On June 8, 2023, the Korea Fair Trade Commission (the “KFTC”) issued an advance notice on a proposed amendment (the “Proposed Amendment”) to its Guidelines for Review of Environment-Related Labeling and Advertising (the “Guidelines”) that aims to more effectively regulate greenwashing. The 20-day public comment period for the Proposed Amendment ended on June 28, 2023.
Greenwashing, a portmanteau of “green” and “whitewashing,” refers to a form of deceptive marketing that portrays a company or its products as more environment-friendly (i.e., “greener”) than they actually are. Recently, the global emphasis on Environmental, Social, and Governance (“ESG”) values has led to a surge in the number of claims that a company or product is environment-friendly, making greenwashing a constant subject of discussion among regulators worldwide, including the KFTC, which has been working on establishing a specific set of guidelines for reviewing greenwashing-related conduct and imposing sanctions. As the KFTC has publicly recognized the need to regulate greenwashing, including in its annual report to the President in January, going forward, the KFTC is expected to proactively regulate greenwashing based on the details laid out in the Proposed Amendment.
In particular, the Proposed Amendment updates the criteria for assessing whether a label or advertisement is “unfair,” by (i) bringing the Guidelines up to date with related legislations that have become effective since the Guidelines were last amended in 2016 (e.g., Notifications of the Ministry of Environment (the “MOE”) and foreign guidelines on greenwashing), (ii) replacing outdated terms with those used in current labels and advertisements, and (iii) presenting specific examples of each type of unfair environment-related labeling and advertising practice. The key details of the Proposed Amendment are as follows:
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1. |
General Principles for Reviewing Unfairness |
The Proposed Amendment reorganizes the general principles for reviewing unfairness in environment-related labeling and advertising in accordance with the principles of (i) authenticity, (ii) clarity, (iii) substantiality, (iv) substantiability, (v) consideration of a product’s entire life cycle, (vi) specificity, and (vii) completeness, and provides specific examples for each principle.
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Principle |
Examples |
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Authenticity |
When labeling or advertising an adhesive product, if volatile organic compounds (“VOCs”) were the only type of harmful substance not detected during testing, umbrella terms and absolute expressions such as “environmentally friendly” or “non-toxic” should not be used as they may mislead consumers into thinking that the product has no potential for polluting the environment in any situation or does not release or contain toxic substances. To ensure authenticity, a label or advertisement should merely state that “VOCs were not detected.” |
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Clarity |
Even when a label does not make any explicit claim on “eco-friendliness,” images, fonts, or other visual representations may still mislead consumers into thinking that the product has no adverse effect on the environment. For example, a label or advertisement with green font along with an image depicting nature (e.g., dense forest, trees) can be misleading and therefore should be avoided. |
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Substantiality |
A statement that there was a “50% increase in recycled fiber” is technically correct if the amount of recycled fiber used in a clothing product increased from 2% to 3%. However, such statement should not be used as it may give the false impression that the product contains a considerable amount of recycled fiber even though it is difficult to say that a 1% increase in recycled fiber helps improve the environment in a meaningful way. |
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Substantiability |
To claim that a product is “biodegradable,” a company should be able to provide objective and scientific proof of its biodegradability (e.g., conditions, time, ratio), and any advertisement making such claim should include relevant evidence (e.g., test results). |
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Consideration of a Product’s Entire Life Cycle |
When labeling or advertising a product that has reduced the carbon emissions generated during its production process by one third, making a statement that there was “an additional 33% reduction in carbon emissions” along with a disclaimer in small font that says “excluding the transportation process” should be avoided, as this may mislead consumers into thinking that there was a significant decrease in carbon emissions, while in fact there was only a slight decrease. This is as considering a product’s entire life cycle, most of the carbon emissions are released during the transportation process. |
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Specificity |
A label that says “recyclable” on a plastic package containing a shower curtain without further explanation may mislead consumers into believing that both the package and the curtain are recyclable, even though only one of the two is. Therefore, the label should further indicate which specific part of a product is recyclable. |
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Completeness |
If only the mattress of a bed product that also includes a headrest and bed frame was certified as environmentally friendly, it should not be advertised as an “environmentally friendly bed” without further explanation, as it may deceive consumers into believing that such certification was obtained for the entire product. |
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Clarification of the Principle of Consideration of a Product’s Entire Life Cycle |
The Proposed Amendment clarifies that environment-related labeling and advertising practices should consider a product’s entire life cycle (i.e., attainment of raw materials, production and distribution, use and disposal), and therefore even if the environmental impact of a product has been improved in some stages of its life cycle, if such improvement is offset or the net impact is harmful considering the entire life cycle, the product should not be labeled or advertised as though its overall environmental impact was improved.
