LG Fashion, one of Korea's biggest attire firms and an affiliate of the conglomerate LG, was ordered to pay a multinational advertising agency TBWA Korea for damages the latter incurred while making a pilot advertisement because of "false" information from LG.

The case is a rarity because the relationship between a big consumer product maker and its ad agency have long been considered as that between master and subordinate.

The ruling in favor of TBWA is set to send a ripple effect through the advertising community.

The Seoul Central District Court, Monday, ruled that LG Fashion should pay 32 million won to cover part of the damages TBWA had sought.

"An employee of LG Fashion made a request for TBWA to produce a pilot advertisement, instructing the agency as if it had been selected for the contract," the Court said. "But the contract went to TBWA's competitor, and LG refused to pay for the TBWA's pilot advertisement."

The court, however, observed that it was hard to prove that the LG employee in question was ill-intentioned or he fully reflected the decision of his company, deciding to limit the financial reward to 70 percent of the total amount TBWA had requested.

TBWA received a request from LG Fashion to make a pilot television ad for a brand of mountain-climbing clothing in June last year and made a presentation to the company executives.

At that time, an LG employee implied that TBWA had all but won the contract over the LG-affiliated ad agency, L-Best, which is run by a cousin of LG Group Chairman Koo Bon-moo. According to industry sources, the LG-affiliated firm has enjoyed a leg up over competitors for advertising contracts from the conglomerate since its foundation in 2007.

Complying with the suggestion of the employee, TBWA developed its pilot and made a full advert at a cost of 47 million won.

"We are aware of the special relationship between ad agents and related companies but this ruling will help correct that and achieve fair play in the business," the court said.

foolsdie@koreatimes.co.kr