Supreme Court Rules Against Shareholders in Fake Baeksuho Case

The Supreme Court of South Korea has confirmed a ruling that absolves the Korea Consumer Agency of liability in a case involving the controversial announcement of 'fake Baeksuho' products that caused a significant drop in the KOSDAQ index in 2015. The court stated that while the agency's use of definitive and sensational language in its press release was inappropriate, it did not establish a direct causal link to the financial losses suffered by individual shareholders of Naturalendo Tech. On June 2, the Supreme Court's first division, led by Justice Noh Tae-ak, upheld the lower court's decision that dismissed the claims of 18 shareholders who had sued the Consumer Agency, its employees, and the government for damages. The controversy began on April 21, 2015, when the Consumer Agency released a statement claiming that many Baeksuho products on the market were counterfeit, specifically identifying the ingredient 'Iyeopwupiso' as a harmful substitute. Although Iyeopwupiso resembles Baeksuho and is cheaper, it is banned for food use due to its potential to cause liver damage. Naturalendo Tech issued an apology, asserting there was no intent to deceive, but the company's stock plummeted from around 86,000 KRW to approximately 8,500 KRW within a month. An investigation by prosecutors later found that the proportion of Iyeopwupiso was only about 3%, concluding that there was no evidence of intentional wrongdoing by Naturalendo Tech. In April 2018, shareholders filed a lawsuit against the Consumer Agency, claiming it had published false information without sufficient investigation, leading to their financial losses. Both the first and second trials ruled against the shareholders, with the second trial noting that while the Consumer Agency's statements were somewhat exaggerated, they did not constitute falsehoods. However, the Supreme Court diverged from this view, emphasizing that the Consumer Agency had not verified the amount or circumstances of Iyeopwupiso in Naturalendo Tech's products at the time of the announcement. The court concluded that the agency's claims implied a significant health risk without adequate evidence, but ultimately ruled that the shareholders could not be compensated for their losses as the damages were deemed indirect.