The obligation of disclosure on business enterprises: focus on the legal regulations of false advertising

In the modern society, advertising serves as an important way for us to get product and service information. However, the emergence of false advertising may be attributed to the obscurity of important information by business enterprises, who has the right to determine the content of advertisements. Providing false advertising is for sure prohibited, but the illegality of obscuring certain important information depends on the violation of the “obligation of disclosure”. Therefore, whether business enterprises shall be obliged to disclose information is critical in the light of the legal policy. When it comes to the obligation of disclosure, three-stage questions are involved: First, whether business enterprises have to disclose certain important information in transactions when publishing the advertisements? Second, if the answer of the first question is “yes”, then under what conditions shall business enterprises disclose such information? Third, what kinds of legal responsibilities shall business enterprises have, when they breach the obligation of disclosure? To answer the first question, this research considers the “turst theory” to be applied as the basis of the obligation of disclosure. To elaborate, business enterprises shall bear the higher obligation in conformity with the rising degree of mutual trust between the consumers and them. It is because business enterprises possess more professional knowledge, more financial capabilities, and even stronger information-gathering abilities. In addition, this research further suggests that the obligation of disclosure may be derived from Article 22 of the Consumer Protection Law and Article 21 of the Fair Trade Act. However, it shall be noted that, judicial remedies for consumers may be only based on the Consumer Protection Law. In comparison with the Consumer Contract Act 2000 of Japan, the obligation of disclosure is found expressly provided. Therefore, such legal practice may be taken into consideration when applying our domestic law. Still, there are already quantity of discussions among scholars on this issue. As a result, this research tries to establish the legal elements of the obligation of disclosure, based on the Consumer Contract Act 2000 and scholars’ perspectives. There are divided opinions between scholars and administrative agencies on deciding who shall bear the obligation of disclosure. This research suggests that the definition of “business enterprises” in the Consumer Protection Law shall be interpreted including even media press as well as advertising agent, however limited to those “determine or make use of ” the advertisements. Finally, this research considers a “fraudulent act” when business enterprises breach the obligation of disclosure, since consumers are more likely to sign an unfair contract under such conditions. Moreover, a violation of Article 22 of the Consumer Protection Law may even constitute the “culpa in contrahendo” or the tort liability.