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Loi sur les transactions équitables dans le commerce des franchises (loi n° 6704 du 13 mai 2002, modifiée en dernier lieu par la loi n° 7109 du 20 janvier 2004), République de Corée

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Détails Détails Année de version 2004 Dates Entrée en vigueur: 1 novembre 2002 Adopté/e: 13 mai 2002 Type de texte Lois en rapport avec la propriété intellectuelle Sujet Marques, Noms commerciaux, Information non divulguée (Secrets commerciaux), Mise en application des droits, Règlement extrajudiciaire de litiges (ADR) Notes Cette version consolidée de la loi sur les transactions équitables dans le commerce des franchises inclut tous les amendements jusqu'en 2004.

Pour les dispositions relatives aux marques commerciales, y compris les marques de commerce, les marques de service, les noms commerciaux, les enseignes et les autres marques commerciales, voir chapitre 1, article 2(1), (6)(a)&(d); chapitre 2, article 6 (12); et chapitre 3, article 11(2)(1).
Pour les dispositions sur la non-divulgation des secrets commerciaux, voir chapitre 2, article 6(11).

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Texte(s) principal(aux) Textes connexe(s)
Texte(s) princip(al)(aux) Texte(s) princip(al)(aux) Anglais Fair Franchise Transactions Act (Act No. 6704 of May 13, 2002, as amended up to Act No. 7109 of January 20, 2004)        
 Fair Franchise Transactions Act

FAIR FRANCHISE TRANSACTIONS ACT

FAIR FRANCHISE TRANSACTIONS ACT 209

FAIR FRANCHISE TRANSACTIONS ACT

Enacted on May 13, 2002 Law No. 6704 Revised on Jan. 20, 2004 Law No. 7109

Chapter 1 General Provision

Article 1 (Purpose) The purpose of this Act is to promote the welfare of

consumers and further develop the national economy in a sound manner by instituting a fair and rational transaction system for franchises and

ensuring mutually complementary and balanced development of the

franchiser/franchisee relationship on an equal footing.

Article 2 (Definition) For the purposes of this Act, the terms used herein are defined as follows:

1. “Franchise” means a continuous business relationship in which

Franchiser allows Franchisee to sell goods (hereinafter to include raw

and auxiliary materials) or services under certain quality standards using its trademarks, service marks, trade name, signs and other

business marks (“Business Marks”), and supports, educates and controls Franchisee as regards relevant management and operating

activities, and in which Franchisee pays Franchise Fees to Franchiser in return for the use of Business Marks and the support

and education concerning the management and operating activities.

2. “Franchiser” means a business entity that grants Franchise

Management Rights to Franchisee in connection with a Franchise.

3. “Franchisee” means a business entity to whom Franchise Management Rights are granted by Franchiser in connection with a Franchise.

4. “Prospective Franchisee” means an applicant who requests a specific

Franchiser, in writing, to provide information contained in an Information

210 Competition Laws & Enforcement Decrees

Disclosure Statement as defined in Subparagraph 10 hereof including

the liabilities of the Franchisee and the conditions of its operating

activities, for the purpose of running a franchisee business in the future.

5. “Franchise Management Rights” mean the rights that Franchiser

grants to Franchisee to operate a Franchise under a Franchise Agreement.

6. “Franchise Fees” means any of the following monetary consideration

prescribed by Presidential Decree, notwithstanding the appellation or

payment form thereof:

a. Money that Franchisee pays to Franchiser at the time of the

granting of Franchise Management Rights in consideration of the

permission to use Business Marks and the support and education

for its operating activities;

b. Money that Franchisee pays to Franchiser as a deposit in order to

guarantee its payment of obligations regarding proceeds from sale

of goods or compensation for damages; and

c. Money that Franchisee pays to Franchiser on a regular basis in

consideration of the use of Business Marks permitted under its

agreement with Franchiser and the support and education for its

operating activities.

7. “Master Franchisee” means a business entity that vicariously

performs a part or all of the duties of Franchiser under its agreement

with Franchiser including, but not limited to, solicitation of

Franchisees within a certain area, maintenance of the quality of

goods or services, and the support, education and control of

Franchisees regarding their management and operating activities.

FAIR FRANCHISE TRANSACTIONS ACT 211

8. “Franchise Broker” means a person that is commissioned to solicit

Franchisees, or prepare or conclude Franchise Agreements, by Franchiser

or Master Franchisee.

9. “Franchise Agreement” means a document that sets forth the rights

and obligations of Franchiser and/or Franchisee (“Franchising Parties”) in

respect of the specific details and conditions of a Franchise.

10. “Information Disclosure Statement” means a document in the form

of a booklet that contains the business status of Franchiser, career

background of its officers, liabilities of Franchisee, conditions of its

operating activities, the education, training, guidance and control of

the Franchisee, the termination, cancellation and renewal of the

Franchise Agreement, and other matters prescribed by Presidential

Decree with regard to the Franchise concerned.

Article 3 (Exclusion of Application) This Act shall not apply to any of the

following cases, with the exception of the provisions of Articles 9 and

10 hereof:

1. If the total Franchise Fees paid by Franchisee to Franchiser for the

six-month period beginning from the date of initial payment of

Franchise Fees do not exceed an amount prescribed by Presidential

Decree; and

2. If the annual sales of Franchiser is less than a certain amount as

prescribed by Presidential Decree.

