1. Case summary and key issue

A. According to the reasoning of the lower judgment and the record, the following facts are revealed. (1) Defendant 2 Co., Ltd. (hereinafter “Defendant Co., Ltd.”) that Defendant 1 operates as the representative director of the company (hereinafter “Defendant Co., Ltd.”) imported vehicles from India (which falls under food as seed coats) and commission Nonindicted Co., Ltd. (hereinafter “Nonindicted Co., Ltd.”) which obtained permission for specialized health functional foods manufacturing business to conduct crushing. (2) around June 12, 2014, Nonindicted Co. 1 reported the manufacture of food functional foods with the primary ingredients of the tea powder as the product. From July 2014 to May 2015, 2015, Nonindicted Co. 3 Co., Ltd. (hereinafter “Defendant Co., Ltd.”) made an electronic subdivision of the food functional foods to Defendant Co., Ltd. (hereinafter “Nonindicted Co., Ltd.)’s 20k foods manufactured in the form of e-mail and e-mail.

4. On 20. 20., the Ministry of Food and Drug Safety announced by the Ministry of Food and Drug Safety (amended by Act No. 2016-29 of the Ministry of Food and Drug Safety; hereinafter referred to as “standard and standard announcement”) stated the phrase “health functional food” and the design (mark) indicating health functional food at the packaging of the end of the e-mail, indicating that the e-mail dypine is a raw material product and final product. The consumer can take the e-mail dypology itself more than a certain amount, thereby assisting in the improvement of the e-mail dypherls and the e-mail dyphering operation.

B. The key issue of the instant case is: (a) whether the e-mail franchi produced by the Defendant Company entrusted to the Nonindicted Company constitutes functional health foods; and (b) whether the Defendant Company should report the business under the former Health Functional Foods Act (amended by Act No. 13201, Feb. 3, 2015; hereinafter “Health Functional Products Act”) to operate the business of selling the e-mail franchis to the manufacturers of functional health foods.

2. Details of the relevant Acts and subordinate statutes and public announcement;

A. The purpose of the Health Functional Foods Act is to contribute to improving citizens’ health and protecting consumers by ensuring the safety and quality of health functional foods and promoting the sound distribution and sale thereof (Article 1). The State and local governments should prepare reasonable policies so that all citizens can be provided with good-quality health functional foods and pertinent information, and guide and manage those who manufacture, process, import, and sell health functional foods (hereinafter “business operators”).

A person who intends to engage in a business of manufacturing, importing, or selling functional foods shall have facilities meeting the standards prescribed by Ordinance of the Prime Minister (Article 4 (1)), and a person who intends to engage in a business of manufacturing functional foods shall obtain permission from the Minister of Food and Drug Safety (Article 5 (1)), as prescribed by Ordinance of the Prime Minister, and shall report to the Minister of Food and Drug Safety the matters prescribed by Ordinance of the Prime Minister, such as a manual on manufacturing methods of the relevant items, if he/she intends to engage in a business of manufacturing, importing, or selling functional foods (Article 7 (1)). Any person who intends to engage in a business of importing, or selling, health functional foods, shall install facilities under Article 4 for each place of business and report to the head of a Si/Gun/Gu, etc. having jurisdiction over the location of the place of business (Article 6 (1) and (2)), manufacturing, importing, and sales business of functional foods, as prescribed by Presidential Decree

Article 2 subparag. 3 of the former Enforcement Decree of the Health Functional Foods Act (amended by Presidential Decree No. 26936, Jan. 22, 2016) refers to "specific types of the health functional food sales business". A. General sale of health functional foods (excluding the sale of health functional foods, but excluding the sale of the sale of health functional foods)". (b) Sale of health functional foods [specialized manufacturer of health functional foods (Article 22(2) of the Health Functional Foods Act).

Functional health foods are classified into "distribution and sale of functional health foods with their own trademarks by requesting them to apply the Good Manufacturing Practice Standards (limited to those designated as businesses adopting Good Manufacturing Practice Standards)."

B. Article 3 subparag. 1 of the Health Functional Foods Act defines functional foods as "food manufactured (including processed) using functional ingredients or ingredients useful to the human body" (Article 3 subparag. 1). The Minister of Food and Drug Safety determines and publicly announces "standards and standards for manufacturing, using, preserving, etc. of functional health foods", and "raw materials or ingredients of functional health foods" (Articles 14(1) and 15(1) of the Act. "Standards, standards and public notification" following delegation are ① common standards and specifications of functional health foods, ② individual standards and specifications of nutritional ingredients and functional ingredients that can be used as raw materials of functional health foods, ③ methods of testing functional health foods.

