In what cases is one punished for an act of unfair competition?

Hello, this is an attorney experienced in fair trade cases at Daeryun Law LLC.

An act of unfair competition refers to various types of prohibited conduct set out in the 「Unfair Competition Prevention Act」 that unfairly exploit another person's achievements, brand, or credit, or that harm market order.

In the consumer goods industry, including cosmetics and beauty products, brand imitation, making product designs and packaging similar, and marketing that induces consumer confusion are areas that become problematic particularly often.

The most representative types are divided into ① acts that cause confusion with another person's marks (brand, trademark, logo, etc.), ② acts that imitate another person's product form (trade dress infringement), ③ acts that improperly acquire or use a competitor's achievements, technology, manufacturing process, or recipe, ④ acts that mislead consumers through false or exaggerated indications, and ⑤ acts that steal, use, or disclose trade secrets.

For example, in the case of a facial mask sheet manufacturing business, the following are cases in which disputes or sanctions actually arise as acts of unfair competition.

① Where a company uses a competitor's packaging design, color composition, and container shape in almost identical form, creating a degree of similarity such that consumers mistake it for the same brand

② Where a company uses phrases excessively similar to a famous brand's trademark or slogan, inducing confusion as to origin

③ Where a company acquires without authorization, through former employees or outsourcing companies, another company's developed ingredient mixing ratios, manufacturing processes, or recipes, and uses them in product production

④ Where a company uses baseless efficacy claims or exaggerated medical assertions in its marketing, misleading consumers

⑤ Where a company steals a competitor's online sales strategy, pricing policy, or wholesaler information and uses it in its business

When such conduct is confirmed, there are many cases in which a claim for damages, a ban on the sale of the products, the deletion of advertisements, and criminal punishment are discussed together.

In fact, in the cosmetics industry, there are quite a few cases in which, merely because product designs or brand expression methods are similar, the matter escalates into an unfair competition lawsuit and liability for damages in the tens of millions of won is recognized.

For example, Company A had built up its brand image over a long period by using a distinctive labeling method that displays ingredients as a bar graph on the front of its cosmetics containers, and a dispute arose when Company B released a product similar even in its ingredient arrangement, graph representation, and phrase placement.

The court determined that the labeling method went beyond a mere design and constituted an 'achievement' formed by Company A through considerable investment and effort, and it recognized liability for damages of approximately 30 million won against Company B.

In another case, an act of unfair competition was also recognized in a matter where a company that had a contractual relationship with Company A released products using a similar trade name during the contract period and sold them as if they were renewed or follow-up products of the existing brand.

The court held that the conduct amounted to unauthorized use of Company A's brand credit and recognition, and ruled that the company must bear liability for damages.

As such, in the cosmetics industry, an act of unfair competition can be established merely through packaging design, ingredient labeling methods, or names or expressions that evoke a brand, and in practice there are many cases in which a substantial amount of compensation is recognized through litigation.

Therefore, it is important to check in advance, from the product planning or renewal stage, whether similarity to competitors could become a problem.

In order for a company to prevent such risks, a preliminary legal review of product design and marketing elements, the establishment of a trade secret management system for partner companies, designers, and employees, and the formulation of a brand asset protection strategy are essential.

If needed, we can provide a specific diagnosis of whether your currently operating product designs, marketing phrases, and distribution structure contain risk factors related to unfair competition issues.

You are welcome to reach out to our firm, which accepts consultation reservations 24 hours a day, 365 days a year.