Advertising Scams Targeting Small Business Owners on the Rise

"Congratulations on your new registration. This is the Naver Place representative."

"You have been selected for this quarter's government support project. We will promote you as a leading local business."

These are common phrases heard multiple times a day by small business owners who have just opened their shops. This includes restaurants, cafes, hospitals, academies, and workshops. The calls come from numerous companies, with some owners receiving as many as ten to dozens of calls daily, disrupting their operations.

Most of the callers are private advertising agencies. Some go beyond normal advertising practices, impersonating portals or government agencies while concealing costs to induce long-term contracts and credit card payments. The primary targets are newly registered stores on 'Naver Place'. New business owners, often anxious after opening, are likely to believe these calls are official notifications from credible institutions.

Im Da-eun, who runs a cafe in Gangdong-gu, Seoul, received such a call in March, just a minute after registering her cafe on Naver Place. The caller claimed to be from an 'official Naver agency' and offered to promote her cafe. Understanding the challenges of starting a new business, the caller emphasized the need for marketing and pressured her by asking, "Are you going to quit after just one year of running the cafe?" They spoke quickly, leaving little room for her to think.

Caught off guard by the relentless calls, Im provided her credit card number. She later realized that the term 'payment' was never mentioned during the call. The agency said, "Just give us your card number, and we will check if you can get a limit approved." However, as soon as she provided the number, a payment of 2,376,000 won was processed under a three-year contract with 12-month installments. Im stated, "I felt it was strange that they were asking for personal information and clearly refused to proceed, but by then, the payment had already gone through. I didn’t even receive a detailed product description, and the contract was sent to me unilaterally via email only after the payment was completed."

Im demanded a cancellation of the payment, stating that she received no services. However, the agency insisted on refunding only the amount minus a 20% cancellation fee. When she protested, saying there was no promotional activity, she managed to secure a full refund promise. Yet, the refund was delayed for nearly a month due to a supposed system issue. Later, they claimed an 'advertising setup fee' had arisen and refunded only the amount after deducting the 20% fee. When Im protested again, they offered to reduce the penalty to 10% in exchange for a settlement.

After consulting with her credit card company and consumer dispute organizations, Im filed a complaint with the Financial Supervisory Service detailing the incident and its unfairness. Following the complaint, which was forwarded to the credit card company and the agency, she received a full refund on June 8. The problem is that cases like Im's, where a full refund is received, are rare. Many small business owners end up exhausted from prolonged disputes with advertising agencies and give up on refunds.

In Ulsan, Kim Hee-eun (pseudonym), who runs a craft studio, ultimately gave up on recovering her losses. The agency had lured her into a contract by claiming that the government would subsidize 90% of the advertising costs. However, the promised marketing was not properly executed, and the installment period was billed differently than stated in the contract.

When Kim requested to terminate the contract, the agency demanded additional payments. They pressured her to wait a year to avoid high cancellation fees, and when the time came, they offered to cancel all previous payments if she sent 870,000 won first.

Hoping for a quick resolution, Kim transferred the money, but the agency then cut off contact. Victims have attempted to file collective lawsuits, but the financial and time burdens of pursuing claims for damages ranging from 1 to 2 million won often deter them. Many small business owners abandon their claims when the damages are similar to or less than the cost of legal action.

While fraudulent online advertising practices are on the rise, the majority of victims are classified as 'businesses' rather than 'consumers' under the law. Although there are means to respond, such as canceling credit card payments, exercising installment dispute rights, and applying for dispute resolution, actual recovery of damages is rare.

According to data submitted by the Korea Internet Advertising Foundation to the office of Kim Sang-hoon, a member of the National Assembly, reports of fraudulent advertising agency practices surged from 345 in 2025 to 1,357 in 2026, in collaboration with the Fair Trade Commission. Reports have been made regarding agencies promising excessive revenue increases or providing services that differ from the contract.
However, when a victim requests cancellation of a credit card installment payment or exercises their rights, they often find it difficult to be recognized. The Financial Supervisory Service views the right to dispute installment transactions as fundamentally based on consumer transactions.

If a business has contracted with an advertising agency for commercial purposes, it is hard to view the transaction as a consumer one. Credit card companies also find it challenging to cancel such payments unilaterally for this reason.

Kim Won-seok, a lawyer at Law Firm Sha, stated, "Contracts for online advertising services are likely to be viewed as typical commercial transactions. Since the contract is for business promotion, it is difficult to recognize the same status as a consumer, and the application of the right to dispute installment transactions or the right to withdraw from the contract is likely to be denied."

