What cases are punishable as unfair competition acts?

Hello, this is a fair trade-specialized attorney from Daeryun Law Firm.

Unfair competition acts refer to various types of prohibited acts specified in the "Unfair Competition Prevention Act" that unjustly use another person's achievements, brand, or credit, or harm market order.

In consumer goods industries including cosmetics and beauty products, brand imitation, similarity of product design and packaging, and marketing causing consumer confusion are particularly frequent areas of issue.

The most representative types are divided into (1) acts that cause confusion with another person's mark (brand, trademark, logo, etc.), (2) acts of imitating another person's product form (trade dress infringement), (3) acts of unfairly acquiring or using competitors' achievements, technology, manufacturing processes, recipes, etc., (4) acts of misleading consumers through false or exaggerated marking, (5) acts of stealing, using, or leaking trade secrets, etc.

For example, in the case of mask sheet manufacturing, the following are actual cases where disputes or sanctions occur as unfair competition acts:

(1) Cases of using a competitor's package design, color composition, and container shape almost identically, creating similarity to the extent that consumers may mistake it for the same brand

(2) Cases of using phrases excessively similar to famous brand trademarks or slogans, causing source confusion

(3) Cases of unauthorized acquisition and use of ingredient mixing ratios, manufacturing processes, recipes, etc. developed by other companies through retired employees or outsourcing companies for product production

(4) Cases of using unfounded effect labeling or exaggerated medical claims in marketing to mislead consumers

(5) Cases of stealing competitor's online sales strategies, pricing policies, and wholesale information for use in business

If such acts are confirmed, claims for damages, prohibition of product sales, deletion of advertisements, and criminal punishment are often discussed together.

In fact, in the cosmetics industry, there are many cases where damages of tens of millions of won are recognized as unfair competition acts simply because product designs or brand expressions are similar.

For example, Company A had been using its own ingredient labeling method that displayed ingredients as bar graphs on the front of cosmetic containers, building its brand image over a long period, when Company B released products with similar ingredient placement, graph expression, and even phrase positions, causing a dispute.

The court determined that the labeling method goes beyond simple design and corresponds to 'achievements' formed through significant investment and effort by Company A, and recognized damages liability of about 30 million won against Company B.

In another case, when a company in a contractual relationship with Company A used a similar trade name to release products during the contract period and sold them as renewal products or follow-up products of the existing brand, unfair competition acts were also recognized.

The court determined that the act unauthorized used Company A's brand credit and recognition, and ruled that they should bear damages liability.

As such, in the cosmetics industry, unfair competition acts can be established with just package designs, ingredient labeling methods, names, or expressions reminiscent of brands, and considerable amounts of compensation are often recognized through actual lawsuits.

Therefore, it is important to check in advance whether similarity to competitors becomes problematic from the product planning or renewal stage.

To prevent such risks, companies must conduct prior legal review of product design and marketing elements, build a trade secret management system for cooperating companies, designers, and employees, and establish a brand asset protection strategy.

If needed, we can specifically diagnose whether your currently operating product designs, marketing phrases, distribution structures, etc. have risk factors related to unfair competition act issues.

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