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STATUTES

THE REPUBLIC OF KOREA

Volume

FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

Act No. 6704, May 13, 2002

Amended by Act No. 7109, Jan. 20, 2004

Act No. 7315, Dec. 31, 2004

Act No. 7796, Jan. 29, 2005

Act No. 8630, Aug. 3, 2007

Act No. 10168, Mar. 22, 2010

Act No. 11323, Feb. 17, 2012

Act No. 12094, Aug. 13, 2013

Act No. 14135, Mar. 29, 2016

Act No. 14454, Dec. 20, 2016

Act No. 14812, Apr. 18, 2017

Act No. 14839, Jul. 26, 2017

Act No. 15360, Jan. 16, 2018

Act No. 15610, Apr. 17, 2018

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

Article 1

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 business 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 shall be defined as follows: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

1. The term "franchise business" means a continuous business relationship in which a franchiser allows its franchisees to use its own trade marks, service marks, trade names, signs, or any other business marks (hereinafter referred to as "business marks"; hereinafter the same shall apply) in selling goods (including raw materials and auxiliary materials) 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 franchise fees to their franchiser in return for the use of business marks 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;

Article 2

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 business;

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 business of a franchiser;

6. The term "franchise fee" means any of the following consideration, irrespective of the name or means of payment: Provided, That such consideration specified 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 business marks, or to receive support for and training on his/her business activities, such as membership fees, admission fees, franchise fees, training fees, or down payments;

(b) Consideration that a franchisee pays to a franchiser as a security for the payment of obligations or damages incurred in connection with the purchase price for commodities, etc. supplied by the franchiser;

Article 2

(c) Consideration that a franchisee pays to a franchiser as the price for fixture, facilities, or commodities supplied or a rent for real estate provided by the franchiser at the time a franchise license is granted in order to start a franchise business;

(d) Consideration that a franchisee pays to a franchiser, on a regular or irregular basis, for the use of business marks licensed under an agreement with the franchiser, support for and training on business activities, etc., and that is specified by Presidential Decree;

(e) Any other consideration that a prospective franchisee or a franchisee pays to a franchiser to acquire or maintain a franchise license;

7. The term "master franchisee" means a business entity that vicariously carries out all or some of the business affairs of a franchiser within a specific area under an agreement with the franchiser, such as the solicitation of franchisees, maintenance of the quality of commodities, and the support for, training on, and control of management and business activities of franchisees;

8. The term "franchise broker" means a person to whom a franchiser or master franchisee entrusts business affairs relating to the solicitation of franchisees, or the preparation or execution

Article 2

of franchise agreements;

9. The term "franchise agreement" means a document that describes stipulations (including special terms and conditions or cautions, if any) on the rights and obligations of a franchiser or a franchisee (hereinafter referred to as "party to franchise business") in respect of the specific details and conditions of the franchise business;

10. The term "information disclosure statement" means a document that contains matters specified by Presidential Decree with regard to the following items:

(a) The general status of a franchiser;

(b) The current status of the franchise business of a franchiser (including matters concerning sales of its franchisees);

(c) Where a franchiser or its executive officer (referring to an executive officer under subparagraph 5 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) falls under any of the following, the relevant fact:

i) Where it or he/she has violated this Act, the Monopoly Regulation and Fair Trade Act or the Act on the Regulation of Terms and Conditions;

ii) Where it or he/she has lost a civil suit or has come to an amicable settlement

Article 2

in a civil suit in relation to a crime of acquiring or defrauding another person's property, such as fraud, misappropriation or embezzlement;

iii) Where it or he/she has been sentenced for a crime of acquiring or defrauding another person's property such as fraud, embezzlement, or malpractice;

(d) Charges of franchisees;

(e) Conditions of and limitations on business activities;

(f) Detailed procedures for the commencement of franchise business and the duration required for the commencement of business;

(g) Explanations on the management of a franchiser and support for and education and training on business activities, etc.;

11. The term "improvements in the store environment" means replacing the existing facilities, equipment, interior, etc. of the store of a franchisee by those with a new deign or quality, or installing new facilities, equipment, interior, etc. In such cases, cases accompanied by or not accompanied by the expansion or relocation of the store shall be included;

12. The term "sales area" means an area where a franchisee sells products

Article 2

or services in accordance with a franchise agreement.

Article 3 (Exclusion from Application)

(1) This Act shall not apply to any of the following cases: <Amended by Act No. 11323, Feb. 17, 2012; Act No. 12094, Aug. 13, 2013>

1. Where the total franchise fee that a franchisee pays to a franchiser during the period of up to six months from the date of the initial payment of the franchise fee does not exceed an amount prescribed by Presidential Decree not exceeding one million won;

2. Where annual sales of a franchiser are less than a certain size prescribed by Presidential Decree not exceeding 200 million won: Provided, That this shall not apply where the number of franchisees which have entered into a contract with a franchiser is more than a number prescribed by Presidential Decree not less than five.