The Korea Consumer Agency also does not consider businesses using advertising services for promotion as typical consumers. Since the purpose of the contract is for business activities, it is challenging to apply consumer dispute resolution procedures directly, and there are limits to proactive mediation. While civil lawsuits or criminal complaints can be considered, victims often abandon their claims due to the costs of hiring a lawyer, the duration of the lawsuit, and the burden of proof, especially since it is difficult to objectively prove the effectiveness of advertising or the fulfillment of services.

The dispute resolution system has also failed to provide substantial remedies. According to the '2025 Electronic Transaction Dispute Resolution Casebook', consultations regarding online advertising disputes decreased from 8,724 in 2023 to 4,983 in 2025. In contrast, the number of dispute resolution applications has remained around 1,500 annually.
The issue is that the rate of applications leading to actual agreements or recovery of damages is low. More than double the number of cases that were dismissed or withdrawn compared to valid applications have been reported. Many business owners express grievances, but a significant number of cases do not reach formal resolution or end without an agreement.

Additionally, since dispute resolution primarily serves to facilitate agreements between parties, if advertising agencies refuse to participate in the resolution process or reject settlement proposals, there is no way to enforce compliance. Ultimately, victims must resort to separate civil or criminal procedures, but the cycle of inaction continues due to the burdens of time and costs.

Experts argue that the current system, which formally distinguishes between consumers and businesses, fails to protect small business owners and micro-enterprises effectively. There is a need for a separate mediation and arbitration mechanism that can quickly assess and enforce contract terminations, credit card payment disputes, and service non-fulfillment.

Criticism from within the advertising agency industry highlights that the sales structure of fraudulent companies is damaging the entire market. On June 8, the Aju Economy investigative team met with Lee Jin-woo, the head of the advertising agency 'Advertising White Paper', to discuss industry sales practices.
Lee stated, "As soon as a small business owner opens their store, the sales begin. Once they register on Naver Place, agencies scrape the data, and as many as 30 to 40 companies call indiscriminately." He added, "Impersonating as 'Naver official agencies' or 'marketing teams' preys on the anxieties of middle-aged small business owners, leading them into long-term contracts."

He also claimed that some agencies have personnel structures that make it difficult to conduct legitimate marketing. "Some agencies have 100 sales staff but only 2 or 3 actual advertising professionals. Instead of conducting marketing directly, they pass the work through a multi-level subcontracting structure and enforce long-term contracts of 12 months or more to secure operating funds, a practice he described as 'robbing Peter to pay Paul'."

The information gap between small business owners, who often lack marketing knowledge, and these agencies is also exploited. For instance, they charge over 1 million won for unnecessary websites for regular restaurants or demand tens of thousands of won for low-quality short videos.

The problem is that such sales practices also intimidate legitimate advertising agencies. Lee expressed, "Fraudulent sales have increased distrust in the entire advertising agency market. Employees fear that if they report these practices under their real names, large organizations could retaliate through blog attacks or manipulation of public opinion, potentially destroying their companies."

Choi Jin-hyuk, head of the Minseong Sangsaeng Research Institute, is assisting victims in drafting letters of complaint and lawsuits, known for his activities under the name 'Indomitable Driver'. He has been publicly disclosing the real names and sales tactics of advertising agencies on his blog.

On June 10, Choi met with the Aju Economy investigative team at a studio in Gangnam, Seoul, and identified 'portal impersonation' and 'government agency impersonation' as key tactics used by some agencies.

Agencies impersonating portals include terms like 'Place' or 'Map' in their corporate names. They introduce themselves as "Place representatives" over the phone, misleading victims into thinking they are employees of the portal company while claiming they mentioned their corporate name, thus evading initial sanctions from credit card companies or law enforcement.

Impersonating government agencies or reputable associations is also a common tactic. According to Choi, the advertising agency 'B○ Holdings' communicates with small business owners using names that include 'Center' or 'Association' instead of their official name, claiming they will send a plaque for 'Korean Consumer Certification'. However, a letter from the Korean Consumer Evaluation, the official issuing body, stated that the agency's website content and plaque design mimicked their official products, demanding they cease such practices.

Choi also pointed out that the low entry barriers in the advertising agency industry contribute to the proliferation of fraudulent companies. He noted, "Employees who learned sales methods from large companies often leave, claiming they can earn more by starting their own companies, creating a network of small agencies that can start operations with as little as 100,000 to 200,000 won."

