"Backdoor Ads and Habitual Overcharging" to Face Hefty Fines... Fair Trade Commission Revises Enforcement Decrees of Three Key Consumer Laws

Stricter Regulations on Door-to-Door Sales, Labeling and Advertising, and Installment Transactions
Penalty Surcharge Cap for Repeat Violators Doubled from 50% to 100%

Going forward, business operators who repeatedly engage in deceptive or exaggerated advertising, or who mislead consumers during door-to-door sales and installment transactions, will face penalty surcharges up to twice as high as before. This is due to a significant increase in the level of punishment for habitual violators, as well as the reduction or elimination of discretionary factors for penalty surcharge mitigation, which companies have previously exploited as a 'shield' to avoid sanctions.

The Fair Trade Commission announced on June 9 that amendments to the enforcement decrees of three consumer protection laws—the Door-to-Door Sales Act, the Act on Fair Labeling and Advertising, and the Installment Transactions Act—have passed the Cabinet meeting. These amendments, together with the revised notice on penalty surcharges for each law that was pre-announced in March, will take full effect starting July 1.

The core of these revisions is the strengthening of aggravated punishment for business operators who habitually violate the law. The Fair Trade Commission has doubled the maximum penalty surcharge increase based on the number of past violations, raising it from the previous 50% to 100%. In addition, the monitoring period for prior violations to apply aggravated punishment has been extended from three years to five years. If there is even a single violation (with a cumulative score of 2 points or more) within the past five years, up to 50% in additional surcharges can be imposed; for four or more violations, the surcharge can be increased by up to 100%.

Conversely, the avenues for companies to seek mitigation of penalty surcharges have been narrowed. Previously, if a company made efforts to compensate consumers for damages after a violation, the penalty surcharge could be reduced by up to 30%. From now on, this will be capped at 10%. In particular, the mitigation benefits under the Act on Fair Labeling and Advertising, which were previously split into a 10% reduction for cooperation during investigation and another 10% for cooperation during review (totaling up to 20%), have been overhauled. Now, only those who actively cooperate at every stage from investigation to review and fully admit the wrongdoing can receive a reduction of up to 10%. Exception clauses, such as those that allowed reductions for claiming to have exercised substantial caution to prevent violations—essentially a basic duty of the business operator—have been completely removed.

Alongside these changes, the penalty surcharge rate system under the Act on Fair Labeling and Advertising has also been comprehensively raised. The Fair Trade Commission has increased the base rates for severe violations from the previous 0.8%–1.6% to 1.5%–1.8%, and for very severe violations, the floor has been raised from 1.6%–2.0% to 1.8%–2.0%, ensuring that heavy penalties are imposed for serious legal violations.

The Fair Trade Commission stated, "Through these amendments to the enforcement decrees and penalty surcharge notices, we expect to reinforce deterrence against business operators' legal violations in areas with high consumer protection needs such as door-to-door sales, labeling and advertising, and installment transactions. This will help establish fair market competition and strengthen the fundamental function of the law to protect consumer rights."

This content was produced with the assistance of AI translation services.