L'Oreal, LG Household, AmorePacific fined for hiding payments to Instagram influencers
By Nam Hyun-woo
L'Oreal Korea, LG Household & Healthcare, AmorePacific and Dyson Korea have been fined by the Fair Trade Commission (FTC) for concealing that they paid Instagram influencers to post favorable reviews of their products, the antitrust agency said Monday.
The FTC imposed a combined 269 million won ($228,740) fine on the four, as well as three other consumer goods companies, for violating the Act on Fair Labeling and Advertising. The others were LVMH Cosmetics, TGRN and Calobye which sell weight loss supplements.
This is the first time the antitrust watchdog has punished this type of illegal advertising on Instagram.
According to the FTC, the seven companies paid or provided free products to the influencers in return for them posting 4,177 reviews on their accounts. In requesting reviews, the companies told the influencers which hashtags and photos to post.
The combined value of the payments and products stood at 1.15 billion won, but the influencers did not reveal that their posts were sponsored.
LG Household & Healthcare CEO Cha Suk-yong
The act stipulates that “no business entity shall place any labeling or advertising that is likely to undermine the fair trade order by deceiving or misleading consumers.” The FTC said concealing sponsorship constitutes “deceptive advertising.”
L'Oreal Korea had the most posts at 1,130, recommending Biotherm, Lancome and Yves Saint Laurent brands; while LG Household & Healthcare spent the most, paying 337 million won to the influencers.
“Such posts can mislead consumers and hamper them in making rational decisions,” an FTC official said. “The FTC decided to impose hefty fines on the companies, given that Instagram has a broad range of users and the posts could critically affect their decision making.”
The FTC added all the companies got the influencers to either delete or correct the problematic posts during the agency's investigation, but L'Oreal Korea failed to get 254 posts removed.