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Referral Marketing Is Not Always Illegal

Referral marketing originates from the basic marketing concept of “recommendation.”
 

If a service or platform is introduced on a one-time basis and a reward is received accordingly, it may be assessed as legitimate promotional activity.
 

However, referral marketing may raise legal issues if it operates in any of the following ways:
 

1. A structure in which profits are generated step-by-step and on a continuing basis depending on the referrer’s performance in recruiting downstream members or their trading results; or

2. Monetary transactions occur without any genuine exchange of goods or services; or

3. Funds are solicited while guaranteeing high returns.

In such cases, legal issues may arise under the Act on Door-to-Door Sales, etc. (including multi-level marketing or sponsored door-to-door sales), the Act on the Regulation of Conducting Fund-Raising Business without Permission, or criminal fraud provisions.
 

The key point is that even when the same label—“referral marketing”—is used, legal evaluation can vary significantly depending on how the operation is actually structured.
 

In legal assessments, the crucial factors include whether rewards are paid in stages based on downstream recruitment or trading performance, whether there is a genuine transaction of goods or services, and whether the individual was substantively involved in member recruitment and management.
 

Key Factors That May Lead Referral Marketing to Criminal Liability

Whether referral marketing leads to legal sanctions is not determined by a single factor. During investigations and trials, authorities comprehensively examine the following elements:
 

Nature of the Revenue Structure

Whether compensation is merely a sign-up bonus, or whether differentiated rewards are paid based on downstream recruitment results, trading volume, or organizational hierarchy, is a critical consideration.

The more the structure resembles performance-linked compensation rather than simple referrals, the higher the likelihood of legal scrutiny.
 

Repetition and Continuity of Conduct

Authorities assess whether the activity was a one-time introduction or whether the same member recruitment activities were repeated over a long period.

Under the Act on Door-to-Door Sales, whether an activity is conducted “as a business” is determined by considering repetition, continuity, and profit motive together.
 

Degree of Involvement After User Acquisition

Beyond merely providing a sign-up link, it is important whether the individual substantively participated in explaining the business structure or compensation scheme, recruiting or managing downstream members, or handling inquiries and complaints.

If such involvement is established, the scope of liability may expand.
 

Role and Function Within the Overall Structure

Regardless of formal titles, authorities comprehensively review the actual functions and roles performed within the organization, such as member recruitment, business explanations or training, downstream organization management, and commission payments.
 

Common Misconceptions in Referral Marketing Cases

One of the most common misconceptions is the belief that liability can be avoided simply because the individual did not directly hold or handle funds.
 

However, in cases involving multi-level marketing or sponsored door-to-door sales, authorities focus less on fund custody and more on:
 

1. The individual’s substantive role within the organization

2. The degree of involvement in member recruitment and management

3. The extent of contribution to operating the compensation structure

Another frequent misunderstanding is that using overseas platforms or foreign entities automatically avoids the application of Korean law.
 

In reality, if members are recruited in Korea, business structures are explained to Korean users, or compensation is paid domestically, Korean laws—including the Act on Door-to-Door Sales—may still apply, regardless of the platform’s or entity’s location.
 

Some also believe that modifying the structure or deleting related materials after issues arise will eliminate legal liability.
 

However, in matters involving multi-level marketing or sponsored door-to-door sales, legal responsibility is assessed based on the structure and conduct at the time the acts occurred.
 

Post hoc structural changes or document deletions do not extinguish liability for already completed offenses and may instead give rise to additional legal issues, such as destruction of evidence under Article 155 of the Criminal Act.
 

Decent’s Approach: What to Review Now in Referral Marketing Matters

In referral marketing cases, early-stage organization and assessment directly influence future legal outcomes. In particular, the following points should be carefully reviewed:
 

• Differentiating roles by specific acts and time periods

• Organizing facts based on substance rather than form

• Setting a response strategy before the scope of liability is fixed

• Understanding how early 대응 impacts final outcomes

Referral marketing may appear, on the surface, to be a simple promotional activity. However, actual legal judgments are always based on structure, role, and degree of involvement.
 

Many individuals later find themselves overwhelmed with anxiety, thinking, “I didn’t realize it could become this serious.”
 

If the issue is taken lightly or postponed, it may lead to unexpected legal liability, which should never be ignored.
 

Because it is essential to accurately identify the structure, clarify roles by timeline, and establish a response strategy suited to the current situation, we strongly recommend conducting an early, expert-level review of your circumstances.