Chapter 2 Basic Principles of Franchise Transactions

Article 4 (Principle of Good Faith) In engaging in an operation of a

Franchise, the Franchising Parties shall perform their respective

duties in good faith.

212 Competition Laws & Enforcement Decrees

Article 5 (Compliance of a Franchiser) Franchiser shall comply with

each of the following:

1. Planning of business for the success of the Franchise;

2. Continuing efforts toward quality control of goods or services and

development of sales techniques;

3. Installation of shop facilities, and supply of goods or services, for

Franchisee at reasonable prices;

4. Education and training of Franchisee and its employees;

5. Continuing advice and support for the management and operating

activities of Franchisee;

6. Prohibition of the opening of a directly-managed shop of Franchiser

or a franchise business engaging in a similar line of business to that

of Franchisee within the business area of Franchisee during the

period of the Franchise Agreement; and

7. Efforts to resolve disputes through dialogue and negotiations with

Franchisee.

Article 6 (Compliance of a Franchisee) Franchisee shall comply with each of

the following:

1. Efforts to maintain the unity of the Franchise and the good repute of

Franchiser;

2. Maintenance of inventory and display of goods in an appropriate

manner in accordance with Franchiser's supply plan and consumer

demand;

FAIR FRANCHISE TRANSACTIONS ACT 213

3. Compliance with adequate quality standards as presented by

Franchiser with regard to goods or services;

4. Use of goods and services as provided by Franchiser in the event of

failure to stock goods or services meeting the quality standards as

provided in the foregoing Subparagraph 3;

5. Compliance with appropriate standards as presented by Franchiser

with regard to the facilities and exterior of the place of business as

well as the means of transport;

6. Consultation with Franchiser prior to effectuating any changes in

the goods or services in which it deals or in its operating activities;

7. Maintenance and provision of data necessary for unified business

management and sales strategy formulation by Franchiser including,

but not limited to, accounting books on the purchase and sale of goods

and services;

8. Provision to the officers, employees or agents of Franchiser of access

to its place of business for the checking and recording of its business

status and the data as set out in the foregoing Subparagraph 7;

9. Prohibition of any change in the location of its place of business or

any transfer of Franchise Management Rights without the consent of

Franchiser;

10. Prohibition of any act to engage in the same line of business as that

of Franchiser during the period of the Franchise Agreement;

11. Prohibition of disclosure of sales techniques or trade secrets

belonging to Franchiser; and

214 Competition Laws & Enforcement Decrees

12. Notification of any infringement on Business Marks by a third party to

Franchiser if it gains knowledge thereof, and appropriate cooperation

with Franchiser to take necessary measures to prohibit such infringement.

Chapter 3 Fair Franchise Transactions

Article 7 (Obligation to Provide Information Disclosure Statement)

(1) Franchiser (hereinafter to include a Master Franchisee or

Franchise Broker in the event such party solicits Franchisees) shall

provide Prospective Franchisee with an Information Disclosure

Statement as prescribed by Presidential Decree at the time which is

the earlier among the following:

1. Five (5) days prior to the date of the Prospective Franchisee's initial

payment of Franchise Fees;

2. Five (5) days prior to the date of the Prospective Franchisee's signing of a

Franchise Agreement.

(2) The Fair Trade Commission may produce a standard form of

Information Disclosure Statements and recommend its use to

Franchiser or a business organization comprised of Franchisers, as

prescribed by Presidential Decree.

Article 8 (Updating and Modification of Information Disclosure Statement)

(1) Within ninety (90) days from the date on which each fiscal year

ends, Franchiser shall update its Information Disclosure Statement.

(2) In the event of any change in the material items of the Information

Disclosure Statement including, but not limited to, the liabilities of

Franchisee or the conditions of its operating activities, as prescribed by

FAIR FRANCHISE TRANSACTIONS ACT 215

Presidential Decree, Franchiser shall modify the Information Disclosure

Statement within ninety (90) days from the date of such change.

Article 9 (Prohibition of Provision of False or Exaggerated Information)

(1) Franchiser shall not provide false or exaggerated information, nor omit any material items as provided in Paragraph 2, Article 8 hereof

in producing, updating or modifying the Information Disclosure

Statement or in presenting, advertising or explaining any information to Prospective Franchisee (hereinafter to include presentation of video

materials).

(2) In providing historical or estimated profit/loss information about its Franchisees including sales, revenues, gross margin and net income,

Franchiser shall have data, as prescribed by Presidential Decree,

available in its office including an audit report produced by a certified public accountant.

(3) Franchiser shall comply with request from any Prospective Franchisee or

Franchisee to provide data provided in the foregoing Paragraph 2.

