Browse topics

• Governing law

  Name	Law or Code?
  Monopoly Regulation and Fair Trade Law ('FTL')	Code
  Guidelines for Review of Unfair Trade Practices	Law
  Act on Special Cases Concerning Regulation and Punishment of Speculative Acts ('Act on Speculative Acts')	Code

  Note: The above constitute generally applicable rules. Some industries have additional, industry-specific regulations concerning prize promotions (gaming, pharmaceuticals, media, etc).

  Last modified 10 Feb 2017

• Extra-territoriality

  Article 2-2 of the FTL imposes extraterritorial jurisdiction for acts that occur overseas but have an effect on the Korean domestic market (ie Korean customers). The Korean Supreme Court has stated that the 'effect on the Korean market' must be limited to cases where there is a direct, considerable, and reasonably foreseeable effect on the Korean market. The Supreme Court added that such determination should be based on a comprehensive and case-by-case review of various factors, including the substance and intent of the conduct, the characteristics of the services or goods at issue, the transaction structure and how it affects the Korean market, etc.

  Most discussions concerning the extraterritorial application of the FTL are in the context of cartel enforcement. While we are not aware of any specific precedent in the context of prize promotions, we believe it would be possible for prize promotions originating overseas, targeting Korean customers, to be subject to enforcement under the FTL and other applicable regulations.

  Last modified 10 Feb 2017

• Skills competitions

  There are no particular regulations concerning skill-based prize promotions, and such promotions would be regulated under the general provisions regarding unfair trade practices pursuant to the FTL. Such promotions would be permissible if the prizes are not improper or excessive (based on business norms) and as long as the terms and conditions of the promotion are accurately specified and advertised.

  Last modified 10 Feb 2017

• Prize draws

  The Act on Speculative Acts prohibits 'obtaining goods or benefits from several people and using chance-based methods to determine win/loss to give such people profit or loss.' A person must obtain approval from the district police to engage in 'speculative acts' such as lotteries, sweepstakes, lucky draws, and giveaways.

  However, it is unclear whether this requirement applies to a contest in which the contest sponsor does not directly collect commission or fees from the contest itself, but rather receives an indirect benefit, such as publicity. As far as we are aware, there has been no judicial or administrative precedent that addresses whether deriving indirect benefits or profit would render promotional activities a speculative activity.

  Last modified 10 Feb 2017

• Selection of winners

  There are no regulations concerning the selection of winners and award of prizes. However, it could be an issue if the process of selection or award of prizes were particularly unfair, or if the terms and conditions were not accurately specified and advertised.

  Last modified 10 Feb 2017

• Judges

  There are no regulations concerning judges and judging for skills competitions.

  Last modified 10 Feb 2017

• Prizes

  Prizes must not be improper or excessive (based on business norms) and the substance of the prize must be accurately specified and advertised.

  Previously there was a regulation that limited the maximum value of gifts or prizes provided to customers through sweepstakes or contests as an ancillary product to the main transaction, but that rule has been abolished as of July 1, 2016.

  Last modified 10 Feb 2017

• Registration requirements and fees

  Registration Requirements

  In terms of registration requirements, as discussed above in the section on prize draws, any business involving 'speculative acts' must be approved in advance by the district police. However, it is unclear whether this requirement applies to a contest in which the contest sponsor does not directly collect commission or fees from the contest itself, but rather receives an indirect benefit, such as publicity.

  Fees / Taxes Payable

  There are no fees payable.

  In terms of taxes, a prize is considered 'other income', and subject to personal income tax and local income surtax. Where the value of a prize exceeds ₩50 000 (approx. US$42) the prize-giver is required to withhold 22% of the amount over ₩50 000 (approx. US$42) for tax purposes. When a Korean company (or foreign company’s Korean affiliate) engages in prizes to promote sales, the value of the prizes is deductible as expenses incidental to sales for corporate income tax purposes.

  Last modified 10 Feb 2017

• Other local requirements

  No requirements, other than those identified in other sections.

  Last modified 10 Feb 2017

• Timing

  No, unless prior approval is required for businesses involving 'speculative acts' (refer to section on Prize draws).

  Last modified 10 Feb 2017

• Translations

  None required.

  Last modified 10 Feb 2017

• Penalties for non-compliance

  Potential penalties are as follows:

  • A Korea Fair Trade Commission (KFTC) corrective order
    
    
  • An administrative fine of up to 2% of relevant revenues, or up to ₩500 million (approx. US$420,000)
    
    
  • Up to three years’ imprisonment or a criminal fine of up to ₩200 million (approx. US$168,000)

  Further, if the substance of the prizes were not accurately specified/advertised, then this could constitute a violation of the Fair Labelling and Advertisement Act, with potential sanctions of up to two years’ imprisonment and criminal fines of up to ₩150 million (approx. US$126,000).

  However, it is worth noting that all of the KFTC enforcement actions involving prize promotions in the past ten years (the public records for which are accessible on the KFTC website) have been subject only to a corrective order without any fines or criminal referral.

  Last modified 10 Feb 2017

• Restrictiveness of regulations

  As discussed in the section on restrictions on prizes, there are no limits on prizes as of July 1, 2016. Therefore, the only restrictions on prize promotions are based on the general regulations of the FTL. Given these changes in relation to prize promotion-related regulations, it is unlikely that this area will be very actively regulated.

  Last modified 10 Feb 2017

• Regularity of sanctions

  Very rarely. All of the KFTC enforcement actions involving prize promotions in the past ten years (the public records for which are accessible on the KFTC website) have been subject only to a corrective order without any fines or criminal sanctions.

  Last modified 10 Feb 2017

• Key contacts
  

  Sung Joo Yoon

  Attorney Kim & Chang [email protected] T +82 2 3703 1114 View bio

  

  Hee Won Marina Moon

  Attorney Kim & Chang [email protected] T +82 2 3703 1114 View bio