(2) Notwithstanding paragraph (1), Articles 9 and 10 (excluding Article 10 (1) 1) shall apply to all franchising trade. <Newly Inserted by Act No. 12094, Aug. 13, 2013>

CHAPTER II BASIC PRINCIPLES FOR FRANCHISE BUSINESS TRANSACTIONS

Article 4 (Principle of Good Faith)

Article 3 ~ 4

@Parties to franchise business shall perform their respective duties in good faith in engaging in franchise business.

Article 5 (Obligations of Franchisers)

Each franchiser shall observe the following obligations:

1. To devise business plans for the success of franchise business;

2. To continue efforts for the quality management of commodities or services and the development of sales techniques;

3. To provide franchisees with facilities for their stores and to supply them with commodities or services at reasonable prices and costs;

4. To provide franchisees and their employees with education and training;

5. To render constant advice and assistance to franchisees with respect to their management and business activities;

6. To refrain from establishing any direct retail store within the business territory of a franchisee or establishing a franchise store of any type of business similar to that of a franchisee;

7. To making efforts

Article 5

to settle any dispute arising in connection with a franchisee through dialog or negotiations.

Article 6 (Obligations of Franchisees)

Each franchisee shall fulfill the following obligations:

1. To endeavor to maintain the integrity of franchise business and the reputation of the franchiser;

2. To maintain inventory at a proper level to meet the supply plan of the franchiser and consumer demand, and to display commodities for that purpose;

3. To meet appropriate quality standards that the franchiser requires for commodities or services;

4. To use commodities or services provided by the franchiser if it is impossible to purchase commodities or services that meet the quality standards under subparagraph 3;

5. To meet appropriate standards that the franchiser requires with respect to facilities and the exterior of the place of business or means of transport;

6. To consult in advance with the franchiser when the franchisee changes commodities, services, or business activities that he/she has handled;

7. To maintain and provide data necessary to establish strategies for the integrated management and sales activities of the franchiser,

Article 6

such as accounting books related to the purchase and sale of commodities or services;

8. To allow executive officers, employees, and other agents of the franchiser to enter the franchisee's place of business for inspecting and recording the current status of business of the franchisee or data under subparagraph 7;

9. To refrain from relocating the place of business or transferring the franchise license to any third party without the consent of the franchiser;

10. To refrain from engaging in the same type of business as that of the franchiser during the term of a franchise agreement;

11. To refrain from divulging business knowhow or trade secrets of the franchiser;

12. To notify the franchiser of any infringement of business marks and provide appropriate cooperation as necessary for preventing infringement where a third party's infringement of business marks is discovered.

CHAPTER III FAIR TRANSACTIONS IN FRANCHISE BUSINESS

Article 6-2 (Registration, etc. of Information Disclosure Statemen

Article 6-2

ts)

(1) Each franchiser shall register an information disclosure statement to be provided to prospective franchisees with the Fair Trade Commission. <Amended by Act No. 12094, Aug. 13, 2013>

(2) Where a franchiser intends to alter matters prescribed by Presidential Decree among matters included in an information disclosure statement registered pursuant to paragraph (1), it shall register an alteration of included matters with the Fair Trade Commission within a period prescribed by Presidential Decree: Provided, That where it intends to alter insignificant matters prescribed by Presidential Decree, it shall report the alteration thereof. <Newly Inserted by Act No. 12094, Aug. 13, 2013>

(3) The Fair Trade Commission shall disclose any information disclosure statement which was registered, the alteration of which was registered or which was reported pursuant to paragraph (1) or (2): Provided, That 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 by Act No. 12094, Aug. 13, 2013; Act No. 14454, Dec. 20, 2016>

(4) The Fair Trade Commission shall, when it discloses an information disclosure statement pursuant to paragraph (3), notify in advance the relevant franchiser of the details to be disclosed and

Article 6-2

the method of disclosure and shall provide such franchiser with an opportunity to correct factual errors, if any. <Amended by Act No. 12094, Aug. 13, 2013; Act No. 14135, Mar. 29, 2016>

(5) For the purpose of disclosing information disclosure statements pursuant to paragraph (3), the Fair Trade Commission may establish and operate a franchise business information system, within the budgetary limits. <Amended by Act No. 12094, Aug. 13, 2013>

(6) Methods and procedures for the registration, alteration of registration, reporting, and disclosure of information disclosure statements shall be prescribed by Presidential Decree. <Amended by Act No. 12094, Aug. 13, 2013>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

#Article 6-2 (Registration, etc. of Information Disclosure Statements)

(1) Each franchiser shall register an information disclosure statement 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 "City Mayor/Do Governor"), as prescribed by Presidential Decree. <Amended by Act No. 12094, Aug. 13, 2013; Act No. 15360, Jan. 16, 2018>

