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FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT — 법갈피

영문법령 / FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

법률타법개정시행 2025-01-21공정거래위원회 · 제20712호 · 공포 2025-01-21

CHAPTER I GENERAL PROVISIONS

Article 1(Purpose) #

The purpose of this Act is to contribute to the promotion of the welfare of consumers and the sound growth of the national economy by establishing a fair trading order for franchise and by ensuring the mutually complementary and balanced growth of franchisers and franchisees on an equal footing.

Article 2(Definitions) #

The terms used in this Act are defined as follows: <Amended on Aug. 3, 2007; Aug. 13, 2013; Dec. 29, 2020; May 18, 2021>

1. The term "franchise" means a continuous business relationship in which a franchiser allows its franchisees to use its own trademarks, service marks, trade names, signs, or any other trademarks (hereinafter referred to as "trademarks") in selling goods (including raw materials and auxiliary materials; hereinafter the same shall apply) or services in compliance with certain quality standards or business methods, and supports, trains, and controls its franchisees in regards to their management, business activities. etc., and in which franchisees pay required payments to their franchiser in return for the use of trademarks and the support and training provided for their management, business activities, etc.;

2. The term "franchiser" means a business entity that grants franchisees a license to run a franchise store;

3. The term "franchisee" means a business entity that holds a license granted by a franchiser to run a franchise store in relation to a certain franchise;

4. The term "prospective franchisee" means any person who discusses or negotiates with a franchiser or a master franchisee with intent to sign a franchise agreement;

5. The term "franchise license" means a franchisee's contractual right to run a franchise store in relation to the franchise of a franchiser;

6. The term "required payment" means any of the following consideration, irrespective of the name or means of payment; provided, such consideration prescribed by Presidential Decree that is not payable to a franchiser shall be excluded herefrom:

(a) Consideration that a franchisee pays to a franchiser in order to obtain a franchise license, including a license for the use of trademarks, or to receive support for and training on his or her business activities, such as membership fees, admission fees, required payments, training fees, or down payments;

Article 6-2(Registration of Franchise Disclosure Documents) #

(1) Each franchiser shall register a franchise disclosure document to be provided to prospective franchisees with the Fair Trade Commission or with the competent Special Metropolitan City Mayor, Metropolitan City Mayor, Special Self-Governing City Mayor, Do Governor, Special Self-Governing Province Governor (hereinafter referred to as "Mayor/Do Governor"), as prescribed by Presidential Decree. <Amended on Aug. 13, 2013; Jan. 16, 2018>

(2) Where a franchiser intends to alter matters prescribed by Presidential Decree among matters included in a franchise disclosure document registered pursuant to paragraph (1), it shall register an alteration of included matters with the Fair Trade Commission or with the competent Mayor/Do Governor within a period prescribed by Presidential Decree; provided, where it intends to alter minor matters prescribed by Presidential Decree, it shall report the alteration thereof. <Added on Aug. 13, 2013; Jan. 16, 2018>

(3) The Fair Trade Commission and a Mayor/Do Governor shall disclose any franchise disclosure document which was registered, the alteration of which was registered or which was reported pursuant to paragraph (1) or (2); provided, personal information defined in subparagraph 1 of Article 2 of the Personal Information Protection Act and trade secrets defined in subparagraph 2 of Article 2 of the Unfair Competition Prevention and Trade Secret Protection Act shall be excluded. <Amended on Aug. 13, 2013; Dec. 20, 2016; Jan. 16, 2018>

(4) The Fair Trade Commission and a Mayor/Do Governor shall, when it discloses a franchise disclosure document pursuant to paragraph (3), notify in advance the relevant franchiser of the details to be disclosed and the method of disclosure and shall provide such franchiser with an opportunity to correct factual errors, if any. <Amended on Aug. 13, 2013; Mar. 29, 2016; Jan. 16, 2018>

(5) For the purpose of disclosing franchise disclosure documents pursuant to paragraph (3) (including cases where a Mayor/Do Governor discloses a franchise disclosure document), the Fair Trade Commission may establish and operate a franchise information system, within the budget. <Amended on Aug. 13, 2013; Jan. 16, 2018>

(6) Methods and procedures for the registration, alteration of registration, reporting, and disclosure of franchise disclosure documents shall be prescribed by Presidential Decree. <Amended on Aug. 13, 2013>

[This Article Added on Aug. 3, 2007]

Article 6-5(Deposit of Required Payments) #

(1) Each franchiser shall require its franchisees (including prospective franchisees; the same shall apply hereafter in this Article and Articles 15-2 and 41 (3) 1) to deposit required payments (limited to consideration specified in subparagraph 6 (a) or (b) of Article 2 and paid in the form of money and including required payments paid before entering into an agreement, if any; hereinafter referred to as "franchise deposit") in an institution prescribed by Presidential Decree (hereinafter referred to as "depository"); provided, this shall not apply where a franchiser enters into an indemnity insurance contract, etc., for its franchisees pursuant to Article 15-2. <Amended on Mar. 29, 2016>

(2) Where the head of the depository receives a franchise deposit from a franchisee, he or she shall notify the franchiser thereof within seven days from the date of such deposit.