Article 10 (Refund of Franchise Fees)

(1) In any of the following cases, Franchiser shall refund Franchise

Fees, as provided in Subparagraphs 6-A and 6-B of the foreg oing Article 2, to Prospective Franchisee or Franchisee within one (1)

month from the date of a request from such Prospective Franchisee or Franchisee:

1. When the Prospective Franchisee requests a refund of Franchise

Fees prior to conclusion of a Franchise Agreement since it has been

acknowledged that the Franchiser has provided false or exaggerated information as provided in Paragraph 1, Article 9 hereof or omitted

material items as provided in Paragraph 2, Article 8 hereof;

216 Competition Laws & Enforcement Decrees

2. When the Franchisee requests a refund of Franchise Fees within two

(2) months from the date of conclusion of a Franchise Agreement

since it has been acknowledged that false or exaggerated information

as provided in Paragraph 1, Article 9 hereof or omission of material

items as provided in Paragraph 2, Article 8 hereof materially

influenced the conclusion of the Franchise Agreement; and

3. When the Franchiser unilaterally discontinues its Franchise without

any justifiable reason and the Franchisee requests a refund of Franchise

Fees within two (2) months from the date of the discontinuance of the

Franchise, as prescribed by Presidential Decree. In such case, the

Franchise Fees to be refunded shall be limited to the amount paid within

the period of the relevant Franchise Agreement.

(2) In determining the amount of Franchise Fees to be refunded

pursuant to the foregoing Paragraph 1, the circumstances of

conclusion of a Franchise Agreement, nature of the money paid,

period of the Franchise Agreement, period of performance of the

Franchise Agreement, degree of accountability of the Franchising

Parties and so forth shall be taken into consideration.

Article 11 (Delivery of Franchise Agreement)

(1) Franchiser shall deliver a Franchise Agreement (hereinafter to

include a document stating the rights and obligations of the

Franchiser and its Franchisee including the matters of special note

and special conditions of transactions) to Prospective Franchisee

prior to the date of its initial receipt of Franchise Fees.

(2) A Franchise Agreement shall include each of the following:

1. Matters related to granting of the rights to use Business Marks;

FAIR FRANCHISE TRANSACTIONS ACT 217

2. Matters related to the conditions of the operating activities of Franchisee;

3. Matters related to the education/training and management guidance

for Franchisee;

4. Matters related to the details of payments of money including

Franchise Fees;

5. Matters related to the establishment of a business area;

6. Matters related to the period of a Franchise Agreement;

7. Matters related to business transfer;

8. Matters related to causes for termination of a Franchise Agreement; and

9. Matters related to the rights and obligations of the Franchising

Parties as prescribed by Presidential Decree.

(3) Franchiser shall keep a Franchise Agreement for three (3) years from

the date of the completion of the relevant Franchise transactions.

(4) The Fair Trade Commission may recommend Franchiser to produce

and use a Franchise Agreement, which serves as a standard for

certain Franchise transactions, in order to establish the sound order

of Franchise transactions and prevent any unfair Franchise

Agreement from being used commonly in the market.

Article 12 (Prohibition of Unfair Transactions)

(1) Franchiser shall not engage in, nor cause another business entity to

engage in, any of the following acts that may hinder fair Franchise

transactions:

218 Competition Laws & Enforcement Decrees

1. Any act to unfairly discontinue or refuse the supply of goods or services to, or the support for operating activities of, Franchisee, or to

significantly restrict the contents thereof;

2. Any act to unfairly restrict or limit the price of goods or services

dealt with by Franchisee, its counter-parties, area of transactions, or business activities;

3. Any act to unfairly cause any disadvantage to Franchisee by

bargaining the position of the Franchiser in transactions; and

4. Any act not falling under any of the foregoing Subparagraphs 1

through 3 which might possibly hamper fair Franchise transactions including an act to unfairly entice a Franchisee of a competing

Franchiser to deal with oneself.

(2) The types and standards of the acts as provided in each subparagraph of the foregoing Paragraph 1 shall be prescribed by

Presidential Decree.

Article 13 (Notification of the Expiration of Franchise Agreement)

(1) In the event Franchiser does not intend to renew or extend its

Franchise Agreement, it shall give written notice thereof to Franchisee at least ninety (90) days prior to the date of expiration of

the Franchise Agreement.

(2) If Franchiser fails to give such notice as provided in the foregoing

Paragraph 1, the Franchise Agreement shall be deemed newly concluded under the same terms and conditions as the Franchise

Agreement existing prior to the expiration thereof; provided, however, that this provision shall not apply if Franchisee raises any

objections prior to sixty (60) days from the date of the expiration of

the Franchise Agreement or in the event of any unavoidable reason

FAIR FRANCHISE TRANSACTIONS ACT 219

as prescribed by Presidential Decree including the occurrence of an Act of God to the Franchiser or Franchisee.

Article 14 (Restrictions on Termination of Franchise Agreement)

(1) If Franchiser intends to terminate a Franchise Agreement due to occurrence of any reason for termination thereof as provided in the

Franchise Agreement, the Franchiser shall request the relevant Franchisee to remedy such situation by sending a document stating

such reason for termination not less than three (3) times under a grace period of not less than two (2) months from the date of

termination thereof; provided, however, that the foregoing provision

shall not apply in cases where it is difficult to maintain Franchise transactions as prescribed by Presidential Decree.

(2) Termination of any Franchise Agreement which has not undergone the

procedures provided in the foregoing Paragraph 1 shall be invalid.

