Corrective Measures
Corrective measures
- The Fair Trade Commission may order a franchiser that commits any of the following violations to deposit franchisee fees, provide information disclosure statements, pay expenses incurred in improving the store environment, return franchise fees, discontinue violations, report plans or actions necessary for correcting violations, or take other measures necessary for correcting violations (Article 33(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser requests the payment of a franchise deposit in violation of provisions for the deposit of the franchise deposit or by fraudulent or otherwise improper means (Article 6-5(1) and (4) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser fails to provide a prospective franchisee with a registered information disclosure statement (Article 7(3) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser provides false or exaggerated information (Article 9(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser fails to return franchise fees within one month of the date on which a franchisee or prospective franchisee makes a written request for the return of franchise fees on the statutory grounds (Article 10(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser omits a matter to be included in a franchise agreement (Article 11(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser engages in unfair trade practices (Article 12(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly forces franchisee to improve the store environment (Article 12-2(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly restricts business hours (Article 12-3(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly breaches sales area (Article 12-4 of the 「Fair Transactions in Franchise Business Act」).
· Franchiser takes a retaliatory action against a franchisee (Article 12-5 of the 「Fair Transactions in Franchise Business Act」).
· Despite franchiser holding advertising andpromotional events for which the expenses are borne fully or partially byfranchisee, it fails to notify the franchisee of the executiondetails or allow the franchisee to peruse the details if so requested (Article 12-6(2) of the Fair Transactions inFranchise Business Act).
· Franchiser penalizes franchisees on the pretext of the formation, membership, activities, etc, of a franchisees association, or enters into a franchise agreement on the condition that a franchisee must or must not join a franchisees association (Article 14-2(5) of the 「Fair Transactions in Franchise Business Act」).
· Despite franchiser failing to enter into an indemnity insurance contract or the like for franchisees, it uses the mark to fraudulently indicate that the franchiser entered into an insurance agreement or the like (Article 15-2(3) and (6) of the 「Fair Transactions in Franchise Business Act」).
Public announcement and notification of corrective order
- The Fair Trade Commission may order a franchiser to make a public announcement that it has received such an order for correction or to give notice thereof to the trading partners (Article 33(3) of the 「Fair Transactions in Franchise Business Act」).
Sanctions against a failure to respond to corrective measures
- If a franchiser fails to comply with an order to take corrective measures, it shall be punished through imprisonment with labor for no more than three years or by the imposition of a fine not exceeding 100 million won (Subparagraph 2 of Article 41(2) of the 「Fair Transactions in Franchise Business Act」).
· When a representative of a corporation, or an agent, employee or other worker of a corporation or private individual fails to comply with an order of corrective measures in connection with a business of the corporation or private individual, not only shall the offender be punished, but also the corporation or private individual shall be punished through the imposition of a fine not exceeding 100 million won; provided, however, that the same shall not apply to cases where the corporation or private individual paid considerable attention or diligently supervised the business concerned to prevent such offensive acts (Article 42 of the 「Fair Transactions in Franchise Business Act」).
Imposition of Penalty Surcharges
Penalty surcharges
- If a franchiser commits any of the following violations, the Fair Trade Association may impose, on the franchiser, penalty surcharges in addition to corrective measures (Main body of Article 35(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser requests the payment of a franchise deposit in violation of the provisions for deposit of the franchise deposit or by fraudulent or otherwise improper means (Article 6-5(1) and (4) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser fails to provide a prospective franchisee with a registered information disclosure statement (Article 7(3) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser provides false or exaggerated information (Article 9(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser fails to return franchise fees within one month from the date on which a prospective franchisee or a franchisee makes a written request for the return of franchise fees on statutory grounds (Article 10(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser omits a matter to be included in a franchise agreement (Article 11(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser engages in unfair trade practices (Article 12(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly forces franchisee to improve the store environment (Article 12-2(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly restricts business hours (Article 12-3(1) and (2) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser unfairly breaches sales area (Article 12-4 of the 「Fair Transactions in Franchise Business Act」).
· Franchiser takes a retaliatory action against a franchisee (Article 12-5 of the 「Fair Transactions in Franchise Business Act」).
· Despite franchiser holding advertising and promotional events for which the expenses are borne fully or partially by franchisee, it fails to notify the franchisee of the execution details or allow the franchisee to peruse the details if requested (Article 12-6(1) of the 「Fair Transactions in Franchise Business Act」).
· Franchiser penalizes franchisees on the pretext of the formation, membership, activities, etc, of a franchisees association, or enters into a franchise agreement on condition that a franchisee must or must not join a franchisees association (Article 14-2(5) of the 「Fair Transactions in Franchise Business Act」).
· Despite franchiser failing to enter into an indemnity insurance contract or the like for franchisees, it uses the mark to fraudulently indicate that the franchiser entered into an insurance agreement or the like (Article 15-2(3) and (6) of the 「Fair Transactions in Franchise Business Act」).
※ However, if a franchiser that has committed such violation has no sales or it is difficult to calculate its sales; if business has not been performed due to the suspension of business, etc.; if it is difficult to calculate the relevant sales because the period of violation, etc. cannot be determined, or if it is difficult to calculate the objective sales because data for the calculation of sales have disappeared or have been destroyed due to a disaster, etc. the Fair Trade Commission may impose a penalty surcharge not exceeding 500 million won (Proviso to Article 35(1) of the 「Fair Transactions in Franchise Business Act」 and Article 34(3) of the 「Enforcement Decree of the 「Fair Transactions in Franchise Business Act」).
Method for calculating penalty surcharges
- Penalty surcharges shall be calculated by multiplying the sales (sales of goods or services sold to the relevant franchisees or prospective franchisees by the relevant franchiser during the period of violation (referring to the period from the date of commencement of a violation until to the date of ending such violation) or the amount equivalent thereto) by 2/100 (Article 35(1) of the 「Fair Transactions in Franchise Business Act」 and Article 34(1) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」).
- However, if a franchiser that has committed such violation has no sales or it is difficult to calculate its sales, the Fair Trade Commission may impose a penalty surcharge not exceeding 500 million won (Proviso to Article 35(1) of the 「Fair Transactions in Franchise Business Act」 and Article 34(3) of the 「Enforcement Decree of the 「Fair Transactions in Franchise Business Act」).
· Where business has not been performed due to the suspension of business, etc.
· Where it is difficult to calculate the relevant sales because the period of violation, etc. cannot be determined
· Where it is difficult to calculate the objective sales because data for the calculation of sales have disappeared or have been destroyed due to a disaster, etc.
Institution of Lawsuits
Filing of lawsuits
- Where a franchiser is subject to corrective measures or penalty surcharges by the Fair Trade Commission but objects thereto, it may file an administrative lawsuit.
Period for filing lawsuits
- A franchiser seeking to file an administrative lawsuit must do so within 30 days from the date of receiving a notice of disposition or being served with the written decision of the Fair Trade Commission (Article 37(3) of the Fair Transactions in Franchise Business Act and Article 99(1) of the Monopoly Regulation and Fair Trade Act).
Jurisdiction over lawsuits
- Administrative lawsuits shall be filed to the Seoul High Court (Article 37(3) of the Fair Transactions in Franchise Business Act and Article 100 of the Monopoly Regulation and Fair Trade Act).