(3) In any of the following cases, any franchiser may request the head of the depository to pay a franchise deposit, as prescribed by Presidential Decree. In such cases, the head of the depository shall pay the franchise deposit to the franchiser within 10 days therefrom:

1. When a franchisee commences business;

2. When two months have passed since the execution date of a franchise agreement; provided, this shall not apply where a franchisee notifies, in writing, to the head of the depository that he or she has taken a measure under any provisions of paragraph (5) 1 through 3 before the expiration of such two months.

(4) No franchiser shall request the payment of a franchise deposit by fraud or other improper means.

(5) In any of the cases under subparagraphs 1 through 3, the head of the depository shall withhold the payment of a franchise deposit until the results of mediation by the Franchise Transaction Dispute Mediation Council under Article 24 or the settlement of any other dispute (hereinafter referred to as "results of the mediation or settlement of disputes") or a corrective measure taken by the Fair Trade Commission pursuant to Article 33 becomes final and conclusive (where an appeal is filed with respect to a corrective measure taken by the Fair Trade Commission, referring to the time an adjudication becomes final and conclusive; and where a lawsuit is filed for a corrective measure or adjudication, referring to the time a final judgment is rendered; the same shall apply hereafter in this Article), and in the case of subparagraph 4, he or she shall reject the draw request for a franchise deposit or request the modification of the draw request:

1. If a franchisee files a lawsuit seeking refund of his or her franchise deposit;

2. If a franchisee files an application for intercession, mediation, or arbitration seeking refund of his or her franchise deposit;

3. If a franchisee reports to the Fair Trade Commission that the franchiser violates Article 10;

4. If a franchiser makes a request for the payment of its franchise deposit by fraud or other improper means in violation of paragraph (4).

(6) If a franchiser or franchisee files a request for the payment or return of its franchise deposit by appending results of the mediation or settlement of disputes or results of corrective measures, the head of the depository shall pay the franchise deposit to the franchiser or return it to the franchisee according to the results within 30 days from the date of such request.

(7) If a franchisee requests the return of his or her franchise deposit with the consent of the franchiser, the head of the depository shall return the franchise deposit to the franchisee within 10 days from the date of such request, notwithstanding paragraphs (5) and (6).

(8) Other matters necessary for the deposit of a required payment shall be prescribed by Presidential Decree.

[This Article Added on Aug. 3, 2007]

Article 7(Duty to Provide Franchise Disclosure Documents) #

(1) Each franchiser (including cases where a master franchisee or a franchise broker finds franchisees; hereinafter the same shall apply) shall provide its prospective franchisees with a franchise disclosure document which was registered or the alteration of which was registered pursuant to Article 6-2 (1) and (2) by methods prescribed by Presidential Decree, such as certified mail, by which the point in time of providing the franchise disclosure document may be objectively confirmed. <Amended on Aug. 3, 2007; Aug. 13, 2013>

(2) Where a franchiser provides a franchise disclosure document pursuant to paragraph (1), it shall provide the franchise disclosure document along with a document (hereinafter referred to as "document stating the current status of neighboring franchisees") stating trade names, locations and telephone numbers of 10 franchisees most adjacent to the place planned for a future store of a prospective franchisee (where the number of franchisees conducting business in a metropolitan local government to which the place planned for the future store of the prospective franchisee belongs is less than 10 at the time the franchiser provides the franchise disclosure document, referring to all franchisees in the relevant metropolitan local government); provided, where the place planned for the future store has not been determined when the franchiser provides the franchise disclosure document, it shall provide the franchise disclosure document as soon as the prospective franchisee determines the place planned for the future store. <Added on Aug. 13, 2013>

(3) Unless a franchiser has provided an information disclosure document registered and a document stating the current status of neighboring franchisees (hereinafter referred to as "franchise disclosure document, etc.") by method referred to in paragraph (1) or 14 days (where a prospective franchisee has been given advice and suggestions by an attorney-at-law or franchise trader under Article 27 on a franchise disclosure document) have passed from the date it provides the franchise disclosure document, etc., it shall not engage in any of the following acts: <Added on Aug. 3, 2007; Aug. 13, 2013>

1. Receiving required payments from a prospective franchisee. In such cases, if a prospective franchisee has deposited his or her franchise deposit in the depository, it is deemed to have received such franchise deposit on the day when the initial deposit is made (or the date agreed by a franchiser and a prospective franchisee to make the first deposit of a required payment);

2. Entering into the franchise agreement with a prospective franchisee.

(4) The Fair Trade Commission may prepare a standard form of franchise disclosure document and recommend franchisers or a trade association comprised of franchisers to use such form. <Amended on Aug. 3, 2007; Aug. 13, 2013>

[Title Amended on Aug. 3, 2007]

Article 9(Prohibition on Providing False or Exaggerated Information) #

(1) No franchiser shall engage in the following acts when it provides prospective franchisees or franchisees with information: <Amended on Aug. 13, 2013>

1. Providing information different from fact or exaggerated information (hereinafter referred to as "providing false or exaggerated information");

2. Providing information by suppressing or minimizing any fact that has significant influence on the conclusion or maintenance of a contract (hereinafter referred to as "providing deceptive information").