Article 15 (Autonomous Covenant)

(1) Franchiser or a business organization consisting of Franchisers

may formulate an autonomous covenant in order to maintain orderly and equitable Franchise transactions.

(2) If any Franchiser or a business organization consisting of

Franchisers intends to formulate an autonomous covenant pursuant

to the foregoing Paragraph 1, it may request the Fair Trade Commission to deliberate whether such covenant violates Paragraph

1, Article 12 hereof.

(3) When requested to deliberate an autonomous covenant in accordance with the foregoing Paragraph 2, the Fair Trade Commission shall notify

the relevant applicant of its deliberation results within sixty (60) days

from the date of the receipt of such request.

220 Competition Laws & Enforcement Decrees

Chapter 4 Dispute Conciliation

Article 16 (Establishment of the Franchise Transaction Dispute Conciliation Council)

(1) The Franchise Transaction Dispute Conciliation Council (“Council”) shall be established in such business organization as prescribed by Presidential Decree for autonomous resolution of disputes among Franchising Parties.

(2) Such business organization as provided in the foregoing Paragraph 1 shall be limited to an incorporated association which has relevance to the business affairs provided herein comprising a certain number of business entities directly involved in the activities thereof with the capabilities to perform the duties of dispute conciliation.

Article 17 (Composition of the Council)

(1) The Council shall be comprised of nine (9) members including one (1) chairman.

(2) The members of the Council shall represent the interests of the public, Franchisers and Franchisees, and the number of members representing such different interests, respectively, shall be the same.

(3) Members of the Council shall be appointed or commissioned by the Fair Trade Commission among those recommended by the head of the business organization provided in Paragraph 1 of Article 16 hereof and those who fall under any of the following criteria:

1. Persons who majored in jurisprudence, economics or business administration in college and is serving or served as an associate professor or in a higher position at a university under the Higher Education Act or an accredited research institute or in an equivalent position for not less than ten (10) years;

FAIR FRANCHISE TRANSACTIONS ACT 221

2. Persons who is serving or served as a judge, prosecutor or attorney -

at-law for not less than ten (10) years; and

3. Persons who is serving or served as a public official of grade three (3)

or higher with experience in monopoly regulation and fair trade.

(4) Chairman of the Council shall be commissioned by the Fair Trade

Commission among the members representing the public interest.

(5) Members of the Council shall serve a tenure of three (3) years and

may be reappointed.

(6) In the event of any vacancy in the Council, a member to fill in for

such vacancy shall be commissioned according to the foregoing

Paragraph 3, and the tenure of such member shall be the remaining

term of office of his/her predecessor.

Article 18 (Restrictions on Commissioning Members Representing Public

Interest)

(1) No officer or employee of Franchiser or Franchisee as of the date of

commissioning shall be commissioned to serve as a member of the

Council representing the public interest.

(2) The Fair Trade Commission shall immediately revoke its commissioning of

any member representing the public interest, if such member becomes an

officer or an employee of Franchiser or Franchisee.

Article 19 (Meetings of the Council)

(1) Chairman of the Council s*hall convene and preside over the

meetings thereof.

222 Competition Laws & Enforcement Decrees

(2) The Council shall open with a quorum of a majority of the members thereof and its decisions shall be binding with the consent of a majority of the members present.

(3) If the chairman of the Council is incapacitated from performing his/her duties, a member nominated by the Fair Trade Commission among the members representing the public interest shall serve as the acting chairman.

(4) The Franchising Parties, who are the parties to a dispute subject to conciliation efforts (“Parties in Dispute”) may present their opinions or submit relevant data by attending meetings of the Council.

Article 20 (Exclusion, Challenge and Avoidance of a Council Member)

(1) If a member of the Council falls under any of the following circumstance, such member shall not be involved in the intercession of the relevant matter:

1. If a member of the Council, his/her spouse or ex -spouse becomes a Party in Dispute subject to conciliation or a joint holder of rights or liabilities;

2. If a member of the Council has or had a relationship by blood or marriage to the Parties in Dispute subject to conciliation;

3. If a member of the Council or a corporation to which a member of the Council belongs serves as an advisor or a consultant with respect to the legal affairs, business administration and so forth of the Parties in Dispute; and

4. If a member of the Council or a corporation to which a member of the Council belongs is or was involved in the matter of the dispute as a representative of the Parties in Dispute, and/or gives testimony or appraisal in relation thereto.

FAIR FRANCHISE TRANSACTIONS ACT 223

(2) The Parties in Dispute may submit to the Council a challenge to a

member thereof if there exist circumstances that makes it possible

that such member may face a conflict of interest in the process of

dispute conciliation by the Council.

(3) If a member of the Council is deemed to fall into one of the categories

under the foregoing Paragraphs 1 and 2, such member may not voluntarily

involve himself/herself in mediation of the relevant matter.

Article 21 (Matters of Conciliation by the Council)

The Council shall mediate disputes over Franchise transactions as

requested by the Fair Trade Commission or the Parties in Dispute.

Article 22 (Application for Dispute Conciliation, etc.)

(1) The Parties in Dispute may file for dispute conciliation to the

Council under Article 21 hereof by submitting a document stating

the matters prescribed by Presidential Decree.

