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With the rapid advancement of AI technology, marketing strategies utilizing virtual humans or AI-generated content have become commonplace. In response, to prevent consumer confusion and establish a sound market order, the government is set to fully implement the ‘AI Content Labeling System’ starting January 2026.
 

This column summarizes the key aspects of the AI Labeling System—including its background, legal basis, practical labeling methods, and risks of non-compliance—that corporate marketing managers and influencers must be aware of.
 

1. Background: Preventing Misinformation and Market Disruption

The primary reason for enforcing the AI Labeling System as a legal obligation is the surge in false and exaggerated advertisements exploiting AI technology.
 

• The "Fake Expert" Problem: There has been an increase in cases where fake doctors or experts created via deepfake technology recommend unverified products, hindering consumers' rational choices and causing financial damage.

• Establishing Market Order: The government has defined these practices not merely as marketing but as "acts disturbing market order." Consequently, it has mandated the disclosure of AI generation (e.g., "This content was created by AI") to ensure consumers can clearly identify the authenticity of information.

2. Legal Basis and Key Provisions

The AI Labeling System is not a simple recommendation but a strong legal obligation based on the following laws:
 

In particular, the Fair Trade Commission (FTC) plans to strictly sanction AI Washing—the act of concealing the use of AI to make content appear human-created—viewing it as deceptive advertising.

3. Practical Guide: Who, What, and How to Label

1) Obligated Parties: AI Business Operators

Under the law, the obligated parties are defined as "AI Business Operators." This encompasses not only AI technology developers but all business entities (corporations, organizations, and individuals) that provide products or services utilizing AI.
 

2) Content Subject to Labeling

• Generative AI Products/Services: Prior notice is mandatory when providing AI-based services such as chatbots or image generation tools.

• Deepfake Results: Virtual audio, images, or videos that are difficult to distinguish from reality.

• Advertising Content: AI-generated content for commercial purposes, such as shopping mall detail pages and influencer sponsored ads.

3) Labeling Methods and Exceptions

• General Principle: Must be labeled in a way that consumers can clearly recognize (e.g., subtitles, watermarks, etc.).

• Cultural/Artistic Exception: However, if the content qualifies as a "artistic or creative expression" and labeling would significantly hinder appreciation, flexible labeling exceptions may apply (Article 31, Paragraph 3 of the Framework Act on AI).

4. Penalties and Risks (Fines vs. Damages)

Sanctions for violating the AI labeling duty are divided into administrative sanctions (fines) and civil liability (damages).

① Violation of the Framework Act on AI: Administrative Fines

If an AI business operator fails to comply with the labeling duty or fails to notify the production of deepfakes, they will receive a corrective order from the Minister of Science and ICT. Failure to comply may result in an administrative fine of up to 30 million KRW.
 

② Violation of the Labeling & Advertising Act: Punitive Damages
 

Beyond simple failure to label, if the act involves malicious false or exaggerated advertising (e.g., using fake experts), the Fair Labeling and Advertising Act applies.
 

• Current: Liability for damages up to 3 times the amount of damage.

• Proposed Amendment: The government is pushing for an amendment to increase this limit to up to 5 times to eradicate market disturbance.

5. Conclusion and Response

The AI Labeling System is not a regulation saying "Do not use AI," but rather a standard of trust requiring "Transparency if AI is used." With the January 2026 implementation approaching, companies must review their internal compliance processes to prevent unnecessary legal disputes.

The Corporate Law Team at Decent Law Firm provides professional assistance regarding AI and IT-related legal advisory and compliance system construction. Please feel free to contact us if you have any inquiries.