(2) Types of the acts referred to in the subparagraphs of paragraph (1) shall be prescribed by Presidential Decree. <Added on Aug. 13, 2013>

(3) Where any franchiser provides its prospective franchisees or franchisees with any of the following information, it shall provide such information in writing: <Amended on Aug. 3, 2007; Aug. 13, 2013>

1. Information about the expected future profits of a prospective franchisee, including estimated sales, profits, gross profit, and net income;

2. Information about the past profits or expected future profits of a franchisee, including sales, profits, gross profit, and net income.

(4) Each franchiser shall, whenever it provides information pursuant to paragraph (3), keep evidentiary materials which serve as a basis for the calculation of such information and which is prescribed by Presidential Decree at its office and shall allow any prospective franchisee or franchisee to inspect such materials at any time during business hours, upon request by the prospective franchisee or a franchisee. <Amended on Aug. 3, 2007; Aug. 13, 2013>

(5) Notwithstanding paragraph (3), any of the following franchisers shall provide a prospective franchisee with the range of estimated sales and grounds for the calculation thereof prescribed by Presidential Decree in writing (hereinafter referred to as "paper describing the calculation of estimated sales"): <Added on Aug. 13, 2013>

1. A franchiser that is not a small and medium enterprise (referring to a person under Article 2 (1) or (3) of the Framework Act on Small and Medium Enterprises);

2. A franchiser the number of franchisees (where the franchiser possesses multiple trademarks, limited to franchisees that use the same trademark) that enter into or maintain a contract with which is not less than a number prescribed by Presidential Decree as of the end of the immediately preceding business year.

(6) A franchiser shall keep a paper describing the calculation of estimated sales for five years from the date it enters into a franchise agreement. <Added on Aug. 13, 2013>

(7) The Fair Trade Commission may establish a standard form of a paper describing the calculation of estimated sales and encourage franchisers to use the standard form thereof. <Added on Aug. 13, 2013>

Article 11(Matters to Be Included in Franchise Agreement) #

(1) If 14 days (referring to seven days where a prospective franchisee has received advice and suggestions from an attorney-at-law or a franchise trader under Article 27 with respect to the details of a franchise agreement) have not passed since the date a franchiser provided a document stating the matters referred to in the subparagraphs of paragraph (2) to a prospective franchisee so that the prospective franchisee can understand the details of the franchise agreement in advance, the franchiser shall not engage in any of the following acts: <Amended on Aug. 3, 2007; Apr. 18, 2017; Aug. 8, 2023>

1. Receiving a required payment from a prospective franchisee. In such cases, if a prospective franchisee has deposited his or her franchise deposit in the depository, it shall be deemed that the franchiser has received such franchise deposit on the date the first deposit is made (or the date a perspective franchisee agrees with the franchiser to make the first deposit of a required payment if the agreement on such date exists);

2. Entering into the franchise agreement with a prospective franchisee.

(2) Each franchise agreement shall include the following: <Amended on Aug. 3, 2007; Oct. 16, 2018; Jan. 2, 2024>

1. Matters concerning the grant of a license for trademarks;

2. Matters concerning the terms and conditions of business activities of the franchisee;

3. Matters concerning the education, training, and business guidance for the franchisee;

4. Matters concerning the payment of required payments and others;

5. Matters concerning the demarcation of sales territory;

6. Matters concerning the term of the agreement;

7. Matters concerning the transfer of business;

8. Matters concerning the grounds for termination of the agreement;

9. The fact that a franchise deposit shall be deposited in the depository by up to two months from the date the prospective franchisee or franchisee enters into the franchise agreement (or by the date of commencement of the franchise, where the franchisee commences the franchise before such two months ends); provided, if a franchiser enters into an indemnity insurance contract, etc., for its franchisees pursuant to Article 15-2, matters concerning the insurance policy shall be included therein;

10. The fact that the prospective franchisee has consulted an attorney-at-law or a franchise trader under Article 27, if it is the case;

11. Matters concerning the obligation to compensate franchisees for loss arising from an act committed by the franchiser or any executive officer of the franchiser in contravention to social norms, such as committing an illegal act or impairing the reputation or creditability of franchise;

12. Where a franchiser compels a franchisee to engage in transactions with a franchiser or a person designated by the franchiser, matters regarding the types of real estate, services, facilities, goods, raw materials, raw materials, auxiliary materials, lease, etc. subject to such compulsion and the method of calculating the supply prices thereof;

13. Other matters prescribed by Presidential Decree, concerning the rights and obligations of parties to franchise.

(3) Each franchiser shall keep each franchise agreement for three years from the date the relevant franchise transaction terminates.

(4) Deleted. <Jun. 20, 2023>

[Title Amended on Aug. 3, 2007]

Article 13(Renewal of Franchise Agreement) #

(1) Upon request by a franchisee to renew the franchise agreement during the period between 180 days and 90 days prior to the expiration date of the franchise agreement, no franchiser shall reject such request without good cause; provided, this shall not apply to any of the following cases:

1. If a franchisee fails to perform his or her obligation to make payment such as required payments under the franchise agreement;

2. If a franchisee fails to accept any term or condition of the agreement or business policy that generally applies to other franchisees;

3. If a franchisee fails to observe the franchiser' important business policy that is considered necessary for maintaining the franchise and that falls under any of the following items:

(a) Matters concerning the securing of business premises and facilities necessary for the operation of a franchise store or the acquisition of necessary qualifications, licenses, or permits under relevant statutes and regulations;

(b) Matters concerning compliance with the manufacturing process or service technique necessary for maintaining the quality of commodities or services on sale;

(c) Other matters considered necessary for franchisees to maintain their franchise in a normal condition and prescribed by Presidential Decree.