Article 6-2

(2) Where a franchiser intends to alter matters prescribed by Presidential Decree among matters included in an information disclosure statement registered pursuant to paragraph (1), it shall register an alteration of included matters with the Fair Trade Commission or with the competent City Mayor/Do Governor within a period prescribed by Presidential Decree: Provided, That where it intends to alter insignificant matters prescribed by Presidential Decree, it shall report the alteration thereof. <Newly Inserted by Act No. 12094, Aug. 13, 2013; Act No. 15360, Jan. 16, 2018>

(3) The Fair Trade Commission and a City Mayor/Do Governor shall disclose any information disclosure statement which was registered, the alteration of which was registered or which was reported pursuant to paragraph (1) or (2): Provided, That 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 by Act No. 12094, Aug. 13, 2013; Act No. 14454, Dec. 20, 2016; Act No. 15360, Jan. 16, 2018>

(4) The Fair Trade Commission and every City Mayor/Do Governor shall, when it discloses an information disclosure statement 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 by Act No. 12094, Aug. 13, 2013; Act No. 14135, Mar. 29, 2016; Act No. 15360, Jan.

Article 6-2

16, 2018>

(5) For the purpose of disclosing information disclosure statements pursuant to paragraph (3) (including cases where a City Mayor/Do Governor discloses an information disclosure statement), the Fair Trade Commission may establish and operate a franchise business information system, within the budgetary limits. <Amended by Act No. 12094, Aug. 13, 2013; Act No. 15360, Jan. 16, 2018>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] <<Enforcemenet Date : Jan. 1, 2019>>

Article 6-3 (Refusal of Registration of Information Disclosure Statements and Other Relevant Matters)

(1) Where an application for registration of information disclosure statements prescribed in Article 6-2 falls under any of the following cases, the Fair Trade Commission may refuse the registration of the information disclosure statement or request the modification thereof: <Amended by Act No. 14454, Dec. 20, 2016>

1. Where an information disclosure statement or any other application document contains any false representation or omits any

Article 6-3

necessary information;

2. Where the details of franchise business in an information disclosure statement include matters prohibited by other Acts.

(2) The Fair Trade Commission shall, when it registers an information disclosure statement, issue a registration certificate to the franchiser. <Amended by Act No. 14454, Dec. 20, 2016>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

#Article 6-3 (Refusal of Registration of Information Disclosure Statements and Other Relevant Matters)

(1) Where an application for registration of information disclosure statements prescribed in Article 6-2 falls under any of the following cases, the Fair Trade Commission and a City Mayor/Do Governor may refuse the registration of the information disclosure statement or request the modification thereof: <Amended by Act No. 14454, Dec. 20, 2016; Act No. 15360, Jan. 16, 2018>

1. Where an information disclosure statement or any other application document contains any false representation or omits any necessary information;

2. Where the details of franchise business in an information disclosure statement include matters prohibited by other Acts.

Article 6-3

(2) The Fair Trade Commission and a City Mayor/Do Governor shall, when it registers an information disclosure statement, issue a registration certificate to the franchiser. <Amended by Act No. 14454, Dec. 20, 2016; Act No. 15360, Jan. 16, 2018>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] <<Enforcemenet Date : Jan. 1, 2019>>

Article 6-4 (Revocation of Registration of Information Disclosure Statements)

(1) Where any information disclosure statement falls under any of the following cases, the Fair Trade Commission may revoke its registration: Provided, That where it falls under subparagraphs 1 and 2, the Fair Trade Commission shall revoke its registration: <Amended by Act No. 12094, Aug. 13, 2013; Act No. 14454, Dec. 20, 2016>

1. Where an information disclosure statement is registered by fraud or other improper means;

2. Where an information disclosure statement falls under Article 6-3 (1) 2;

3. Where any important matter prescribed by Presidential Decree (hereinafter referred to as "important matter") is omitted from among the matters referred to in the items of subparagraph

Article 6-4

10 of Article 2;

4. Where a franchiser reports the cessation of business;

5. Where a franchiser requests the Fair Trade Commission to revoke the registration of an information disclosure statement.

(2) The Fair Trade Commission may disclose a list of franchisers whose registration of an information disclosure statement has been revoked. <Newly Inserted by Act No. 12094, Aug. 13, 2013>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

#Article 6-4 (Revocation of Registration of Information Disclosure Statements)

(1) Where any information disclosure statement falls under any of the following cases, the Fair Trade Commission and a City Mayor/Do Governor may revoke its registration: Provided, That where it falls under subparagraphs 1 and 2, the Fair Trade Commission shall revoke its registration: <Amended by Act No. 12094, Aug. 13, 2013; Act No. 14454, Dec. 20, 2016; Act No. 15360, Jan. 16, 2018>

1. Where an information disclosure statement is registered by fraud or other improper means;

2. Where an information disclosure statement falls under Article 6-3 (1)

Article 6-4

3. Where any important matter prescribed by Presidential Decree (hereinafter referred to as "important matter") is omitted from among the matters referred to in the items of subparagraph 10 of Article 2;

4. Where a franchiser reports the cessation of business;

5. Where a franchiser requests the Fair Trade Commission to revoke the registration of an information disclosure statement.