The standard and standard announcement provides that functional health foods shall be manufactured and processed in the form of refined, caps, exchange, reconstruction, powder, powder, fluore, fluore, diesel, diesel, fluore, film, etc., with the main purpose of taking functional ingredients or ingredients in order to obtain useful effects for the purpose of health in the human body." The standard and standard announcement provides that the standard specifications of each standard set forth in the "individual standard and standard" shall be applied by dividing them into "raw materials that are not sold directly to consumers" and "final products that are manufactured and processed by using them." The standard and standard announcement provides that functional fibres as one of the functional ingredients in the individual standard and standard, and the final standard and standard specifications of food products shall be the same as that of food products.

2) Article 9(1) of the Food Sanitation Act provides that standards and specifications for containers, packaging, and labeling of functional health foods shall be appropriate for the standards and specifications for the containers and packages of functional health foods determined and publicly notified by the Minister of Food and Drug Safety pursuant to delegation from Article 9(1) of the Food Sanitation Act (hereinafter referred to as "public notification on containers and packages").

The public notice of containers and packaging prescribes the specifications of food apparatus, containers, and raw materials used for the manufacture and processing of food appliances, and the method of testing containers and packaging.

Meanwhile, the Act on Labeling and Advertising of Foods, Etc. (hereinafter referred to as the "Food Labeling Act") provides that the name of the product, content quantity, raw material name, etc. may be indicated on the functional health foods, but in cases prescribed by Ordinance of the Prime Minister, only a part of them may be indicated (Article 4(1)3), and Article 2 [Attachment 1] 2 of the Enforcement Rule of the Food Labeling and Advertising Act [Attachment 1] may be omitted in the case of functional health foods for the purpose of use in the manufacturing industry.

C. Article 10(1) of the Regulations on Health Functional Foods for business operators provides that business operators shall observe manufacturing facilities and products (including raw materials) to ensure the safety of health and hygiene and to ensure the safety of the people in order for business operators to secure the safety of health functional foods, maintain the quality of the health functional foods, maintain distribution order, and promote national health. (Article 10(1) of the Regulations on Health Functional Foods for business operators shall not sell products, display or keep such products for the purpose of sale, display or keep such products for the purpose of sale, or use such products in manufacture of health functional foods. (Article 2); (Article 3); (Article 4); and (Article 10(1) of the Regulations on Health Functional Foods for business operators shall not exchange such products for the purpose of selling them; and (4) other matters corresponding to subparagraphs 1 through 4, which are deemed necessary by business operators for securing the safety of health functional foods, quality control, and promotion of national health and sanitation; and (4) other matters to be observed by business operators under subparagraph 5 of the Enforcement Rules of the Health Functional Foods Act.

A person may be subject to a corrective order where he/she violates the matters to be observed by a business operator under each subparagraph of Article 10(1) of the Health Functional Foods Act (Article 29), and where he/she violates any of subparagraphs 2, 3 and 4 of this Article, he/she may be subject to business suspension, revocation of permission, or closure of his/her place of business (Article 32(1)1), or criminal punishment (Article 44 subparag. 3 and Article 45 subparag. 2), 1 and 5, he/she may be subject to an administrative fine (Article 47(1)4).

In addition, business operators shall manufacture, use, or preserve functional health foods, the standards and specifications of which are determined pursuant to Article 14(1) and (2) of the Functional Health Foods Act, and shall not sell functional health foods that do not meet such standards and specifications, or manufacture, import, use, store, transport, preserve, or display such functional health foods for sale (Article 24(1)).

Where a business operator violates Article 24 (1), the head of a Si/Gun/Gu, etc. may have the relevant public official seize or discard the relevant functional health foods, or order the relevant business operator to take measures to eliminate any danger and injury to food sanitation (Article 30 (1)), to suspend business operations for a period not exceeding six months, to revoke permission for business, or to close the place of business (Article 32 (1) 7), to suspend business operations for a period not exceeding five years, or to suspend business operations for a period not exceeding 50 million won (Article 44 subparagraph 7).

