Since flags are tools for identification, at /r/vexillology one of the common criteria for calling a flag bad is if it looks too much like an existing flag. I was wondering; have poorly designed flags or too similar flags ever caused significant issues?
I can think of a few incidents.
Kuwait continued to fly the Turkish flag even after it was separated from the Ottoman Empire at the start of World War I. The British had tried to get it to fly a distinctive flag, but the Sheikh had refused. In November of 1914, a British ship in the Shatt al-Arab fired across the bow of what turned out to be a Kuwaiti vessel. The incident prompted Kuwait to adopt a red flag with "Kuwait" on it in Arabic, which it used until 1961.
The original Confederate national flag looked very similar to the Union flag. At the First Battle of Bull Run some soldiers had difficulty telling the two apart. The more distinctive Battle Flag was adopted as a response.
At the 1936 Summer Olympics, Liechtenstein discovered that its flag was identical to Haiti's. They added a golden crown to the top right corner shortly thereafter.