Fair Labeling and Advertising Act Lawyer
Fair Labeling and Advertising Act Lawyer | What triggers a case and how to respond at each stage
The Act on Fair Labeling and Advertising (표시광고법) regulates advertisements and product labeling that mislead or deceive consumers, or that unreasonably restrict fair competition. Violations can lead to a corrective order, a surcharge (과징금) calculated on related sales, and in serious cases a criminal referral to prosecutors (표시광고법 제3조, 제9조, 제17조). Because the Korea Fair Trade Commission (KFTC) has wide discretion in classifying an advertisement as false, exaggerated, deceptive, or unfairly comparative, how the company frames its explanatory materials during the investigation stage often determines the outcome.
Fair Labeling and Advertising Act | Four Categories of Prohibited Advertising
Article 3 of the Act on Fair Labeling and Advertising (표시광고법 제3조) lists the conduct the KFTC treats as unlawful labeling or advertising. Most enforcement actions are built around classifying the advertisement into one of these four categories, so understanding which category is alleged is the first step in preparing a response.
Advertising that states facts differently from the truth, or exaggerates them beyond what is objectively verifiable, falls here (표시광고법 제3조 제1항 제1호). The KFTC generally looks at whether an average consumer, viewing the ad as a whole, would form a mistaken belief about the product's substance. Comparative performance claims and 'best/first/only' style claims are frequently examined under this category.
This covers advertising that conceals or downplays facts a consumer would need to make an informed choice, in a way likely to mislead them (표시광고법 제3조 제1항 제2호). Omitting material limitations, side effects, or conditions attached to a promotion is a common trigger. Whether the omission was 'material' to the purchasing decision is usually the central dispute.
Advertising that compares a company's own goods or services with a competitor's without a clear or reasonable factual basis, or without disclosing the criteria of comparison, can be found unfair (표시광고법 제3조 제1항 제3호). This frequently arises in 'vs. competitor' marketing and price-comparison campaigns.
Advertising that disparages a competitor's goods, services, or business activities without objective grounds, in a way that damages their reputation, is separately prohibited (표시광고법 제3조 제1항 제4호). This category often overlaps with unfair comparative advertising claims made in the same campaign.
Mandatory Labeling Obligations Are a Separate Track
Beyond advertising content, the Act also lets the KFTC designate mandatory information that must be disclosed on labeling or in advertisements for certain goods and services (표시광고법 제4조). Failing to include mandatory disclosures — for example, on cost calculation basis, usage precautions, or certification details — is assessed independently of whether the advertisement itself was false or exaggerated, and companies are sometimes surprised to find both issues cited in the same corrective order.
Fair Labeling and Advertising Act | How a KFTC Investigation Actually Starts and Proceeds
Most cases begin either from a consumer report, a competitor's complaint, or the KFTC's own periodic monitoring of online and broadcast advertising. Understanding the stage you are at changes what kind of response is useful.
Preliminary Fact-Finding (사실조사) and the Request for Materials
The KFTC typically opens with a written request for materials — the advertisement's underlying data, sales figures, and internal approval records. This is not yet a finding of violation, but the materials submitted here become the primary evidence the case officer relies on later, so incomplete or defensive responses at this stage are difficult to walk back.
Statement of Opinion and the Right to Be Heard
Before the KFTC issues a resolution, the company is generally given an opportunity to submit a written opinion and, in Commission-track cases, to appear before the Fair Trade Commission's deliberation. This is where objectively verifiable substantiating data for the advertising claim (such as test reports or third-party certifications) has the most persuasive weight.
The Substantiation Burden Often Shifts to the Advertiser
In practice, once the KFTC questions whether a specific claim is verifiable, the advertiser is effectively expected to produce the objective data supporting that claim (표시광고법 제5조). Advertisers who did not retain testing data, source studies, or the basis for comparative claims at the time the ad ran are at a significant disadvantage during this stage.
Fair Labeling and Advertising Act | Corrective Orders, Surcharges, and Criminal Referral
The consequences of a finding under the Act range from a public corrective order to a monetary surcharge, and in aggravated cases to a criminal referral. Which sanctions are combined depends on the scale of the advertising, the harm to consumers, and whether the conduct is repeated.
Corrective Order and Public Disclosure
The KFTC can order the advertiser to stop the advertisement, correct it, or publicize the fact of the correction (표시광고법 제7조). Because the order itself, once finalized, is disclosed and can affect brand reputation, many companies focus their defense on narrowing the scope of what must be publicly corrected rather than contesting the underlying finding outright.
