First Sanction Imposed on Cosmetics Seller for Not Providing Technical Data Request to Subcontractor

Fair Trade Commission Issues Corrective Order and 16 Million KRW Fine to MAP Company
"First Sanction Related to Cosmetic Industry Technical Data Request Procedures"

[Asia Economy Reporter Moon Chaeseok] MAP Company, which sells water drops and hand creams, has been sanctioned by the Fair Trade Commission for failing to provide a written request for technical data when contracting with a subcontractor. It became the first company in the cosmetics industry to be penalized for violating the technical data request procedure.

On the 6th, the Fair Trade Commission announced that MAP Company was issued a corrective order and fined 16 million KRW for not providing written documents related to technical data while receiving cosmetics under a manufacturing consignment Original Design Manufacturing (ODM) contract.

The company outsourced cosmetics manufacturing to Company C and, from July 2015 to January 2018, requested nine full ingredient lists of cosmetics without providing written documents specifying confidentiality methods, rights ownership, compensation, and payment methods.

The full ingredient list refers to technical data that includes all ingredients of a product and their content percentages (%). It contains information on what ingredients and how much should be used to make the cosmetics.

It is also economically useful data. Knowing the cosmetic content helps competitors reduce trial and error when making the same product.

The Fair Trade Commission recognized MAP Company’s actions as a violation of the Subcontracting Act regardless of whether the company was aware of the illegal facts. This is because the company failed to provide the mandatory technical data to the subcontractor.

Under the Cosmetics Act, if safety or quality management issues arise during sales or use, the responsible seller (original business operator) is held accountable. Therefore, original business operators often receive and keep product standards and quality control records from subcontractors.

The Fair Trade Commission judged that if the original business operator provides a written request for technical data to the subcontractor in advance, it can prevent the operator from arbitrarily interpreting rights ownership and compensation of the technical data and from engaging in technology misuse.

Moon Jongsuk, head of the Technology Misuse Monitoring Team at the Fair Trade Commission, explained, "Even if manufacturing-related data is needed for consumer protection, it is significant that the obligation for the original business operator to issue a written request for technical data to the subcontractor under the Subcontracting Act has been emphasized."

He added, "The Fair Trade Commission will strengthen monitoring not only of technology misuse by industry but also of procedural violations occurring during the technical data request process by original business operators."

This content was produced with the assistance of AI translation services.