(2) A franchisee's right to request the renewal of the agreement may be exercised only when the total period of the franchise agreement, including its initial period, does not exceed 10 years.

(3) Any franchiser that intends to refuse the request for renewal under paragraph (1) shall notify the relevant franchisee of the grounds for refusal within 15 days from the date it receives such request.

(4) If a franchiser fails to give notice of refusal under paragraph (3) or fails to give written notice of change in terms and conditions or written notice that it is not willing to renew the franchise agreement to a franchisee during the period between 180 days and 90 days prior to the expiration date of the agreement, the franchise agreement is deemed to be renewed under the same terms and conditions as those of the franchise agreement effective before the expiration of the agreement; provided, this shall not apply where a franchisee raises an objection not later than 60 days before the expiration of the agreement or where a natural disaster or other unavoidable causes prescribed by Presidential Decree occurs to a franchiser or franchisee.

[This Article Wholly Amended on Aug. 3, 2007]

Article 15-3(Establishment of Mutual Aid Association) #

(1) In order to engage in mutual aid services under Article 15-2 (1) 3, franchisers may establish a mutual aid association (hereinafter referred to as "mutual aid association"), with authorization from the Fair Trade Commission.

(2) A mutual aid association shall be a corporation, which shall be duly formed by making registration of incorporation at the seat of its principal office.

(3) Each franchiser that has become a member of a mutual aid association shall pay contributions, etc. required for carrying out mutual aid services to the association.

(4) Fundamental property of a mutual aid association shall be consisted of contributions, etc. paid by its members.

(5) Qualifications for members of a mutual aid association, matters concerning its executive officers and the guidelines for the allotment of contributions shall be stipulated by its articles of incorporation.

(6) Matters necessary for the standards and procedure for the authorization of incorporation of a mutual aid association, matters to be included in its articles of incorporation, and its operation and supervision, etc. shall be prescribed by Presidential Decree.

(7) Any mutual aid association that intends to engage in mutual aid services under paragraph (1) shall establish mutual aid regulations and obtain authorization from the Fair Trade Commission therefor. The same shall also apply to any amendment to mutual aid regulations.

(8) The mutual aid regulations under paragraph (7) shall include matters necessary for operating mutual aid services, such as the scope of mutual aid services, mutual aid fees, and policy reserve to be appropriated for mutual aid services.

(9) Except as provided in this Act, provisions applicable to incorporated associations of the Civil Act shall apply mutatis mutandis to mutual aid associations.

(10) The Insurance Business Act shall not apply to business of mutual aid associations under this Act.

[This Article Added on Aug. 3, 2007]

Article 17(Composition of Council) #

(1) The Council shall be comprised of nine members, including one Chairperson.

(2) The Council shall be composed of the same number of seats each for members representing public interest, members representing franchisers' interest, and members representing franchisees' interest.

(3) From among any of the following persons, those appointed or commissioned by the Chairperson of the Fair Trade Commission upon recommendation of the President of the Mediation Agency shall become members of the Council established in the Mediation Agency (hereinafter referred to as "Council of the Mediation Agency"), and from among any of the following persons, those appointed or commissioned by the Mayor/Do Governor shall become members of the Council established in each City/Do (hereinafter referred to as "Council of the City/Do"): <Amended on Dec. 29, 2005; Aug. 3, 2007; Mar. 27, 2018; Aug. 8, 2023>

1. Persons who major in law, economics, or business administration and who have served or who currently serve in a school under subparagraph 1, 2, or 5 of Article 2 of the Higher Education Act or an officially recognized research institute, as an associate professor or in an equivalent or higher position;

2. Persons who have served or currently serve as a judge or a prosecutor or who hold a license as attorney-at-law;

3. Persons who have served or who currently serve as a Grade-IV or higher-ranking public official (including public officials in general service who are members of the Senior Executive Service) with experience in affairs relating to antitrust or fair trade.

4. Persons who have extensive knowledge of and experience in franchise transactions and dispute mediation.

(4) The chairperson of the Council of the Mediation Agency shall be appointed or commissioned by the Chairperson of the Fair Trade Commission from among the members representing the public interest, and the chairperson of the Council of the City/Do shall be appointed or commissioned by the Mayor/Do Governor from among the members representing the public interest. In such cases, the chairperson of the Council of the Mediation Agency shall be full-time. <Amended on Aug. 3, 2007; Mar. 27, 2018; Aug. 8, 2023>

(5) The term of office for each member shall be three years, which may be renewed consecutively.

(6) If a vacancy occurs in the Council among its members, such vacancy shall be filled in accordance with paragraph (3) and the term of office for a member commissioned to fill a vacancy shall be the remaining term of office for his or her predecessor.

