As consumers increasingly choose to shop online through social media, advertisements and user reviews on social media are having a growing influence on consumers’ purchasing decisions. Along with this trend, there has also been a rise in unfair advertising on social media, notably, sponsored user reviews that fail to disclose that they are advertisements (deceptive advertising), and fake user reviews about products that were never purchased or used by individuals hired by advertising agencies (user review manipulation).
The Korea Fair Trade Commission (“KFTC”) has repeatedly expressed its determination to proactively respond to unfair advertising on social media, including by imposing sanctions, and has mentioned certain areas on which it will be focusing its monitoring efforts. Accordingly, companies that are engaging in or plan to engage in social media marketing in Korea should closely follow related developments at the KFTC.
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Developments at the KFTC
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Plans to Strengthen Regulations
The KFTC has noted in its Enforcement Plan for 2023 and during the first meeting of its Fair Trade Advisory Group Meeting (held on August 28, 2023) that it plans to proactively monitor social media for unfair customer solicitation, and step up efforts to detect deceptive advertising and user review manipulation that is often carried out by small-sized online vendors, and encourage the companies to make voluntary corrections.
During a media interview on February 14, 2023, then Director General of the Competition Policy Bureau, Sang Min Song, who is currently the KFTC’s Secretary General for Policy, emphasized that trust is a key component of online transactions in a digital economy, and said the KFTC will strengthen its efforts to inspect and correct deceptive advertising and user review manipulation to foster a safe and reliable consumer environment.
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Annual Monitoring Inspections
In 2022, for the second year in a row, the KFTC conducted a monitoring inspection of unfair advertising on major social media platforms and issued a press release announcing the results on February 7, 2023.
According to the press release, in 2022, the most prevalent type of unfair advertising regarding disclosure of economic interests was improper location of disclosure (47.2%), followed by ambiguity of disclosure details (41.3%), inappropriate modes of expression for disclosure (23.9%), and non-disclosure (17%). Compared to 2021, while there was a significant decrease in the number of non-disclosure cases in 2022, there was an increase in the number of cases involving ambiguity of disclosure details. Accordingly, the KFTC is expected to focus its next annual monitoring inspection on social media advertisements where economic interests are disclosed but in an ambiguous manner.
Of the inspected platforms, the largest number of illegal postings were found on Instagram, followed by Naver Blog and YouTube. In particular, the KFTC noted that it will expand its monitoring of short-form content platforms whose rapid development has led to a surge in the number of illegal postings on such platforms.
Further, as the press release mentions that the KFTC will closely monitor platforms for unfair ads for health and hygiene products (e.g., cosmetics) and food and personal preference products (e.g., health supplements), it will be necessary for companies to take necessary precautions when running advertisements for such products.
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Enforcement Trends
In 2019, the KFTC for the first time imposed sanctions against companies for engaging in unfair advertising on social media. In particular, the companies had provided social media influencers economic benefits to post advertisements on their social media accounts for the companies’ products (e.g., weight loss products, cosmetics, small home appliances) but the posts failed to disclose the fact that an economic benefit had been provided to the influencers as compensation.
Since then, in 2022 and April 2023, the KFTC imposed sanctions against electronics companies that engaged in a so-called “empty box marketing” scheme, a type of brushing scam, in which recruited individuals were given the right to post customer reviews after placing orders using their personal accounts and receiving empty boxes in lieu of the actual product.
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As the KFTC has made clear its intention to take proactive measures against deceptive advertising and user review manipulation on social media, companies are advised to inspect their current practices regarding online advertisements, and make improvements where necessary. In particular, companies can benefit from preparing internal guidelines for influencer marketing based on the KFTC’s Handbook on the Disclosure of Economic Interests, which was published in 2020, and conducting an internal review of various issues regarding unfair labelling and advertising that could arise in the process of hiring influencers to run advertisements on their social media accounts.
[Korean Version]