(2) The Fair Trade Commission may request the Council to mediate

cases concerning disputes over Franchise transactions.

(3) If requested to engage in dispute conciliation according to the foregoing Paragraph 1, the Council shall promptly give notice of its

mediation results to the Parties in Dispute and make a report

thereof to the Fair Trade Commission.

Article 23 (Conciliation, etc.)

(1) The Council may recommend the Parties in Dispute to settle the

matters between themselves, or may produce and present a dispute

mediation proposal to the Parties in Dispute.

224 Competition Laws & Enforcement Decrees

(2) In any of the following cases, the Council may refuse or discontinue

its role of mediation:

1. If either of the Parties in Dispute refuses mediation;

2. If a legal action in court has already been instituted, or a legal action

is instituted in court after filing for mediation; and

3. If any event, as prescribed by Presidential Decree, in which it is of

no practical benef it to perform mediation, arises including those

cases where the details of a filing are evidently acknowledged under

related laws or objective data.

(3) In any of the following circumstances, the Council shall terminate

its mediation procedures:

1. If a mediation is effectuated, with the Parties in Dispute accepting a

recommen- dation or a mediation proposal by the Council or deciding

to settle the dispute for themselves;

2. If a mediation is not effectuated upon the lapse of sixty (60) days

from the date of receipt of a filing or a request for mediation; and

3. If it is of no practical benefit to proceed with mediation procedures in

cases where a mediation is discontinued according to the foregoing

Paragraph 2.

(4) In cases where the Council refuses or discontinues a mediation

pursuant to the foregoing Paragraph 2 or ends mediation procedures

under the foregoing Paragraph 3, it shall promptly make a report, in

writing, of the circumstances of the mediation and the reasons for

refusal, discontinuance or cessation of mediation to the Fair Trade

FAIR FRANCHISE TRANSACTIONS ACT 225

Commission, together with submission of related documents, as

prescribed by Presidential Decree, and give notice thereof to the

Parties in Dispute.

(5) The Council may conduct an investigation or request the Parties in

Dispute to submit relevant data or to appear, if necessary, to

confirm the facts concerning the matters of mediation.

(6) The Fair Trade Commission shall not recommend, nor order, any

corrective measures to the Parties in Dispute until mediation

procedures as regards the matters of mediation are completed;

provided, however, that the foregoing provision shall not apply in

respect to the cases which are already under investigation by the

Fair Trade Commission pursuant to Article 32 hereof.

Article 24 (Production of Mediation Protocols and Their Effect)

(1) If a mediation is effectuated, the Council shall produce a mediation

protocol signed and sealed by the members thereof involved in such

mediation and the Parties in Dispute. In such case, an agreement

with the same effect as the mediation protocol shall be deemed to

have been concluded between the Parties in Dispute.

(2) The Council may produce a mediation protocol if the Parties in

Dispute settle, by themselves, a matter under mediation prior to the

commencement of mediation procedures by the Council and request

production of such mediation protocol.

Article 25 (Provisions on the Organization of the Council, etc.) In addition

to the provisions of the foregoing Articles 16 through 24, other necessary

matters in respect of the organization, operation and mediation procedures

of the Council shall be prescribed by Presidential Decree.

226 Competition Laws & Enforcement Decrees

Article 26 (Subsidies) The Fair Trade Commission may provide a subsidy

to the business organization, in which the Council is set up under

Article 16 hereof, covering all or a part of the expenses necessary for

operation of the Council.

Article 27 (Franchise Transaction Counselor)

(1) Any person who passes an examination of qualification as a Franchise

Transaction Counselor (“Counselor”) conducted by the Fair Trade

Commission and subsequently completes an internship as prescribed by

Presidential Decree shall be qualified as a Counselor.

(2) Any of the following persons shall not be qualified as a Counselor:

1. Any minor, incompetent or quasi-incompetent;

2. Any person declared bankrupt and not reinstated yet;

3. Any person sentenced to imprisonment without labor or a heavier

punishment, of which execution has been completed (including those

cases where execution thereof is deemed completed), or any person

regarding whom two (2) years have not yet elapsed after it was

finally determined not to execute such punishment;

4. Any person who is under suspension of the execution of punishment

not lighter than imprisonment without labor; and

5. Any person regarding whom two (2) years have not yet elapsed from

the date of the cancellation of Counselor registration according to

Article 31 hereof.

(3) Necessary matters with regard to the qualification examination and

internship of a Counselor including, but not limited to, the subjects

FAIR FRANCHISE TRANSACTIONS ACT 227

and methods of such examination and the period of internship shall

be prescribed by Presidential Decree.

Article 28 (Duties of Counselors) Counselors shall conduct counseling as regards each of the following:

1. Matters related with the feasibility study of a Franchise;

2. Matters related with production and modification of an Information Disclosure Statement and a Franchise Agreement;

3. Matters related with the liabilities of Franchisee, conditions of the operating activities of a Franchise, and so forth; and

4. Matters related with education and guidance of the Franchising Parties.

Article 29 (Registration of Counselors)

(1) If a person qualified as a Counselor intends to begin performing duties as a Counselor as provided in Article 28 hereof, such person shall register with the Fair Trade Commission as prescribed by Presidential Decree.