(7) The chairperson of the Council of the Mediation Agency shall not engage in any for-profit business affairs other than his or her duties. <Added on Jan. 2, 2024>

(8) Article 37 (3) of the Act on the Management of Public Institutions shall apply mutatis mutandis to the scope of for-profit business affairs under paragraph (7). <Added on Jan. 2, 2024>

(9) The chairperson of the Council of the Mediation Agency may concurrently conduct non-profit business affairs subject to examination by the Chairperson of the Fair Trade Commission as to whether it falls under the for-profit business affairs under paragraph (8). <Added on Jan. 2, 2024>

Article 19(Meetings of Council) #

(1) Meetings of the Council shall be divided into meetings comprised of all members (hereinafter referred to as "plenary meetings") and meetings comprised of each one member from those representing public interest, those representing franchisers' interest, and those representing franchisees' interest (hereinafter referred to as "sub-meetings"). <Amended on Aug. 3, 2007>

(2) Plenary meetings of the Council shall deliberate on and pass resolutions on the following matters: <Added on Aug. 13, 2013>

1. Matters determined at a sub-meeting to be dealt with at a plenary meeting;

2. Matters concerning the enactment and amendment of detailed rules for the operation of the Council;

3. Other matters deemed necessary to be dealt with at a plenary meeting, which are submitted by the chairperson of the Council to the plenary meeting.

(3) Sub-meetings of the Council shall deliberate on, and pass resolutions on matters other than the matters referred to in paragraph (2) with the exception of the subparagraphs. <Amended on Aug. 13, 2013>

(4) Plenary meetings of the Council shall be presided over by the chairperson, which a majority of the members of the Council shall constitute a quorum, and any decision thereof shall require the concurring vote of a majority of those present. <Amended on Aug. 3, 2007; Aug. 13, 2013>

(5) Sub-meetings of the Council shall be presided over by a member representing public interest and shall adopt resolutions with the attendance of all the constituent members and by the concurring vote of all the members present. In such cases, resolutions adopted by a sub-meeting shall be deemed resolutions adopted by the Council, the results of which shall be reported to a plenary meeting. <Added on Aug. 3, 2007; Aug. 13, 2013>

(6) Where the chairperson is unable to perform his or her duties due to any accident, any member designated by the Chairperson of the Fair Trade Commission or the competent Mayor/Do Governor, from among members representing public interest, shall exercise and perform all the duties of the chairperson. <Amended on Aug. 3, 2007; Aug. 13, 2013; Mar. 27, 2018>

(7) Any party to franchise who is involved in a dispute brought before the Council for mediation (hereinafter referred to as "disputing party"), may attend a meeting of the Council to state his or her opinion or submit relevant documents. <Amended on Aug. 3, 2007; Aug. 13, 2013>

Article 22(Application for Mediation) #

(1) Any disputing party may file a written application for mediation of matters prescribed by Presidential Decree, with the Council pursuant to Article 21.

(2) Where respective disputing parties file applications for mediation with separate Councils or where any disputing party files duplicate applications for mediation with multiple Councils, a Council selected by the relevant franchisee from among the following Councils shall be in charge of such mediation: <Added on Mar. 27, 2018>

1. The Council of KOFAIR;

2. The Council of the City/Do where the main business place of the franchisee is located;

3. The Council of the City/Do where the main business place of the franchiser is located.

(3) The Fair Trade Commission may request the Council to mediate disputes arising from franchise transactions. <Amended on Mar. 27, 2018>

(4) Upon receipt of an application for mediation pursuant to paragraph (1), the Council shall immediately notify disputing parties of the matters brought for mediation; the Council of KOFAIR shall inform the Fair Trade Commission of such matters; and the Council of the City/Do shall inform the Fair Trade Commission and the City/Do thereof. <Amended on Aug. 3, 2007; Mar. 27, 2018; Dec. 7, 2021>

(5) An application for mediation of a dispute filed under paragraph (1) shall have the effect of interruption of extinctive prescription; provided, this shall not apply when the application is withdrawn or rejected. <Added on Apr. 18, 2017; Mar. 27, 2018>

(6) In cases falling under the proviso of paragraph (5), if any judicial claim, participation in bankruptcy procedures, seizure or provisional seizure, or provisional disposition occurs within six months, extinctive prescription shall be deemed interrupted by the initial application for mediation of a dispute. <Added on Apr. 18, 2017; Mar. 27, 2018>

(7) Extinctive prescription interrupted under the main clause of paragraph (5) shall run anew in any of the following cases: <Added on Apr. 18, 2017; Mar. 27, 2018>

1. Where a mediation report is prepared after the mediation of the dispute is concluded;

2. Where the mediation procedures end, leaving the dispute unsolved.

Article 23(Mediation) #

(1) The Council shall initiate a dispute mediation procedure without delay pursuant to Presidential Decree, upon receipt of an application for mediation under Article 22 (1) or a request for mediation under paragraph (2) of the same Article. <Added on Mar. 29, 2016>

(2) The Council may recommend the disputing parties to mediate on their own in relation to matters dealt with in the mediation, or present mediation proposals by preparing them. <Amended on Mar. 29, 2016>

(3) The Council shall reject an application for mediation in any of the following cases. In such cases, the Council shall obtain confirmation from the Fair Trade Commission in regards to whether the act or case for which an application for dispute mediation is filed falls under subparagraph 3: <Amended on Aug. 3, 2007; Mar. 29, 2016; Dec. 31, 2018; Jun. 20, 2023>

1. Where the application for mediation is filed by a person who has no direct interest in the details of the application for mediation;

2. Where the application for mediation is filed for a matter not subject to the application of this Act;

3. Where the application for mediation is filed for a case into which the Fair Trade Commission has commenced an investigation pursuant to Article 32-3 (2) before the application for mediation is filed; provided, the same shall not apply where an application for mediation is filed after the Fair Trade Commission makes dispositions such as corrective measures.