(2) The Fair Trade Commission and a City Mayor/Do Governor may disclose a list of franchisers whose registration of an information disclosure statement has been revoked. <Newly Inserted by Act No. 12094, Aug. 13, 2013; Act No. 15360, Jan. 16, 2018>

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] <<Enforcemenet Date : Jan. 1, 2019>>

Article 6-5 (Deposit, etc. of Franchise Fees)

(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 franchise fees (limited to consideration specified in subparagraph 6 (a) or (b) of Article 2 and paid in the form of money and including franchise fees paid before entering into an agreement, if any; hereinafter referred to as "franchise deposit") in an institution

Article 6-5

designated by Presidential Decree (hereinafter referred to as "depository"): Provided, That the foregoing shall not apply where a franchiser enters into an indemnity insurance contract, etc., for its franchisees pursuant to Article 15-2. <Amended by Act No. 14135, Mar. 29, 2016>

(2) When the head of the depository receives a franchise deposit from a franchisee, he/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 ten days therefrom:

1. When a franchisee commences business;

2. When two months have passed since the execution date of a franchise agreement: Provided, That the foregoing shall not apply where a franchisee notifies, in writing, to the head of the depository that he/she has taken a measure under any provisions of subparagraphs 1 through 3 of paragraph (5) 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

Article 6-5

cases under subparagraphs 1 through 3, t ad of t depository shall withhold the payment of a franchise deposit until the results of mediation by the Franchise Business 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/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/her franchise deposit;

2. If a franchisee files an application for intercession, mediation, or arbitration seeking refund of his/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).

Article 6-5

(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/her franchise deposit with the consent of the franchiser, the head of the depository shall return the franchise deposit to the franchisee within ten days from the date of such request, notwithstanding paragraphs (5) and (6).

(8) Other necessary matters concerning the deposit of a franchise fee shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

Article 7 (Duty to Provide Information Disclosure Statements)

(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 an information disclosure statement 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 information disclosure statement may be objectively confirmed. <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug.

Article 7

13, 2013>

(2) Where a franchiser provides an information disclosure statement pursuant to paragraph (1), it shall provide the information disclosure statement along with a document (hereinafter referred to as "document stating the current status of neighboring franchisees") stating trade names, locations and telephone numbers of ten 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 ten at the time the franchisor provides the information disclosure statement, referring to all franchisees in the relevant metropolitan local government): Provided, That where the place planned for the future store has not been determined when the franchiser provides the information disclosure statement, it shall provide the information disclosure statement as soon as the prospective franchisee determines the place planned for the future store. <Newly Inserted by Act No. 12094, 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 "information disclosure statement, 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 an information disclosure statement) have passed from the date it provides the information

Article 7

disclosure statement, etc., it shall not engage in any of the following acts: <Newly Inserted by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

1. Receiving franchise fees from a prospective franchisee. In such cases, if a prospective franchisee has deposited his/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 franchise fee);

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

(4) The Fair Trade Commission may prepare a standard form of information disclosure statement and recommend franchisers or a trade association comprised of franchisers to use such form.

Article 8 Deleted. <by Act No. 8630, Aug. 3, 2007>

Article 9 (Prohibition on Providing False or Exaggerated Information, etc.)

(1) No franchiser shall engage in the following acts when it provides prospective franchisees or franchisees with information: <Amended Act No. 12094, Aug. 13, 2013>

1. Providing information different from fact or exaggerated information

Article 8 ~ 9

(hereiafter referred to as "providig 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 acts referred to in the subparagraphs of paragraph (1) shall be prescribed by Presidential Decree. <Newly Inserted Act No. 12094, Aug. 13, 2013>

(3) When any franchiser provides its prospective franchisees or franchisees with any of the following information, it shall provide such information in writing: <Amended by Act No. 8630, Aug. 3, 2007>

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 franchisor 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 specified by Presidential Decree at its office and shall allow any prospective franchisee or franchisee to inspect such materials

Article 9

at any time during business hours, upon request by the prospective franchisee or a franchisee. <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, 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"): <Newly Inserted Act No. 12094, 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. <Newly Inserted Act No. 12094, 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

Article 9

to use the standard form thereof. <Newly Inserted Act No. 12094, Aug. 13, 2013>

Article 10 (Return of Franchise Fees)