(2) A Counselor who has registered pursuant to the foregoing Paragraph 1shall update such registration every five (5) years as determined by the Fair Trade Commission.

(3) Any person other than a Counselor who has registered pursuant to the foregoing Paragraph 1 shall not represent himself/herself as a Counselor provided in Article 27 hereof, nor use any similar terminology.

Article 30 (Responsibilities of Counselors)

(1) Counselors shall perform their duties in good faith, and maintain their dignity.

228 Competition Laws & Enforcement Decrees

(2) In performing their duties, Counselors shall not deliberately

conceal the truth, nor make any false report.

Article 31 (Cancellation of Registration and Suspension of Qualification)

(1) If any Counselor who has registered pursuant to Article 29 hereof

falls under any of the following, the Fair Trade Commission may

revoke the registration of such Counselor; provided, however, that

the Fair Trade Commission shall revoke such registration in the

case of Subparagraphs 1 and 2:

1. If a Counselor has made or updated a registration by fraud or other

illegal means;

2. If a Counselor comes to fall under any of the reasons for

disqualification set forth in Paragraph 2, Article 27 hereof;

3. If a Counselor divulges to a third party any secret of which the

Counselor gains knowledge in connection with counseling;

4. If a Counselor rents a certificate of registration as a Counselor to a

third party; and

5. If a Counselor, deliberately or by a material negligence, incurs

material damages to a third party in connection with counseling.

(2) Any Counselor who fails to update registration pursuant to

Paragraph 2, Article 29 hereof shall be subject to suspension of

qualification. In such case, the Counselor shall recover his/her

qualification from the time when such Counselor receives

supplementary education and updates his/her registration as

prescribed by the Fair Trade Commission in a public notice.

FAIR FRANCHISE TRANSACTIONS ACT 229

Chapter 5 Fair Trade Commission's Procedures of Handling Cases,

etc.

Article 32 (Restrictions on Acts Subject to Investigation) Franchise

transactions, which may be subject to investigation by the Fair Trade

Commission hereunder, shall be limited to those transactions

regarding which three (3) years have not elapsed yet from the date of

the completion thereof; provided, however, that the foregoing provision

shall not apply to Franchise transactions reported within three (3)

years from the date of completion thereof.

Article 33 (Corrective Measures)

(1) The Fair Trade Commission may order any Franchiser, who

violates Paragraph 1 of Article 7, Article 8, Article 9, Paragraph 1 of

Article 10, Paragraphs 1 through 3 of Article 11 and Paragraph 1 of

Article 12 hereof, to provide or modify an Information Disclosure

Statement, refund Franchise Fees, discontinue the violative act,

report a plan or an action for rectification of such violation, and take

other measures required to remedy such violation.

(2) If mediation by the Council is effectuated pursuant to Article 24

hereof, the Fair Trade Commission shall not order corrective

measures as provided in the foregoing Paragraph 1, nor recommend

correction as prescribed in Paragraph 1, Article 34 hereof, unless

there exist special circumstances.

(3) If the Fair Trade Commission issues a corrective order as provided in

the foregoing Paragraph 1, the Fair Trade Commission may order the

relevant Franchiser to make public that it has received a corrective order

or to give notice thereof to its counter-party in the transaction.

230 Competition Laws & Enforcement Decrees

Article 34 (Recommendation of Correction)

(1) If there is insufficient time to order corrective measures under Article 33 hereof against any Franchiser violating a provision hereof,

the Fair Trade Commission may formulate a plan to redress such situation and recommend such Franchiser to comply with such plan,

as prescribed by Presidential Decree. In such case, the Fair Trade Commission shall concurrently notify the Franchiser that if the

Franchiser accepts such recommendation, corrective measures shall

be deemed to have been taken.

(2) Any Franchiser, who receives such recommendation as provided in the foregoing Paragraph 1, shall notify the Fair Trade Commission

whether it accepts the recommendation within ten (10) days from the date of receipt of such recommendation.

(3) If any Franchiser, who receives such recommendation as provided in the foregoing Paragraph 1, accepts the recommendation, such

Franchiser shall be deemed to be subject to corrective measures pursuant to Article 33 hereof.

Article 35 (Surcharges) The Fair Trade Commission may impose penalty

surcharges against any Franchiser, who violates Paragraph 1 of Article

7, Article 8, Article 9, Paragraph 1 of Article 10, Paragraphs 1 through 3 of Article 11 and Paragraph 1 of Article 12 hereof, within the scope of

not exceeding an amount equivalent to its sales, as prescribed by Presidential Decree, multiplied by two hundredths (2/100).

Article 36 (Cooperation by the Heads of the Administrative Authorities

Concerned) The Fair Trade Commission may avail itself of the opinions of

the heads of the administrative authorities concerned or request such heads to provide personnel or other support required for an investigation, if

deemed necessary in its reasonable discretion, for enforcement hereof.