(4) The Council shall terminate the mediation procedure in any of the following cases: <Amended on Aug. 3, 2007; Mar. 29, 2016; Dec. 31, 2018; Jun. 20, 2023>

1. Where the mediation is successfully concluded because the disputing parties accept the Council's recommendation or mediation proposals, or mediate on their own, etc.;

2. Where the mediation is not concluded even 60 days (90 days if both of the disputing parties agree to extend the period) after the date an application or request for mediation is filed;

3. Where there is no practical benefit to proceed with the mediation procedure, because one of the disputing parties refuses the mediation, or for other reasons.

(5) Where the Council rejects an application for mediation pursuant to paragraph (3) or terminates the procedure thereof pursuant to paragraph (4), the Council of KOFAIR shall, without delay, report in writing on the details of mediation, the grounds for rejecting the application for mediation or for terminating the procedure thereof, etc. to the Fair Trade Commission and the City/Do Council to the Fair Trade Commission and the relevant City/Do along with the related documents, and they shall notify the disputing parties of such fact, as prescribed by Presidential Decree. <Amended on Mar. 29, 2016; Mar. 27, 2018; Dec. 31, 2018; Dec. 7, 2021>

(6) The Council may investigate or request the disputing parties to submit the relevant documents or appear before it, if necessary to verify the facts relating to the mediation. <Amended on Mar. 29, 2016>

(7) The Fair Trade Commission shall not recommend or order the relevant disputing parties to take corrective measures regarding the matters brought for mediation, over which it did not make dispositions such as corrective measures, until the mediation procedures are completed. <Amended on Mar. 29, 2016; Dec. 31, 2018; Jun. 20, 2023>

Article 34-2(Consent Resolutions) #

(1) A franchiser or master franchisee subject to investigation or deliberation by the Fair Trade Commission (hereafter in this Article referred to as "applicant") may file with the Fair Trade Commission an application for a consent resolution under paragraph (3) for such purposes as voluntarily addressing unfairness in transactions, etc. resulting from an act subject to such investigation or deliberation (hereafter in this Article referred to as the "relevant act"), remedying damage caused to franchisees, and improving transaction practices; provided, the Fair Trade Commission shall proceed with the deliberation procedures under this Act without adopting a consent resolution, where the relevant act falls under either of the following cases:

1. Where the requirement for filing an accusation prescribed in Article 44 (2) is met;

2. Where the applicant withdraws his or her application before a consent resolution is adopted.

(2) Where an applicant files an application under paragraph (1), he or she shall do so in writing, stating the following matters:

1. Facts that specify the relevant act;

2. A correction scheme necessary for restoring competition practices by such means as suspension of the relevant act or reinstatement or actively improving transaction practices;

3. Any other correction scheme necessary for remedying or preventing damage caused to franchisees, etc.

(3) Where determining that the corrective measures under paragraph (2) 2 and 3 (hereinafter referred to as "corrective measures") meet all of the following requirements after completing an investigation into the facts of the relevant act, the Fair Trade Commission may suspend the deliberation process related to the relevant act and make a resolution to the same effect as the corrective measures (hereinafter referred to as the "resolution of consent"). In such cases, the corrective measures may be amended after negotiations with the applicant:

1. The correction scheme shall be in balance with corrective measures and other sanctions to be imposed if the relevant act is found to violate this Act;

2. The correction scheme shall be deemed appropriate to restore fair and free competition practices or transaction practices or to protect franchisees, etc.

(4) Any consent resolution adopted by the Fair Trade Commission does not mean that the relevant act is recognized as a violation of this Act, and no one shall assert that the relevant act violates this Act on the grounds that an applicant is issued a consent resolution.

[This Article Added on Jan. 4, 2022]

Article 35(Penalty Surcharges) #

(1) The Fair Trade Commission may impose a penalty surcharge on a franchiser that violates Article 6-5 (1) or (4), 7 (3), 9 (1), 10 (1), 11 (1) or (2), 12 (1), 12-2 (1) or (2), 12-3 (1) or (2), 12-4, 12-5, 12-6 (1), 14-2 (5), or 15-2 (3) or (6) to the extent not exceeding an amount of money calculated by multiplying the sales (in the case of a business entity prescribed by Presidential Decree, referring to the operating income; hereinafter the same shall apply) prescribed by Presidential Decree by 2/100; provided, where a franchiser that has committed such violation has no sales or it is difficult to calculate its sales, prescribed by Presidential Decree, the Fair Trade Commission may impose a penalty surcharge to the extent not exceeding 500 million won. <Amended on Mar. 29, 2016; Jan. 16, 2018>

(2) Where the Fair Trade Commission imposes a penalty surcharge pursuant to paragraph (1), it shall take into consideration the following matters:

1. The details and severity of a violation;

2. The duration and number of times of a violation;

3. The size of profit acquired by committing a violation.

(3) Where a franchiser that has violated this Act is merged, a violation committed by such franchiser shall be deemed a violation committed by a company that continues to exist after the merger or is incorporated by the merger and the Fair Trade Commission may impose a penalty surcharge on such company and collect the penalty surcharge therefrom.