(1) Where any franchiser falls under any of the following cases, it shall return the relevant franchise fee to a prospective franchisee or franchisee within one month from the date the prospective franchisee or franchisee makes a written request describing matters specified by Presidential Decree: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

1. If the franchiser violates Article 7 (3) and the prospective franchisee or franchisee requests the return of the franchise fee before the execution date of the franchise agreement or within four months after the execution date of the franchise agreement;

2. If the franchiser violates Article 9 (1) and the prospective franchisee requests the return of the franchise fee before the franchise agreement is entered into;

3. If the franchiser violates Article 9 (1) and the franchisee requests the return of the franchise fee within four months from the execution date of the franchise agreement as it is found that the statement of false or exaggerated information or the omission of any important matter had material effect on the execution of the agreement;

4. If the franchiser unilaterally ceases the franchise business without

Article 10

jus cause and a franchisee requess he reurn of he franchise fee within four months from the cessation date of the franchise business specified by Presidential Decree.

(2) In determining the amount of the franchise fee that shall be returned pursuant to paragraph (1), circumstances leading to the execution of the relevant franchise agreement, nature of the consideration paid either in the form of money or otherwise, term of the franchise agreement, performance period of the franchise agreement, and the degree of fault to each party of the franchise business shall be taken into account. <Amended by Act No. 8630, Aug. 3, 2007>

Article 11 (Matters to Be Included, etc. in Franchise Agreement)

(1) If 14 days have not elapsed from the date a franchiser provides its prospective franchisees with a document describing matters under the subparagraphs of paragraph (2) to help the prospective franchisees understand in advance details of the franchise agreement, the franchiser shall not engage in any of the following acts: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14812, Apr. 18, 2017>

1. Receiving a franchise fee from a prospective franchisee. In such cases, if a prospective franchisee has deposited his/her franchise deposit in the depository, it shall be deemed that he/she 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 franchise fee if the agreement on such date exists);

Article 11

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

(2) Each franchise agreement shall include the following: <Amended by Act No. 8630, Aug. 3, 2007>

1. Matters concerning the grant of a license for business marks;

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 franchise fees and others;

5. Matters concerning the demarcation of business 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

Article 11

a franchise deposit shall be deposited in the depository for two months from the date the prospective franchisee or franchisee enters into the franchise agreement (or until the date of commencement of the franchise business, where the franchisee commences the franchise business before the expiration of such two months): Provided, That 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 or a franchise trader under Article 27, if it is the case;

11. Other matters specified by Presidential Decree concerning the rights and obligations of parties to franchise business.

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

(4) The Fair Trade Commission may recommend each franchiser to prepare and use a standard franchise agreement form for specific franchise business transactions in order to establish the sound order in franchise business transactions and prevent unfair franchise agreements from being widely used.

Article 12 (Prohibition on Unfair Trade Practices)

(1) No franchiser

Article 12

shall engage in, or cause any oth business entity to engage in, any of the following acts that are likely to hamper fair franchise business transactions: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013; Act No. 14135, Mar. 29, 2016>

1. Suspending or refusing the supply of commodities or services or business assistance to a franchisee or placing significant limitations thereon;

2. Imposing unfair restraints or limitations on the prices of commodities or services that a franchisee handles, or on customers, business territory, or business activities of a franchisee;

3. Putting a franchisee at an unfair disadvantage by abusing its position in transactions;

4. Deleted; <by Act No. 12094, Aug. 13, 2013>

5. Unreasonably imposing obligations to compensate for damage on a franchisee, imposing an excessive penalty compared with criteria prescribed by Presidential Decree, such as the purpose and contents of an agreement, and losses that will occur;

6. Any act that does not fall under subparagraphs 1 through 3 and 5, which is likely to interfere with fair transactions in franchising, such as inducing franchisees of a competing franchiser to conduct transactions with the franchiser.

Article 12

(2) The types of and criteria for the acts specified in each subparagraph of paragraph (1) shall be prescribed by Presidential Decree.

Article 12-2 (Prohibition of Unfair Pressure to Improve Store Environment, etc.)

(1) No franchiser shall compel a franchisee to improve the store environment without just cause prescribed by Presidential Decree.

(2) A franchiser shall bear an amount of money equivalent to a percentage prescribed by Presidential Decree not exceeding 40/100 of costs prescribed by Presidential Decree, for costs incurred in improving the store environment of a franchisee: Provided, That this shall not apply where the franchisee falls under any of the following:

1. Where the franchisee voluntarily makes improvements in the store environment although the franchiser does not make persuasion or a request;

2. Where the franchisee inevitably makes improvements in the store environment because sanitation problems, safety problems, and other similar problems occur due to reasons imputable to him/her.

(3) The calculation of, claim for, and procedures for payment of costs to be

Article 12-2

born by th franchisr pursuant to paragraph (2), and other necessary matters shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

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

(1) No franchiser shall perform an unfair act of restricting business hours of a franchisee (hereinafter referred to as "unfair restrictions on business hours") in the light of normal transaction practices.