3. Determination as to the instant case

A. Whether the end of the instant tea constitutes functional health foods

Examining the above provisions of the relevant Acts and subordinate statutes and regulations on the business of health functional foods as seen above in a systematic and comprehensive manner, the end of e-mail, which the Defendant Company entrusted to the Nonindicted Company, shall in itself be deemed to fall under the health functional foods under Article 3 subparag. 1 of the Health Functional Foods Act, and the Defendant Company’s sales of the e-mail, etc. to the manufacturers of health functional foods as raw materials of health functional foods (raw materials) shall not be deemed to be different. The specific reasons are as follows. 1) The e-mail end of e-mail falls under the food in which the e-mail, which is a functional ingredient, contains tea, and is able to take by consumers, and at least, it is included in the concept of “health functional foods” as defined in Article 3 subparag. 1 of the Health Functional Foods Act.

2) Article 3 subparag. 1 of the Health Functional Foods Act does not stipulate the method or form of packaging of health functional foods as a conceptual element of health functional foods, but does not stipulate that the health functional foods should be packaged in small quantities on a one-time basis in quantity, both standards, specifications, containers, and packaging notices. Article 3 subparag. 1 of the Health Functional Foods Act provides that "common manufacturing standards and specifications notices of health functional foods shall be made and processed on a one-time basis in the form of refined, caps, exchange, overfluor, powder, fluor, fluor, fluor, and film, and that "the food functional foods should be easily manufactured and processed in the form of refined, fluor, gel, fluor, and film," but it does not purport that "the quantity of food functional foods should be packaged in small quantities on a one-time basis in accordance with individual standards and specifications." Article 4(1)3 of the Food Product Labeling Act and Article 2 of the Enforcement Rule of the Health Functional Foods Act provides that "the quantity of food foods shall be omitted."

B. Whether a business report is necessary even where a business operator intends to run the business of selling the instant tea, i.e., the instant tea.

Examining the details of the relevant statutes and notifications as seen earlier in light of the legislative purpose of the Health Functional Foods Act, even in cases where a person intends to operate a business selling tea or e-mail, which is a raw material product, a report on the business of selling health functional foods under Article 6 (2) of the Health Functional Foods Act should be made.

The specific reasons are as follows.

1) In order to achieve the legislative purpose of the Health Functional Foods Act to ensure the safety and improve the quality of health functional foods, administrative agencies need to manage and supervise all the process from the process to the final sale of health functional foods, and accordingly, management and supervision of raw materials used as raw materials for final products should be conducted.

2) Article 10(1) of the Health Functional Foods Act provides that a person who has obtained permission to manufacture health functional foods shall file a report on manufacture of items pursuant to Article 7(1) of the Health Functional Foods Act to ensure the safety of health functional foods, quality control, maintenance of distribution order, and promotion of national health; and that a person who has obtained permission to manufacture health functional foods shall manage and supervise materials at the stage of the distribution and sale of raw materials products, as long as an administrative agency is able to manage and supervise raw materials products at the stage of the manufacture of materials through permission to manufacture functional foods and reports on manufacture of items; and that a person who has obtained permission to manufacture health functional foods may also manage and supervise materials at the stage of the distribution and sale of raw materials products thereafter.

4) Although the Food Sanitation Act regulates raw materials by treating them only as food and regulate them pursuant to the Food Sanitation Act, the Health Functional Foods Act is weak compared to the regulations imposed on food sellers. The Health Functional Foods Act imposes on the sellers of raw materials and the duty of prohibiting the sale of food in violation of the standards and specifications (see Article 10(1)) and the duty of prohibiting the sale of health functional foods in violation of the Health Functional Foods Act (see Article 24).

C. The lower court determined that the e-mail franchis produced by the Defendant Company by entrusting the Nonindicted Company constitutes a health functional food under Article 3 subparag. 1 of the Health Functional Foods Act, and that the act of selling the e-mail franchis falls under the business scope of the 'health functional food sales business' under Article 4(1) subparag. 3 of the Health Functional Foods Act, and thus, the Defendant Company should report its business under Article 6(2) of the Health Functional Foods Act. Such determination of the lower court is based on the legal doctrine as seen earlier, and it did not err by misapprehending the legal doctrine as to the meaning of the 'health functional food'

4. Conclusion

Therefore, all appeals are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Noh Jeong-chul

Jeju High Court Decision 201No. 50

Justices Kim In-bok