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Amid the increasing use of social media platforms by consumers, recent consumer perception surveys have indicated that sponsored customer reviews on social media are having a greater influence on consumers\' purchasing decisions than more traditional forms of advertisement (e.g., TV commercials, in-store signage). However, there has also been a surge in such sponsored reviews that fail to disclose that they are advertisements, prompting the Korea Fair Trade Commission (the \"KFTC\") and the Korea Consumer Agency (the \"KCA\") to launch a monitoring inspection and survey on this issue. During its survey, the KCA analyzed consultation cases relating to social media ads that were filed during the past five years, and found that there had been a five-time increase in the number of complaints by consumers who made purchases through social media ads.

From April to December 2021, the KFTC and the KCA monitored Naver Blog, Instagram, YouTube, three major social media platforms known to have a high rate of deceptive ads in the form of customer reviews and selected in consideration of their influence (e.g., number of views, number of subscriber) and detection rate of similar postings, etc., and assessed whether sponsored reviews on those platforms were in compliance with the KFTC\'s Guidelines on Review of Labelling and Advertisements Regarding Recommendations and Endorsements, which requires disclosure of economic interests when posting ads, and specifies acceptable modes of such disclosure.

The most prevalent types of deceptive advertising on the three platforms were (i) failure to disclose economic interests, (ii) inappropriate location of the disclosure (e.g., requiring clicking on a \"see more\" link to view the disclosure, placing the disclosure in-between multiple hashtags), and (iii) disclosure using an inappropriate mode of expression (e.g., rendering disclosures in a font size and/or color that is not easily recognizable by consumers). By type of product or service, there was a high percentage of deceptive ads for cosmetic products, health supplements (e.g., for weight loss, aesthetic purposes) and food services, for which it is easier to write or request posting of customer reviews. Of the total 17,020 deceptive ads found on the three platforms, 9,538 were found on Instagram, 7,383 on Naver Blog and 99 on YouTube. The KFTC and the KCA requested to the authors (e.g., social media influencers) or advertisers of the deceptive ads to make voluntary corrections and monitored their implementation status.

The KCA also inspected the platforms\' compliance policies regarding advertisements, and conducted a consumer survey on unfair ads on social media, following which it recommended the platforms to make changes to their functions so that consumers may report unfair ads with greater ease, and provide consumers who reported unfair ads with feedback.

As the KFTC announced that it will be constantly monitoring social media platforms for deceptive ads throughout this year, and take necessary measures against habitual or serious violations in accordance with the Fair Labelling and Advertising Act, it is advisable that companies conduct an internal review of their advertising practice on social media, and supplement their systems to ensure compliance with relevant laws and regulations.

Kim & Chang Newsletters (21. Feb. 2022)

https://www.kimchang.com/en/insights/detail.kc?sch_section=4&idx=24582&lawCurPage=1&lawSchSection=4&kncCurPage=1&kncSchSection=2&scroll=1100