FAIR FRANCHISE TRANSACTIONS ACT 231

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

(1) In respect to an investigation, deliberation, decision-making and

recommen- dation of correction by the Fair Trade Commission hereunder,

the provisions of Article 42 (Proceedings of Meetings and Decision

Quorum) through Article 45 (Commissioner's Signature and Sealing),

Paragraphs 1 through 3 of Article 49 (Identification and Reporting of

Violations), Paragraphs 1 through 4 of Article 50 (Investigation of

Violations), Article 52 (Opportunity to State Opinions) through Article 53-2

(Suspension of Execution of Corrective Orders) and Article 55-2

(Procedures for Processing Cases) of the Monopoly Regulation and Fair

Trade Act shall apply mutatis mutandis.

(2) As regards the imposition and collection of penalty surcharges

hereunder, the provisions of Article 55-3 ( Imposition of Penalty

Surcharges) through Article 55-6 (Interest Payment on Refunded

Penalty Surcharges) of the Monopoly Regulation and Fair Trade Act

shall apply mutatis mutandis.

(3) With respect to the exclusive jurisdiction and compensation for

damage concerning a filing for objection, institution of a legal action

and an action for appeal hereunder, Article 53 (Appeal) through

Article 55 (Exclusive Jurisdiction over Actions for Appeal), and

Article 56 (Liability for Damages) through Article 57 (Judicial

Limitations on Claims for Damages) of the Monopoly Regulation and

Fair Trade Act shall apply mutatis mutandis; provided, however,

that Article 56 (Liability for Damages), Article 56-2 (Forwarding of

Documents) and Article 57 (Judicial Limitations on Claims for

Damages) of the Monopoly Regulation and Fair Trade Act shall not

apply mutatis mutandis in such cases as prescribed by Presidential

Decree including, but not limited to, those cases where a violation

perpetrated by a business entity or an organization of business

entities is insignificant or where it is of no practical benefit to take

232 Competition Laws & Enforcement Decrees

corrective measures since such business entity or organization has

already rectified such violation on its own. (4) As regards commissioners of the Fair Trade Commission and public

officials who are engaging or has engaged in duties hereunder or members of the Council who are taking or has taken charge of

mediation of disputes over Franchise transactions, Article 62 (Obligation to Preserve Confidentiality) of the Monopoly Regulation

and Fair Trade Act shall apply mutatis mutandis.

(5) With respect to the procedures regarding imposition and collection

of fines for negligence hereunder, Paragraphs 3 through 6, Article 69-2 (Fine for Negligence) of the Monopoly Regulation and Fair

Trade Act shall apply mutatis mutandis.

Article 38 (Relations with the Monopoly Regulation and Fair Trade Act)

With regard to matters concerning Franchise transactions which are subject to this Act, Subparagraph 1 (limited to acts to unfairly refuse

transactions), Subparagraph 3 (limited to acts to unfairly entice customers of competitor to engage in transactions), Subparagraph 4

and Subparagraph 5 (limited to the acts to make transactions on the condition of unfairly restricting the business activities of a transaction

counter-party) of Paragraph 1, Article 23 of the Monopoly Regulation

and Fair Trade Act and Paragraph 1, Article 29 thereof shall not apply.

Article 39 (Delegation and Commissioning of Authority)

(1) The authority of the Fair Trade Commission hereunder may be partially delegated to the heads of the institutions concerned, or the

mayor of special metropolitan city or metropolitan cities, or Do (province) chiefs, or commissioned to the heads of other administrative

authorities, as prescribed by Presidential Decree.

(2) The Fair Trade Commission may commission a relevant corporation

or group to perform execution and management of the qualification

FAIR FRANCHISE TRANSACTIONS ACT 233

examination and internship of Counselors pursuant to Paragraph 1, Article 27 hereof, as prescribed by Presidential Decree.

Article 40 (Report) The Fair Trade Commission may cause a person, who

is delegated or commissioned to perform duties as provided in Article 39 hereof, to make necessary reports as regards such delegated or

commissioned duties.

Chapter 6 Penalties

Article 41 (Penalties)

(1) Any person who provides false or exaggerated information or omits

material items in violation of Paragraph 1, Article 9 hereof shall be

punished by an imprisonment of not more than five (5) years or a fine of not more than 150 million Won (one hundred fifty million).

(2) Any person who falls under any of the following shall be punished

by an imprisonment of not more than three (3) years or a fine of not more than 100 million Won (one hundred million):

1. Any person who does not comply with an order for corrective measures under Paragraph 1, Article 33 hereof; and

2. Any person who violates Article 62 of the Monopoly Regulation and

Fair Trade Act which applies mutatis mutandis under Paragraph 4, Article 37 hereof.

