Result of examination for violation of advertisement labeling law
Initiate sanctions for non-refund of order fee
The Fair Trade Commission imposed sanctions on Tesla for failing to properly inform consumers that its battery performance deteriorates in cold weather. The photo shows a Tesla fast charging station in downtown Seoul on the 14th. Reporter Kim Bum-jun
The Fair Trade Commission is known to have made a judgment that Tesla deceived consumers by exaggerating the battery performance when selling electric vehicles in the Korean market. Accordingly, the Fair Trade Commission began the process of imposing a fine of 10 billion won on Tesla Korea.
According to related ministries and industries on the 14th, the Fair Trade Commission (FTC) recently sent a review report to Tesla Korea after one year and six months of investigation into the allegation that Tesla Korea violated the Labeling and Advertising Act. The FTC concluded that the FTC did not properly inform consumers of the fact that the battery performance decreases by nearly 40% when the weather is cold.
It is reported that the Fair Trade Commission is planning to impose a fine of more than 10 billion won on Tesla Korea. The penalty for violating the Labeling and Advertising Act is up to 2% of related sales. Last year, Tesla Korea’s sales were about 1.1 trillion won.
As a result of the Fair Trade Commission investigation, the battery efficiency of major Tesla electric vehicles such as the Model 3 decreased significantly when the weather got colder. In the Model 3 Long Range, the mileage decreased by 38.8% below minus 7 degrees Celsius. Tesla said that this model can travel 446.1 km on a single charge, but the Fair Trade Commission judged that it was only 273 km below minus 7 degrees Celsius, which was an exaggerated advertisement. They also deceived consumers into thinking that the average mileage in warm regions such as California, USA is a universal mileage. The Fair Trade Commission is also in the process of imposing a fine for negligence on the charge that Tesla did not return the fee even if the order was canceled after applying for a vehicle purchase online.
It is known that Tesla is in a position to impose a fine by the Fair Trade Commission as unreasonable in that all domestic and foreign electric vehicle companies advertise based on the mileage at room temperature.
“Intentional deception of lowering battery efficiency”
Imposing a fine of 10 billion won for violating the Labeling and Advertising Act
The Fair Trade Commission’s investigation began in September 2020 when the Citizens’ Council for Consumer Sovereignty, a civic group, submitted a report to the Fair Trade Commission that ‘Tesla is exaggerating the self-driving function’. In the course of the investigation, the Fair Trade Commission judged that the problem of not properly reporting the battery performance was more important than the autonomous driving function. Tesla’s position is that it is a discriminatory sanctions aimed at Tesla in that it has followed normal advertising practices. If the Fair Trade Commission sanctions are finalized, it is known that they will take legal action, including administrative litigation.
○ Battery efficiency decreases when driving in cold weather
![[단독]](https://i0.wp.com/img.hankyung.com/photo/202202/AA.28916521.1.jpg?w=800&ssl=1)
As a result of the investigation by the Consumer Policy Bureau of the Fair Trade Commission, when the cold weather continues, the chemical reaction slows down and the internal resistance increases, resulting in a sharp decrease in battery efficiency. When the temperature drops below minus 7 degrees Celsius, the Model 3 Performance’s mileage is reduced by 60% from 414.8 km to 250.8 km. The Tesla Model 3 Long Range, which emphasizes long-distance driving as a strength, has reduced its mileage by 38.8%, reducing the driving range to 273 km on a single charge. An industry official said, “In cold weather, ‘battery heating’ that warms the battery is essential.
The Fair Trade Commission judged Tesla’s act as a violation of the Labeling and Advertising Act to deceive consumers. In addition, the fact that Tesla was aware of the decrease in battery performance at low temperatures but did not notify it was also considered a serious crime. This is because electric vehicle manufacturers such as Tesla are reporting the difference in battery efficiency at room temperature and low temperature to the Ministry of Environment in order to receive subsidies for purchasing low-emission vehicles.
The upper limit of fines for violations of the Labeling and Advertising Act is 2% of related sales. Considering the estimated sales of Tesla Korea last year (1.1 trillion won), it is expected that Tesla will be fined more than 10 billion won. An official said, “The fine for violating the Labeling and Advertisement Act usually does not exceed 0.5% of sales, but I know that the level of sanctions is high this time.”
○ “Why are you making a problem with only Tesla?”
The Fair Trade Commission started an investigation into whether or not Tesla’s self-driving function was exaggerated after a report from a civic group a year and five months ago. At the time, a civic group raised the issue, saying, “Tesla is advertising its partially automated driving assistance function as ‘Fully Autonomous Driving (FSD)’.” In the course of the investigation, the Fair Trade Commission thought that it would be difficult to punish Tesla under the current law as it clearly states that FSD is a driving assistance function. However, the level of sanctions increased as sparks splattered due to deterioration of battery performance during low-temperature driving.
Tesla’s position is that it is unreasonable to impose sanctions only on Tesla in that all electric vehicle manufacturers at home and abroad have different battery performance at room temperature and low temperature, and all companies are advertising based on the mileage at room temperature. GM Korea’s EV LT also reduced its mileage by 34.1% at low temperatures. BMW’s i3 model also showed a 35.5% decrease as the mileage at low temperatures was reduced to 160 km. It is known that Tesla has appointed Kim & Chang, a law firm, as its legal representative. It is speculated that if the Fair Trade Commission decides on the level of sanctions through a plenary meeting, an administrative lawsuit will be initiated.
In addition to violating the Labeling and Advertisement Act, the Fair Trade Commission is reportedly planning to impose fines for Tesla’s failure to return the customer’s fee (100,000 won) when ordering a vehicle online, even if the order is canceled.
In addition to the Fair Trade Commission, Tesla is also in conflict with other government ministries such as the Ministry of Environment and the Ministry of Trade, Industry and Energy. Tesla’s argument is that the exclusion of Tesla from the Ministry of Environment’s ‘low-emission vehicle supply target system’ is discrimination against foreign companies.
It is also believed that the Ministry of Trade, Industry and Energy stopped subsidizing electric vehicles worth 90 million won or more to target Tesla.
Reporter Lee Ji-hoon/Kim Il-gyu lizi@hankyung.com