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Examples of Unfair Environment-Related Labeling or Advertising by Representative Types of Conduct |
The Proposed Amendment, reflecting the MOE’s Notification on Management System for Labeling and Advertising of Environmental Properties, newly provides examples of environment-related labeling and advertising practices, organizing them in the following four types of representative unfair conduct.
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Type of Unfair Conduct |
Examples (Excerpt) |
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False or Exaggerated Labeling and Advertising |
Claiming that there was an improvement in a product’s environmental properties or effects even though there was little, if any, improvement. |
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Making an exaggerated or false claim regarding environment-related awards, certifications, selections or patents, by claiming that a product won an award that it did not or by making false claims about an award that it had won, among others. |
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Using an environment-related certification mark without authorization or falsifying the details of an authorized certification mark. |
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Using environment-related corporate or management certifications that are unrelated to the product. |
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Deceptive Labeling or Advertising |
When listing information on a product’s environmental properties or effects, failing to indicate specifically which part of the product (e.g., the product itself, or the packaging materials) the label or advertisement is referring to, or omitting, concealing or downplaying all or part of such information. |
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Highlighting that a product does not contain harmful ingredients or properties that would not be included in such product in the first place, thereby falsely suggesting that the product’s environmental properties or effects have been improved due to their absence. |
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Highlighting that matters required under the applicable law were implemented as though this has improved the product’s environmental properties or effects. |
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Labeling or Advertising Based on Unfair Comparisons |
Making a comparative statement regarding a product’s environmental properties or effects without specifying the product against which such comparison was made, or based on an unfair comparison conducted under unequal conditions. |
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Failing to specify the details of or standards used in a comparison, which could mislead consumers or give them a false impression and have a significant impact on their purchasing decisions. |
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Comparing other false information about the product’s environmental properties or effects, thereby misleading consumers. |
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Slanderous Labeling or Advertising |
Making slanderous statements about a rival product’s environmental properties or effects without presenting a specific basis for comparison. |
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Highlighting a rival product’s disadvantages in terms of environmental properties or effects to make consumers think that the rival product is significantly inferior or more disadvantageous than it actually is. |
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Concealing, omitting, or downplaying information on a rival product’s environmental properties or effects. |
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Update of the Guidelines for Specific Terms and Expressions Based on the Principle of Consideration of a Product’s Entire Life Cycle |
The Proposed Amendment reorganizes the guidelines for specific terms and expressions based on three product life cycle stages: (i) composition of raw materials or resources, (ii) production and use, and (iii) disposal and recycling, and updates the terms and expressions to match those currently used in related fields of expertise. Further, based on domestic and foreign legislations, KFTC decisions and MOE notifications, the Proposed Amendment provides specific examples of certain unfair claims that are often made with regard to each stage that should be avoided or may constitute a violation of law.
For example, at the mentioned composition of raw materials or resources stage, it can be deemed false or exaggerated to claim that a vitamin product contains “100% natural vitamins” even though a synthetic raw material was used in the manufacturing process (false or exaggerated advertising). At the production and use stage, businesses should avoid using expressions such as “low carbon,” “carbon emissions reduced,” or “carbon offset,” without providing information supporting such claims (e.g., where and how the carbon emissions were reduced) as if there was an improvement in a product’s environmental properties.
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Specific Guidelines for Corporate Labeling and Advertising |
The Proposed Amendment requires a company, when labeling or advertising environment-related corporate goals or plans, to prepare a specific plan for implementation to secure personnel and resources to support such plan, and to specify measurable goals and deadlines.
The Proposed Amendment also specifically prohibits companies from misleading consumers by using certain phrases, designs or colors on labels or in advertisements to suggest that, contrary to reality, their products have environmental advantages, and from falsely suggesting that the environmental property or effects of some products apply to all products under a larger brand.
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New Self-Checklist |
The Proposed Amendment introduces a simplified self-checklist to help companies self-assess the illegality of their environment-related labeling and advertising conducts.
After gathering feedback from interested parties during the public comment period, the KFTC plans to finalize and implement the Proposed Amendment through resolution at a plenary hearing.
Going forward, companies that engage in or plan to engage in environment-related labeling and advertising practices should become familiar with the details of the Proposed Amendment in preparation of the draft being finalized and taking effect. In particular, companies should review whether there are any of the types of violations described in the Proposed Amendment in their current labels or advertisements, and keep abreast of law enforcement developments at the KFTC regarding greenwashing.