(2) Any of the following acts done by a franchiser shall be deemed unfair restrictions on business hours:

1. Although a franchisee requests the franchiser to permit the reduction of business hours because sales in the midnight business hours prescribed by Presidential Decree are sluggish compared with expenses incurred in conducting such business due to reasons such as characteristics of the business district where a store of the franchisee is located and an operating loss occurs during a certain period prescribed by Presidential Decree, not permitting the reduction of business hours;

2. Although a franchisee requests the franchiser to permit the reduction of business hours within the range least necessary due to inevitable reasons such as the occurrence and treatment

Article 12-3

of a disease, not permitting the reduction of business hours.

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

Article 12-4 (Prohibition of Unfair Violation of Sales Areas)

(1) A franchiser shall designate a sales area for a franchisee and mention such sales area in a franchise agreement when it enters into the franchise agreement with the franchisee.

(2) Where a franchiser intends to change the existing sales area due to the occurrence of causes prescribed by Presidential Decree, such as drastic change in commercial districts, in the course of renewing the franchise agreement, he/she shall reach an agreement with the franchisee. <Amended by Act No. 15360, Jan. 16, 2018>

(3) No franchiser shall open a direct retail store or a franchise store (referring to an affiliated company under subparagraph 3 of Article 2 of the Monopoly Regulation and Fair Trade Act: hereinafter the same shall apply) of its owned store or its affiliated company of the same type of business (referring to the type of business that may be recognized as the same type of business in the light of the regional and human range of the demanding class, items dealt in, a form and method of trading) as that of a franchisee within the sales area for the franchisee during the period of franchise agreement without just ground. <Amended by Act No. 15360, Jan. 16, 2018>

[This Article Newly

Article 12-4

Inserted by Act No. 12094, Aug. 13, 2013]

Article 12-5 (Prohibition of Measures of Retaliation)

No franchiser shall inflict suspension, rejection, or limitation on the supply of products or services or on the provision of supports for business management or business activities, withdrawal of franchise agreements and other disadvantages to a franchisee, nor make affiliated companies or other business operators conduct such acts on the ground that the franchisee conducts any of the following acts:

1. Applying for mediation prescribed in Article 22 (1);

2. Rendering cooperation with written fact-finding surveys conducted by the Fair Trade Commission, provided for in Article 32-2;

3. Rendering cooperation with reporting provided for in Article 32-3 (1) and investigations conducted by the Fair Trade Commission provided for in paragraph (2) of the same Article.

[This Article Newly Inserted by Act No. 15360, Jan. 16, 2018]

Article 12-6 (Notification, etc. of Execution Details of Advertising and Promotional Events)

(1) Where the franchiser holds advertising and promotional events whose expenses are borne fully or partially by a franchisee, it shall notify

Article 12-5 ~ 12-6

the franchisee of the execution details and allow the franchisee to peruse the details if requested.

(2) Specific time, methods, or processes regarding the notification or perusal of execution details under Article 1 shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 14135, Mar. 29, 2016]

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

Where necessary for the establishment of fair trade order in franchising, the Fair Trade Commission may establish the basis for desirable transactions for each type of business and recommend franchisers to comply with such basis.

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

Article 13 (Renewal, etc. 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 justifiable reasons: Provided, That the foregoing shall not apply to any of the following cases:

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

Article 12-7 ~ 13

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 business 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;

(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 business in a normal condition and specified 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 ten years.

Article 13

(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, That the foregoing 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 specified by Presidential Decree occurs to a franchiser or franchisee.

[This Article Wholly Amended by Act No. 8630, Aug. 3, 2007]

Article 14 (Limitations on Termination of Franchise Agreement)

(1) Any franchiser that intends to terminate a franchise agreement shall clearly state the franchisee's breach of the agreement during the grace period of not less than two months and shall give written notice at least twice that it will terminate the agreement unless such breach is corrected during the given period: Provided, That the foregoing shall not apply to cases specified by Presidential Decree as it is difficult to continue

Article 14

franchise business transactions. <Amended by Act No. 8630, Aug. 3, 2007>

(2) The termination of a franchise agreement without complying with the procedure under paragraph (1) shall not have the effect.

Article 14-2 (Consultation, etc. on Alteration of Conditions of Trade of Franchisees Association)

(1) Franchisees may form an organization (hereinafter referred to as "franchisees association") in order to protect their rights and interests and promote improvements in economic status.

(2) A franchisees association only composed of franchisees (in the case of franchisees entering into an agreement with a franchiser that has multiple trademarks, limited to franchisees who use the same trademark) who enter into and maintain a franchise agreement with a specific franchiser may request such franchiser to hold consultations on the conditions of trade (hereafter in this Article referred to as "conditions of trade"), such as an alteration of the franchise agreement.