(3) Any person who falls under any of the following shall be punished by an imprisonment of not more than two (2) years or a fine of not

more than 50 million Won (fifty million):

1. Any person who fails to provide an Information Disclosure Statement in violation of Paragraph 1, Article 7 hereof; and

234 Competition Laws & Enforcement Decrees

2. Any person who fails to update and modify an Information Disclosure Statement in violation of Article 8 hereof.

Article 42 (Fine for Negligence)

(1) If any Franchiser falls under the provisions of the following

Subparagraph 2 or 3, it shall be subject to a fine for negligence of

not more than 100 million Won(one hundred million). If it falls

under the provision of Subparagraph 1, it shall be subject to a fine

for negligence of not more than 50 million Won(fifty million):

1. Any person that does not make an appearance twice or more without

any justifiable reason in violation of Subparagraph 1, Paragraph 1,

Article 50 of the Monopoly Regulation and Fair Trade Act which

applies mutatis mutandis according to Paragraph 1, Article 37 hereof;

2. Any person that does not make a report or submit necessary data or

items without any justifiable reason as provided in Subparagraph 3,

Paragraph 1, Article 50 or Paragraph 3, Article 50 of the Monopoly

Regulation and Fair Trade Act which applies mutatis mutandis

according to Paragraph 1, Article 37 hereof, or makes a false report

or submits false data or items; and

3. Any person that refuses, obstructs or evades, without any justifiable

reason, an investigation under Paragraph 2, Article 50 of the

Monopoly Regulation and Fair Trade Act which applies mutatis

mutandis according to Paragraph 1, Article 37 hereof.

(2) If any Franchisee falls under the provisions of Subparagraph 2 or 3

of the foregoing Paragraph 1, it shall be subject to a fine for

negligence of not more than 100 million Won(one hundred million).

If it falls under the provision of Subparagraph 1, it shall be subject

to a fine for negligence of not more than 10 million Won(ten million).

FAIR FRANCHISE TRANSACTIONS ACT 235

(3) If an officer of Franchiser or Franchisee respectively falls under the

provision of Subparagraph 3 of the foregoing Paragraph 1, such

officer shall be subject to a fine for negligence of not more than 50

million Won (fifty million). If such officer falls under the provision of

Subparagraph 1 or 2, such officer shall be subject to a fine for

negligence of not more than 10 million Won (ten million).

(4) If an employee of Franchiser or Franchisee or a party with

equivalent legal interests respectively falls under the provision of

Subparagraph 3 of the foregoing Paragraph 1, such person shall be

subject to a fine for negligence of not more than 50 million Won (fifty

million). If such person falls under Subparagraph 2 or Subparagraph

1 of th e foregoing Paragraph 1, such person shall be respectively

subject to a fine for negligence of not more than 10 million Won (ten

million) and not more than 5 million Won (five million).

(5) Any person, who does not comply with an imperative to maintain

order under Article 43-2 of the Monopoly Regulation and Fair Trade

Act which applies mutatis mutandis according to Paragraph 1,

Article 37 hereof, shall be subject to a fine for negligence of not more

than 1,000,000 Won (one million).

(6) Any person, who fails to make evidentiary materials available or

does not comply with a request to provide relevant data in violation

of Paragraphs 2 and 3, Article 9 hereof, shall be subject to a fine for

negligence of not more than 10 million Won (ten million).

(7) Any person, who represents himself/herself as a Counselor or uses a

similar terminology in violation of Paragraph 3, Article 29 hereof

shall be subject to a fine for negligence of not more than 3 million

Won (three million).

236 Competition Laws & Enforcement Decrees

Article 43 (Joint Penal Provisions) If the representative, agent, employee

or worker of a corporation or an individual perpetrates a violation

under Article 41 hereof with respect to the business affairs of such

corporation or individual, such corporation or individual shall be

punished by a fine set forth in each paragraph of Article 41 hereof, in

addition to the due punishment of the violator.

Article 44 (Accusation)

(1) The crimes set forth in Paragraph 1, Subparagraph 1 of Paragraph

2 and Paragraph 3 of the foregoing Article 41 hereof may be subject

to prosecution, only when charges are brought by the Fair Trade

Commission.

(2) The Fair Trade Commission shall inform the Prosecutor General of

any crimes of which the severity of violation is deemed objectively

evident and material in its reasonable discretion, among the crimes

set forth in Paragraph 1, Subparagraph 1 of Paragraph 2 and

Paragraph 3 of the foregoing Article 41 hereof.

(3) The Prosecutor General may request the Fair Trade Commission to

bring charges by giving notice of any fact meeting the requirements

of such accusation as provided in the foregoing Paragraph 2. The

Fair Trade Commission shall comply with a request from the

Prosecutor General to make such charges.

(4) The Fair Trade Commission shall not rescind its charges after

prosecution has begun.

Addendum <Enacted May 13, 2002>

FAIR FRANCHISE TRANSACTIONS ACT 237

(1) (Date of Enforcement) This Act shall enter into force on November 1, 2002.

238 Competition Laws & Enforcement Decrees

(2) (Interim Provisions regarding Corrective Measures, Penalty Surcharges

and Penal Provisions) As regards application of corrective measures,

penalty surcharges and penal provisions against any violation of

Subparagraph 1 (limited to the acts to unfairly refuse transactions),

Subparagraph 3 (limited to the acts to unfairly entice the customers

of a competitor to engage in transactions), Subparagraph 4 and

Subparagraph 5 (limited to acts to make transactions on the

condition of unfairly restricting the business activities of a

transaction counter-party) of Paragraph 1, Article 23 of the existing

Monopoly Regulation and Fair Trade Act prior to the enforcement

hereof and Paragraph 1, Article 29 thereof, such Act shall apply.

Addendum <Jan. 20, 2004 Law No. 7109>

This Act shall enter into force from the date of its promulgation.


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