanctions Against Unfair Labeling and Advertising

Where a business entity engages in unfair labeling or advertising, the KFTC may issue a corrective order, order to publish the fact that the entity received a corrective order, or impose penalty surcharges (up to the amount of sales multiplied by 2% or 500 million won), on the business entity. Also the KFTC may file a criminal charge against the business entity or its employees.

Key Case

Implementing Policies on Fair Labeling and Advertising

Disclosure of Material Facts

The KFTC may publicly notify matters that business entities, etc. shall include in labeling or advertising to expand the scope of information that will be provided to consumers for reasonable selection of commodities, and to prevent consumer damage occurring due to lack of information.

Key Case

Verification of Details of Labels and Advertisements

• The fact represented by a business entity in a label or advertisement shall be verifiable; the KFTC may request a business entity to submit relevant materials for verification.
• The major facts for which materials requested for verification are mainly the ones that seriously affect consumer’s choice of purchase.

Temporary Suspension Order

The KFTC is authorized to order a business entity to temporarily suspend unfair labeling or advertising, where the relevant labeling or advertising is likely to cause irrecoverable damage to consumers or rival business entities, and thus prevention of such damage is deemed urgently required.

Enhancing Accessibility to Consumer Safety Information and Responds to Consumer Safety Issues

• The KFTC provides recall information for 11 types of products, such as food, industrial products, cosmetic products through the Integrated Consumer Support System (Consumer 24).
• The KFTC provides recall information for 11 types of products, such as food, industrial products, cosmetic products through the Integrated Consumer Support System (Haengbok Dream).
• The KFTC holds Business Consultative Group meetings for the early detection of the signs of potential injury, the cooperation of business in injury prevention, and early product recall.
• The KFTC is currently holding Business Consultative Groups in 8 sectors, such as large electronic product, large supermarket, hygiene product, automobile, and water purifier.

• Consumer 24 WebSite(http://www.consumer.go.kr)

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