(LEAD) FTC to slap 20 bln-won fine on Samsung Electronics for misleading gaming ads

(ATTN: ADDS response from Samsung in last 3 paras)
By Kang Yoon-seung

SEOUL, Oct. 27 (Yonhap) -- South Korea's antitrust watchdog said Tuesday it has decided to impose a tentative fine of 20 billion won (US$15.1 million) on Samsung Electronics Co. for misleading advertisements concealing features limiting the performance of its Galaxy S21 and S22 smartphones during gaming.

The Fair Trade Commission's (FTC) decision concerns the two smartphone series, released in 2021 and 2022, respectively, along with the Galaxy Tab S8 tablet series launched in 2022.

According to the FTC, the South Korean tech giant failed to disclose that its game optimizing service (GOS) imposed preset performance limits as soon as certain demanding gaming apps were launched, while promoting the products' advanced gaming capabilities in advertisements.

GOS is a heat management system for gaming apps. Under its game-specific policies, it capped maximum CPU and GPU performance regardless of the device's temperature or other conditions.

The limitations could cause freezes, lag and reduced graphics quality during gameplay, the FTC said.

"When Samsung Electronics began releasing such advertisements around 2021, high-end PC games were being adapted for mobile devices, and the market for premium smart devices offering high performance was growing rapidly," the FTC said.

"Gaming performance was one of the most effective indicators for showcasing the capabilities of premium smart devices through rapid screen transitions and elaborate graphical effects," the FTC pointed out. "Thus, numerous smart device manufacturers emphasized gaming performance in their advertisements."

The FTC said consumers tended to place importance on gaming capabilities when deciding whether to purchase premium devices amid such market conditions.

The watchdog then said that from 2021 to 2022, Samsung Electronics used marketing phrases such as "the fastest 5-nanometer AP in a Galaxy device yet to hard-carry your gaming" and "the ultimate mobile gaming experience, with a 120Hz display delivering rapid screen transitions and responding instantly to touch."

However, the FTC said GOS limited performance regardless of the devices' conditions, with Samsung Electronics failing to disclose such restrictions while only highlighting the products' gaming experiences.

The watchdog said such misleading marketing hindered consumers' ability to make reasonable purchasing decisions and constituted "deceptive labeling or advertising" under the Act on Fair Labeling and Advertising.

"The latest decision is significant as it reaffirms the need by companies to clearly inform consumers of important factors affecting performance when certain features are emphasized in advertisements," the FTC said.

Samsung Electronics, meanwhile, released software updates in March 2022 allowing users to lift the performance limits.

Samsung said it found the FTC's move difficult to understand and would actively defend its position through legal procedures.

"GOS was a feature designed to optimize gaming performance and allow users to enjoy games stably for extended periods," the company said in a statement, adding that all domestic and overseas lawsuits have concluded and the complaints filed with the FTC by the participants in those lawsuits have also been withdrawn.

"We will actively present and defend our position through legal procedures going forward," Samsung said.

colin@yna.co.kr
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