(3) Where a franchiser receives a request for consultation under paragraph (2), it shall comply with such request for consultation faithfully: Provided, That where multiple franchisees associations request consultations, the franchiser shall first hold a consultation with a franchisees association composed of the majority of franchisees.

Article 14-2

(4) In relation to consultations under paragraph (2), no franchisees association shall request the conditions of trade against the unity or essential matters of franchising, interfere with the management of a franchiser or unfairly restrict competition.

(5) No franchiser shall penalize franchisees on the pretext of the formation, membership, activities, etc, of a franchisees association or enter into a franchise agreement on condition that a franchisee must or must not join the franchisees association.

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

Article 15 (Voluntary Code of Practice)

(1) In order to maintain fair trading practices for franchise business, any franchiser or trade association comprised of franchisers may introduce a code of practice on a voluntary basis.

(2) Any franchiser or trade association comprised of franchisers that intends to introduce a voluntary code of practice pursuant to paragraph (1) may request the Fair Trade Commission to examine whether any provision of such code violates Article 12 (1).

(3) The Fair Trade Commission in receipt of a request for the examination on a voluntary code of practice pursuant to paragraph (2) shall notify the applicant of the results of the examination within

Article 15

60 days from the date of such request.

Article 15-2 (Indemnity Insurance Contract, etc., for Franchisees)

(1) In order to compensate losses sustained by franchisees, any franchiser may enter into any of the following contracts (hereinafter referred to as "indemnity insurance contract, etc., for franchisees"): <Amended by Act No. 11323, Feb. 17, 2012>

1. An insurance contract under the Insurance Business Act;

2. A debt guarantee contract with an institution under Article 38 of the Act on the Establishment, etc. of Financial Services Commission for securing the payment of indemnity for franchisees;

3. A mutual aid contract with a mutual aid association established pursuant to Article 15-3.

(2) Any person who owes an obligation to pay indemnity to a franchisee under an indemnity insurance contract, etc., for franchisees shall pay such indemnity without delay when a cause for the payment occurs. If the person delays the payment of such indemnity, he/she shall pay default interest thereon.

(3) Any franchiser that intends to enter into an indemnity insurance contract, etc., for franchisees shall not submit false data on sales and other relevant facts in order to enter into an indemnity

Article 15-2

insurance contract, etc., for franchisees.

(4) Each franchiser shall ensure that an indemnity insurance contract, etc., for franchisees, which it intends to enter into, shall be at an appropriate level to cover losses sustained by franchisees.

(5) Any franchiser that has entered into an indemnity insurance contract, etc., for franchisees may use a mark indicating such fact.

(6) Any franchiser that fails to enter into an indemnity insurance contract, etc., for franchisees shall neither use the mark under paragraph (5) nor produce or use any similar mark.

(7) Other necessary matters concerning an indemnity insurance contract, etc., for franchisees shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 8630, 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"), subject to 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.

Article 15-3

(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) Legal capital of a mutual aid association shall be constituted 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) Necessary matters concerning 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 otherwise

Article 15-3

provided by 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 Newly Inserted by Act No. 8630, Aug. 3, 2007]

Article 15-4 (Encouragement, etc. of Conclusion of Agreement between Franchisers and Franchisees)

(1) The Fair Trade Commission may encourage franchisers and franchisees to voluntarily enter into an agreement promising the observance of statutes related to franchising and mutual support and cooperation.

(2) Where franchisers and franchisees enter into an agreement under paragraph (1), the Fair Trade Commission shall formulate and implement a support plan, such as reward, in order to encourage them to execute such agreement.

(3) The Fair Trade Commission shall determine matters necessary for the content of an agreement, procedures for the conclusion thereof, evaluation of the actual results of the execution thereof, support plan, etc. under paragraphs (1) and (2).

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

Article 15-5 (Report Rewards)

Article 15-4 ~ 15-5

(1) The Fair Trade Commission may give a monetary reward to persons who report or inform of offenses against this Act and present evidential materials to prove such report or information within budgetary limits.

(2) Matters necessary for the scope of persons eligible for monetary rewards provided for in paragraph (1), standards and procedures for giving monetary rewards, etc. shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 15360, Jan. 16, 2018]

CHAPTER IV MEDIATION, ETC. OF DISPUTES

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

There is established in the Korea Fair Trade Mediation Agency under Article 48-2 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "KOFAIR") a Franchise Business Transaction Dispute Mediation Council (hereinafter referred to as the "Council") in order to mediate disputes on franchise business.

