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Internet payoffs result in FTC fines

Instagram influencers secretly compensated to promote products
Nov 26,2019
The Fair Trade Commission (FTC) wants to know who’s influencing the influencers and has fined companies that have paid off internet personalities to promote their brands.

Seven companies, including LG Household and Healthcare, Amorepacific, L’Oreal, LVMH and Dyson Korea, were ordered to pay penalties totaling 269 million won ($229,000) for having compensated online reviewers.

Although the government has previously targeted false advertising on power blogs, this is the first action taken against Instagram activity.

The FTC on Monday said it found 4,177 postings by major Instagram influencers who were paid by the companies but did not disclose the arrangements to their followers. Influencers were paid more than 1.15 billion won for activities dating back to 2017. Some received free products.

Amorepacific was cited in 660 of the cases and paid Instagram influencers a total of 318 million won to promote the company’s major cosmetic brands.

L’Oreal paid 104 million won in 1,130 cases for the promotion of its cosmetics, while Louis Vuitton paid 85 million won in 949 cases for reviews of its brands, such as Dior.

LG Household and Healthcare was found to have paid 337 million won to influencers for promoting its products, while Dyson Korea was found to have paid influencers a total of 260 million won in 150 cases for promoting its vacuum cleaners and hair dryers.

According to the FTC, the companies gave specific instructions to the paid influencers on the way they post the products, including the hashtags, and the way the products are photographed.

The influencers were also instructed in the use of certain promotional terms, like “it’s an amazing design,” or “I would like to recommend to young people in their 20s and 30s” or “there’s nothing better than this for dieting.”

The FTC said failing to disclose the relationship threatens the credibility of the market.

“This is the first time we have regulated against advertisements posted on Instagram that did not disclose that the influencers were paid,” said a FTC official. “As the number of illegal advertisements has been reduced since the government started regulating blogs, we hope our recent action would do the same on Instagram and YouTube.”

The Korean government has been stepping up its crackdown against illegal earnings made through social media platforms, which has become a major issue in recent years.

A family reportedly made huge profits by posting YouTube videos of their children and used the funds to purchase a high-end commercial building in Gangnam despite failing to pay income tax on the advertising revenue earned.

Last month, the National Tax Service fined seven popular YouTubers 1 billion won for evading income taxes on earning made thorough their channels.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]