The fine is the largest ever handed out by the Fair Trade Commission in a false advertisement case.
Seoul's anti-trust agency slapped the South Korean unit of German carmaker Volkswagen with a 37.3 billion won ($32 million) fine Wednesday for false advertising over the carmaker's emissions fraud scandal.
The Fair Trade Commission (FTC) said it would also ask prosecutors to investigate Volkswagen's headquarters, its South Korean unit and former and current executives including Terence Bryce Johnsson, head of overseas sales for Volkswagen affiliate Audi.
The fine is the largest ever handed out by the FTC in a false advertisement case.
"Audi Volkswagen Korea made false advertisements about its cars, claiming they meet the emission requirements and have better gas mileage," the FTC said, according to Yonhap news agency.
"The FTC imposes a fine of 37.3 billion won, and will file criminal complaints against five incumbent and former executives of the company."
The world's second-largest automaker faces legal action in several nations after it admitted last year to installing emissions-cheating software in its diesel vehicles worldwide.
The FTC said Volkswagen made "deceptive" ads describing its diesel cars as meeting European pollution standards even though they were equipped with the emissions-cheating software.
The move came after Seoul banned the sale of 80 Volkswagen models in August and fined the company 17.8 million won for forging documentation related to fuel efficiency and emissions.
The scandal has taken its toll on the firm's reputation in the country, with its sales in South Korea plunging 33 percent in the first half of this year from a year ago.
Foreign carmakers, especially German brands like Volkswagen, have steadily expanded their presence in the South's auto market long dominated by local giant Hyundai and its affiliate Kia.
Foreign cars accounted for about 13 percent of total auto sales last year, up from 10 percent in 2012.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)