“If False Advertising Repeats, Fines Double”… Fair Trade Commission Significantly Strengthens Penalties for Violating Labeling and Advertising Law

Amendments to Enforcement Decree and Fine Guidelines Announced
Additional Fines for Repeat Violations to Increase from 50% to 100%

Going forward, companies that repeatedly engage in false or exaggerated advertising will face significantly heavier fines imposed by the Korea Fair Trade Commission. Even a single prior violation will now result in harsher penalties. In addition, the so-called “loophole” of pretending to cooperate during investigations to receive reduced fines and then changing statements in court will be completely blocked.

On March 25, the Fair Trade Commission announced that it will be holding a legislative notice and administrative notice for the amendments to the Enforcement Decree of the Act on Fair Labeling and Advertising and the guidelines for fines, which contain these changes. This revision is a follow-up measure to the improvement plan for the fine system announced by the Fair Trade Commission at the end of last year.

The most significant change is the strengthened criteria for imposing additional fines on repeat violators. Currently, fines can only be increased if a company has violated the law at least twice in the past three years and the accumulated penalty points reach a certain level. From now on, however, if a company has even a single violation in the past five years and commits another offense, it will be subject to additional fines.

The range of additional fines is also being significantly increased. The upper limit for additional fines based on the number of violations will be raised from the current 50% to 100%, so companies that habitually break the law will face what is essentially a “fine bomb.” The intention is to make the loss from the penalties far greater than any profit gained through illegal behavior, thereby eliminating the incentive to violate the law.

The system for reducing fines will also become stricter. Currently, if companies cooperate by submitting documents or other means during Fair Trade Commission investigations or deliberations, their fines are reduced. However, there have been cases in which companies, after receiving a reduced fine, later claim in court that the submitted documents were false or change their testimony. To prevent this, a new “revocation system for fine reduction due to cooperation during investigation or deliberation” has been introduced. If it is later found that the documents or statements that served as the basis for the reduction were submitted through fraudulent means or were false, the previously reduced fine can be fully reinstated.

Additionally, the Fair Trade Commission will reorganize the system for determining the base rate for fines from the current three-tier structure to a four-tier one, to ensure penalties are appropriately matched to the violation. The Fair Trade Commission stated, “These measures are intended to enhance the effectiveness of sanctions against repeated violations and ensure reliability in the investigation process,” adding, “After thoroughly gathering stakeholder opinions during the notice period, the amendments will be implemented following review by the Legislation and Judiciary Committee.”

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