As increasing number of consumers rely on feedback from other consumers and social media influencers before making purchases, companies are increasingly engaging influencers and content creators to advertise their products on social media, video sharing websites, and blogs. The Korea Fair Trade Commission (“KFTC”), like many other competition authorities, has been monitoring the influencer marketing activities and is expected to more aggressively take action against advertisements that are deemed deceptive or false.
For example, during 2014-2015, the KFTC investigated certain advertisements conducted by bloggers, which failed to disclose the fact that an economic benefit had been provided to the influencers in consideration for their endorsement of the products. Ultimately, the KFTC imposed sanctions against the advertisers, concluding that such advertisements were indeed deceptive and/or false. The use of deceptive or false advertisements can be subject to a corrective order, administrative fine, and even criminal penalty (in very serious cases) under the Fair Labeling and Advertisement Act.
In addition, the KFTC is expected to soon announce the result of its recent investigations into influencer marketing for certain consumer products, including weight loss products, cosmetics, and consumer electronics. The KFTC is also expected to amend the guidelines on the review of advertising through recommendations and endorsement to include more detailed guideline on influencer marketing.
It may be difficult for companies to control the manner in which influencers advertise their products or to ensure that they comply with the applicable laws and regulations. However, because the advertiser companies themselves can be held liable for any deceptive or false advertisements, one key issue would be to ensure proper disclosure of any compensation or consideration provided to the influencers. In addition, influencer marketing may raise issues under Korea’s anti-corruption laws in case of dealings with the members of the press (members of the press are deemed to be “public officials” under the Anti-graft Law, and economic benefits given to the members of the press are tightly controlled). Finally, benefits provided to the influencers can have tax implications for the advertiser companies.
To prevent legal risks associated with influencer marketing, companies and their employees are advised to understand the potential legal issues and establish clear internal guidelines and manuals for influencer marketing (including full disclosure of any compensation or consideration given to the influencers), closely review any advertisement contracts with marketing agencies and influencers, and develop a system to monitor influencer advertisements.
