The Korea Fair Trade Commission (the "KFTC"), which enforces the Fair Labeling and Advertising Act (the "Advertising Act"), imposed administrative fines and corrective orders against companies that conducted online (viral) marketing by proving cash or other benefits to bloggers to promote their products or services.
In August of 2012, the KFTC amended the Guidelines on Labeling and Advertising Recommendations and Endorsements, a sub-regulation of the Advertising Act (the "Guidelines"), to include a provision that requires the disclosure of any economic consideration that is provided for writing recommendations or endorsements in blogs. In the case at issue, four companies, including a beer company, an automobile manufacturer and a coffee retailer, were fined a total of KRW 309 million in the aggregate and issued corrective orders for concealing the fact that they provided consideration to bloggers and thereby misled consumers into believing that they were objective recommendations and endorsements of experts and regular consumers. This is the first time that the new provision was applied after the amendment of the Guidelines, and we expect its enforcement to become more active with the increase in advertisements utilizing blogs. Companies planning to conduct viral marketing through power bloggers should be mindful of this case.
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