(4) Where a franchiser that has violated this Act is divided or divided and merged, a violation before the date of the division or the division and merger of the franchiser that is divided shall be deemed a violation of any of the following companies and the Fair Trade Commission may impose a penalty surcharge on such company and collect the penalty surcharge therefrom:

1. A company that is divided;

2. A new company that is incorporated by the division or the division and merger;

3. Where a part of a company that is divided is merged into another company and such another company continues to exist, such another company.

(5) Where a franchiser that has violated this Act incorporates a new company pursuant to Article 215 of the Debtor Rehabilitation and Bankruptcy Act, a violation committed by the franchiser shall be deemed a violation of either the existing company or a new company, and the Fair Trade Commission may impose a penalty surcharge on the new company and collect the penalty surcharge therefrom.

(6) Criteria for the imposition of penalty surcharges under paragraph (1) shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Aug. 13, 2013]

Article 41(Penalty Provisions) #

(1) A person who provides false or exaggerated information or deceptive information, in violation of Article 9 (1), shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 300 million won. <Amended on Aug. 3, 2007; Aug. 13, 2013>

(2) A person falling under any of the following subparagraphs shall be punished by imprisonment with labor for not more than three years or by a fine not exceeding 100 million won: <Amended on Aug. 3, 2007; Jan. 16, 2018; Dec. 29, 2020>

1. A person who conducts acts to inflict a disadvantage to a franchisee or makes other business operators conduct such acts, in violation of Article 12-5;

2. A person who fails to comply with an order to take corrective measures under Article 33 (1);

3. A person who violates Article 119 of the Monopoly Regulation and Fair Trade Act, which is applicable mutatis mutandis pursuant to Article 37 (4).

(3) A person falling under any of the following subparagraphs shall be punished by imprisonment with labor for not more than two years or by a fine not exceeding 50 million won: <Amended on Aug. 3, 2007; Aug. 13, 2013>

1. A person who receives a franchise deposit directly from a franchisee, in violation of Article 6-5 (1);

2. A person who receives a required payment or executes a franchise agreement, in violation of Article 7 (3);

3. A person who produces or uses a mark representing that it has entered into an indemnity insurance contract, etc., for franchisees or any similar mark, in violation of Article 15-2 (6).

(4) A person who lends or borrows a registration certificate of a franchise trader or a person who arranges such, in violation of Article 29-2, shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding 10 million won. <Added on Jan. 4, 2022>

(5) A person who requests the payment of a franchise deposit by fraud or other improper means, in violation of Article 6-5 (4), shall be punished by a fine not exceeding an amount equivalent to double the franchise deposit. <Added on Aug. 3, 2007; Jan. 4, 2022>

Article 43(Administrative Fines) #

(1) A franchiser falling under subparagraph 3 or 4 shall be subject to an administrative fine not exceeding 100 million won, and a franchiser falling under subparagraph 1, 1-2, or 2 shall be subject to an administrative fine not exceeding 50 million won: <Amended on Aug. 3, 2007; Aug. 13, 2013; Apr. 17, 2018; Dec. 29, 2020>

1. A person who fails to submit data under Article 32-2 (2) or submits false data;

1-2. A person who prevents a franchisee from submitting data or requests a franchisee to submit false data, in violation of Article 32-2 (4);

2. A person who fails to make an appearance twice or more without good cause in violation of Article 81 (1) 1 of the Monopoly Regulation and Fair Trade Act, which is applicable mutatis mutandis pursuant to Article 37 (1);

3. A person who fails to submit a report or necessary data or goods in accordance with Article 81 (1) 3 or (6) of the Monopoly Regulation and Fair Trade Act, which is applicable mutatis mutandis pursuant to Article 37 (1) without good cause, or who submits a false report, data or goods;

4. A person who refuses, interferes with, or evades an investigation conducted pursuant to Article 81 (2) and (3) of the Monopoly Regulation and Fair Trade Act without good cause, which is applicable mutatis mutandis pursuant to Article 37 (1).

(2) Deleted. <Apr. 17, 2018>

(3) An executive officer of a franchiser shall be subject to an administrative fine not exceeding 50 million won, if he or she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he or she falls under subparagraph 1, 1-2, or 2 of that paragraph. <Amended on Apr. 17, 2018>

(4) An employee of a franchiser or a person who has any legal interest equivalent thereto shall be subject to an administrative fine not exceeding 50 million won, if he or she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he or she falls under subparagraph 2 of that paragraph, or by an administrative fine not exceeding five million won, if he or she falls under subparagraph 1 or 1-2 of that paragraph. <Amended on Apr. 17, 2018>

(5) A person who fails to comply with an order issued pursuant to Article 66 of the Monopoly Regulation and Fair Trade Act to maintain the order, which is applicable mutatis mutandis pursuant to Article 37 (1), shall be subject to an administrative fine not exceeding one million won. <Amended on Aug. 3, 2007; Dec. 29, 2020>

(6) A person falling under any of the following subparagraphs shall be subject to an administrative fine not exceeding 10 million won: <Amended on Aug. 3, 2007; Aug. 13, 2013; Jan. 4, 2022>

1. A person who fails to register an alteration within a period, in violation of the main clause of Article 6-2 (2), or falsely registers an alteration;

2. A person who fails to provide information under any subparagraph of Article 9 (3) in writing, in violation of that paragraph;

3. A person who fails to keep evidentiary materials or fails to comply with a request for materials, in violation of Article 9 (4);

4. A person who fails to provide a paper describing the calculation of the estimated sales, in violation of Article 9 (5);

5. A person who fails to keep a paper describing the calculation of the estimated sales, in violation of Article 9 (6);

6. A person who fails to keep a franchise agreement, in violation of Article 11 (3);

7. A person who fails to notify the details of executing expenses for advertising or promotional events or fails to comply with a request for perusal of such details, in violation of Article 12-6 (2).