Surcharge Calculated on Related Sales
A surcharge of up to a statutorily set percentage of sales revenue attributable to the advertised goods or services during the relevant period can be imposed (표시광고법 제9조). The scope of what counts as 'related sales' — including which product lines and which time period are included — is frequently the most contested factual issue, since it directly changes the surcharge amount.
Criminal Referral for Serious Violations
For advertising found to seriously mislead consumers or cause significant harm, the KFTC can refer the matter for criminal prosecution, exposing the responsible individuals and the company to criminal penalties (표시광고법 제17조). Because this is a separate criminal track from the administrative sanction, a company facing both should coordinate its administrative response with the criminal defense strategy from an early stage.
⚠ Administrative Litigation Deadline
If a company wishes to challenge a KFTC corrective order or surcharge decision, an administrative appeal or administrative litigation must generally be filed within 90 days of being notified of the disposition (행정심판법 제27조, 행정소송법 제20조). Missing this window generally forecloses further challenge to the disposition itself.
Fair Labeling and Advertising Act | Online, Influencer, and Comparative Marketing Are Highest-Risk Areas
Certain marketing formats attract disproportionate KFTC attention because they are easy to monitor at scale and prone to ambiguous substantiation.
Undisclosed Sponsored Content and Influencer Marketing
The KFTC's guidelines on recommendation and endorsement advertising require clear disclosure when an influencer or reviewer has received payment or free products in exchange for a review (표시광고법 제3조 및 관련 심사지침). Failure to disclose this economic relationship is treated as a form of deceptive advertising even if the product claims themselves are accurate.
Price and Discount-Rate Advertising
Advertising a discount off an inflated 'original price' that was rarely, if ever, actually charged is a recurring enforcement target, since it misrepresents the real benefit to the consumer. Companies running frequent promotional pricing should be able to show the actual sale history supporting the claimed baseline price.
Fair Labeling and Advertising Act | From Receiving a Request for Materials to Case Resolution
We review the request for materials or notice of investigation, the advertisement itself, and any internal approval records to assess which category of violation is likely being examined.
We work with the company to gather test data, certification documents, and internal records that can substantiate the advertising claims or clarify the scope of any disclosure that was made.
We prepare the company's written response to the fact-finding request and, where applicable, the statement of opinion submitted before the Commission's deliberation.
If the case proceeds to a Commission resolution, we support the company's appearance and argument at the deliberation session, focusing on the scope of any corrective order and the calculation basis for any surcharge.
If the resolution is unfavorable, we assess whether an administrative appeal or administrative litigation within the statutory deadline is warranted, and prepare the corresponding filing (행정심판법 제27조, 행정소송법 제20조).
Fair Labeling and Advertising Act | How Fees Are Structured for These Cases
Generally set based on the complexity of the investigation, the number of advertisements or products at issue, and whether the matter is expected to proceed to a full Commission deliberation.
Where applicable, a success fee may be structured around a favorable narrowing of the corrective order's scope or a reduction in the surcharge amount, rather than a guaranteed outcome.
If the matter proceeds to an administrative appeal or litigation contesting the KFTC's disposition, this is generally billed as a separate stage given the additional procedural work involved.
Costs such as expert opinions on advertising substantiation, translation of foreign-language source materials, and filing fees are billed separately as actually incurred.
※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.
Fair Labeling and Advertising Act | Self-Check Before You Respond
1️⃣ First Response After Receiving a Request for Materials
- Have you confirmed exactly which advertisement, time period, and product line the KFTC's request covers?
- Do you have the original testing data, certifications, or studies that supported the claim at the time it was made?
- Have you checked internal approval records to see who signed off on the final ad copy?
- Have you calculated an internal estimate of what 'related sales' might be counted toward a surcharge?
2️⃣ Reviewing an Advertisement Before It Runs
- Can every factual claim in the ad be traced to an objective, verifiable source?
- Is any comparison with a competitor's product based on a fair and disclosed methodology?
- Are any sponsorships, free products, or payments to reviewers clearly disclosed?
- If a discount is advertised, can you document that the 'original price' was actually charged in the recent past?
3️⃣ If You Have Received a Corrective Order
- Does the order's scope match the actual advertisement, or does it sweep in unrelated claims?
- Is the deadline for administrative appeal or litigation (90 days from notice) clearly calendared?
- Have you assessed the reputational impact of the public disclosure requirement?