Choi criticized the complacency of law enforcement agencies, stating, "When a victim receives a partial refund, the police often treat the case lightly. The case involving the advertising agency 'W○ Commerce', which has 4,500 victims, has not progressed properly in the investigation." He argued that law enforcement approaches these cases more as civil contract disputes than as fraud allegations.

Choi added, "While victims may find it difficult to be protected under consumer protection laws, excessive penalty clauses in contracts can be contested under the Act on the Regulation of Terms and Conditions. Article 8 of this law invalidates clauses that impose excessively burdensome liability on customers, meaning that penalty clauses charging tens of thousands of won per blog post upon contract termination are invalid."

Concerns about the sales practices of some advertising agencies are not new. Even around 2020, when the review feature on Naver Place became fully active, store owners reported suffering from deceptive sales practices by advertising agencies. However, no measures have been established to prevent these recurring issues. Instead, the loopholes in the system have allowed these sales tactics to become more sophisticated.

The Aju Economy investigative team applied for a job at an advertising agency last month, went through an interview, and participated in training for new employees. The agency's sales strategy was to claim 'full advertising cost support'. They explained that they would not charge a single won for advertising, citing success stories from Naver Place.

However, they demanded about 2.9 million won annually under the guise of 'management fees' or 'solution costs', including value-added tax. Although they did not use the term 'advertising costs', it was effectively a paid contract worth hundreds of thousands of won. The agency provided detailed instructions on the content and timing of calls. The first call was to be completed within 50 seconds to one minute, and they were instructed not to mention costs during this call. An agency representative stated during training, "If we mention the 2.9 million won management fee in the first call, the contract success rate drops to about 30%." The goal of the first call was to send a proposal of 8 to 9 pages to the small business owner after piquing their interest with the promise of free support, then introduce costs through the proposal and follow-up calls to induce a contract.

During the training, they also claimed that the marketing methods of competing advertising agencies were illegal. They asserted that some blog review products sold on expert intermediary platforms like 'Kmong' and 'Soomgo' rely on illegal packet programs using fake internet addresses (IP), which could lead to permanent deletion from the Naver system due to abuse.

They promoted themselves as safe, using only 100% real-name verified accounts and blogs of a certain grade. However, the criteria for determining abusive elements by the Naver Smart Place customer center define abusive behavior not only as the use of illegal programs but also as accessing through multiple accounts, excessive false clicks induced by search advertising companies or applications. Regardless of whether accounts are verified under real names, artificially inflating reviews and views disrupts the portal ecosystem and violates regulations.

As deceptive advertising agency practices increase, various guidelines for preventing victimization are being established. However, the fundamental systems to block fraudulent sales remain inadequate, and there is a growing call for legal mechanisms to effectively protect small businesses.

Hwang Yong-sik, a professor at Sejong University’s Business Administration Department, emphasized, "To prevent victimization, businesses that use terms like 'Naver official agency', 'government support', or 'guaranteed higher exposure' should be viewed with suspicion, and facts should be verified first." He added, "Structures that pressure contracts over the phone, demand prepayments, and impose excessive penalties upon cancellation are typical warning signs. It is crucial to keep thorough evidence, including call recordings, text messages, contracts, and payment records, to aid in recovery of damages."

The Fair Trade Commission is also taking action. In April, the Commission held a meeting to review investigations into illegal activities by online advertising agencies as part of a task force. The meeting examined actions that mislead businesses into contracts by implying government support, explaining payments as small monthly amounts while requiring upfront payments for several years, failing to fulfill promises of revenue increases or full refunds, and demanding excessive penalties for early termination. The Commission plans to refer 18 advertising agencies, which have received repeated complaints, to law enforcement for investigation.

However, industry insiders and experts argue that mere post-factum investigations are insufficient to prevent victimization. There is currently no system in place to directly limit excessive penalty claims by advertising agencies. In 2021, Kim Young-seok, a member of the National Assembly, proposed an amendment to the Door-to-Door Sales Act to regulate the indiscriminate penalty demands of advertising agencies, but the bill was not adequately discussed and was discarded with the expiration of the National Assembly's term in May 2024. Since then, no follow-up measures have been taken to establish a system.

Professor Hwang stated, "The fact that the Fair Trade Commission is referring cases of impersonating government support and demanding excessive penalties for investigation indicates that mere post-factum enforcement has its limits. This issue should not be dismissed as a mere contract dispute between individual businesses. It is time to establish legal mechanisms that effectively protect small business owners and micro-enterprises and to resume legislative discussions that have been stalled."