(7) A person falling under any of the following subparagraphs shall be subject to an administrative fine not exceeding three million won: <Amended on Aug. 3, 2007; Aug. 13, 2013; Jan. 4, 2022>

1. A person who fails to make a report or makes a false report, in violation of the proviso to Article 6-2 (2);

2. A person who uses a mark representing a franchise trader or any title similar thereto, in violation of Article 29 (4).

(8) Administrative fines provided for in paragraphs (1) through (7) shall be imposed and collected by the Fair Trade Commission as prescribed by Presidential Decree. <Added on Aug. 3, 2007>

(9) Deleted. <Mar. 22, 2010>

(10) Deleted. <Mar. 22, 2010>

(11) Deleted. <Mar. 22, 2010>

FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

Article 1(Purpose) #

Article 2(Definitions) #

Article 3(Exclusion of Small Franchisers from Application) #

Article 4(Principle of Good Faith) #

Article 5(Obligations of Franchisers) #

Article 6(Obligations of Franchisees) #

Article 6-2(Registration of Franchise Disclosure Documents) #

Article 6-3(Refusal of Registration of Franchise Disclosure Documents and Other Relevant Matters) #

Article 6-4(Revocation of Registration of Franchise Disclosure Documents) #

Article 6-5(Deposit of Required Payments) #

Article 7(Duty to Provide Franchise Disclosure Documents) #

Article 8 #

Article 9(Prohibition on Providing False or Exaggerated Information) #

Article 10(Return of Required Payments) #

Article 11(Matters to Be Included in Franchise Agreement) #

Article 11-2(Standard Franchise Agreement Form) #

Article 12(Prohibition of Unfair Trade Practices) #

Article 12-2(Prohibition of Unfair Pressure to Improve Store Environment) #

Article 12-3(Prohibition of Unfair Restrictions on Business Hours) #

Article 12-4(Prohibition of Unfair Violation of Sales Territories) #

Article 12-5(Prohibition of Measures of Retaliation) #

Article 12-6(Notification of Details regarding Execution of Advertising or Promotional Events) #

Article 12-7(Recommendation of Basis for Transactions for Each Type of Business) #

Article 13(Renewal of Franchise Agreement) #

Article 14(Limitations on Termination of Franchise Agreement) #

Article 14-2(Consultation on Alteration of Conditions of Trade of Franchisees Association) #

Article 15(Voluntary Code of Practice) #

Article 15-2(Indemnity Insurance Contract for Franchisees) #

Article 15-3(Establishment of Mutual Aid Association) #

Article 15-4(Encouragement of Conclusion of Agreement between Franchisers and Franchisees) #

Article 15-5(Monetary Rewards for Reporting) #

Article 16(Establishment of Franchise Transaction Dispute Mediation Council) #

Article 17(Composition of Council) #

Article 18(Restriction on Commissioning Members Representing Public Interest) #

Article 19(Meetings of Council) #

Article 20(Disqualification of, Challenge to, or Recusal of, Member) #

Article 21(Matters Subject to Mediation of Council) #

Article 22(Application for Mediation) #

Article 23(Mediation) #

Article 23-2(Relationship to Litigation) #

Article 24(Preparation and Effects of Mediation Protocols) #

Article 25(Provisions Governing Organizational Structure of Council) #

Article 26 #

Article 27(Franchise Traders) #

Article 28(Business of Franchise Traders) #

Article 29(Registration of Franchise Traders) #

Article 29-2(Prohibition on Lending Registration Certificates of Franchise Traders) #

Article 30(Responsibilities of Franchise Traders) #

Article 31(Revocation of Registration of Franchise Traders and Suspension of Qualification) #

Article 31-2(Education on Franchise Transactions) #

Article 32(Limitation on Objects Subject to Investigation) #

Article 32-2(Written Fact-finding Surveys) #

Article 32-3(Reporting on Offenses) #

Article 33(Corrective Measures) #

Article 34(Recommendation for Correction) #

Article 34-2(Consent Resolutions) #

Article 34-3(Procedures for and Revocation of Consent Resolutions) #

Article 34-4(Charges for Compelling Compliance) #

Article 35(Penalty Surcharges) #

Article 36(Cooperation of Heads of Relevant Administrative Agencies) #

Article 37(Application Mutatis Mutandis of the Monopoly Regulation and Fair Trade Act) #

Article 37-2(Liability for Damage) #

Article 38(Relationship to the Monopoly Regulation and Fair Trade Act) #

Article 39(Delegation and Entrustment of Authority) #

Article 40(Reporting) #

Article 41(Penalty Provisions) #

Article 42(Joint Penalty Provisions) #

Article 43(Administrative Fines) #

Article 44(Accusation) #