[This Article Wholly Amended by Act No. 8630, Aug. 3, 2007]

Article 17 (Composition of Council)

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

Article 16 ~ 17

(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) Members shall be appointed or commissioned by the Chairperson from among persons recommended by the head of KOFAIR and persons falling under any of the following subparagraphs: <Amended by Act No. 7796, Dec. 29, 2005; Act No. 8630, Aug. 3, 2007>

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 adjunct professor or in an equivalent or higher position;

2. Persons who have served or who currently serve as a judge or a prosecutor or who were admitted to the bar;

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) The Chairperson shall be commissioned by the Chairman of the Fair Trade Commission

Article 17

from among members representing public interest. <Amended by Act No. 8630, Aug. 3, 2007>

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

(6) If a vacancy occurs on 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/her predecessor.

Article 18 (Restriction on Commissioning Members Representing Public Interest)

(1) No members representing public interest shall be commissioned from among persons who serve as an executive officer or employee of a franchiser or franchisee as at the date of the commissioning.

(2) The Chairman of the Fair Trade Commission shall immediately decommission any person commissioned as a member representing public interest if the person becomes an executive officer or employee of a franchiser or franchisee. <Amended by Act No. 8630, Aug. 3, 2007>

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

Article 18 ~ 19

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 by Act No. 8630, Aug. 3, 2007>

(2) Plenary meetings of the Council shall deliberate on and pass resolutions on the following matters: <Newly Inserted by Act No. 12094, 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 the subparagraphs of paragraph (2). <Newly Inserted by Act No. 12094, Aug. 13, 2013>

(4) Plenary meetings of the Council shall be presided over by the Chairperson, which shall open with the attendance of the majority of the incumbent members, and adopt resolutions by an affirmative vote of the majority of the members present. <Amended by Act No. 8630, Aug. 3, 2007>

Article 19

(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 an affirmative 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. <Amended by Act No. 8630, Aug. 3, 2007>

(6) In case of the absence from duty of the Chairperson from whatever cause arising, any member designated by the Chairman of the Fair Trade Commission from among members representing public interest shall exercise and perform all the duties of the Chairperson. <Amended by Act No. 8630, Aug. 3, 2007>

(7) Any party to franchise business 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/her opinion or submit relevant documents.

Article 20 (Exclusion, Challenge, or Avoidance of Members)

(1) Any of the following members shall be excluded from the mediation: <Amended by Act No. 14135, Mar. 29, 2016>

1. If the member or his/her spouse or ex-spouse is a disputing party to the case brought for mediation or is in a relationship of a joint right-holder or obligor with the disputing party;

Article 20

2. If the member is or was a relative of a disputing party to the case brought for mediation;

3. If the member or a corporation to which the member belongs serves as a consultant or advisor for legal affairs or business management of a disputing party;

4. If the member or a corporation to which the member belongs is or was involved in the dispute brought for mediation as an agent of a disputing party or has ever testified as a witness or an expert witness in regard to the dispute.

(2) If any member is not in a position to be fair in the mediation of the Council, a disputing party may file an application for challenge against such member with the Council. <Amended by Act No. 14135, Mar. 29, 2016>

(3) Any member who has an excuse under paragraph (1) or (2) may voluntarily avoid participating in the mediation of the dispute. <Amended by Act No. 14135, Mar. 29, 2016>

Article 21 (Matters Subject to Mediation of Council)

The Council shall mediate disputes arising from franchise business transactions at the request of the Fair Trade Commission or a disputing party.

Article 22 (Application for Mediation and Relevant Matters)

(1) Any disputing

Article 21 ~ 22

party may file a written application for mediation of matters specified by Presidential Decree with the Council pursuant to Article 21.

(2) The Fair Trade Commission may request the Council to mediate disputes arising from franchise business transactions.

(3) The Council shall, upon receiving an application for mediation of a dispute pursuant to paragraph (1), immediately notify the disputing parties of the matters brought for mediation. <Amended by Act No. 8630, Aug. 3, 2007>

(4) An application for mediation of a dispute filed under paragraph (1) shall have the effect of interruption of extinctive prescription: Provided, That the foregoing shall not apply when the application is withdrawn or rejected. <Newly Inserted by Act No. 14812, Apr. 18, 2017>

(5) In cases falling under the proviso to paragraph (4), 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: <Newly Inserted by Act No. 14812, Apr. 18, 2017>

(6) Extinctive prescription interrupted under the main body of paragraph (4) shall run anew in any of the following cases: <Newly Inserted by Act No. 14812, Apr. 18, 2017>

1. Where a mediation

Article 22

report is prepared after the med of the dispute is concluded;

2. Where the mediation ends failing to mediate the dispute.

Article 23 (Mediation, etc.)

(1) The Council shall initiate a dispute mediation procedure without delay pursuant to Presidential Decree upon the receipt of an application for mediation under Article 22 (1) or a request for mediation under paragraph (2) of the same Article. <Newly Inserted by Act No. 14135, Mar. 29, 2016>

(2) The Council may recommend the disputing parties to reconcile with one another in relation to matters dealt with in the mediation, or present mediation proposals by preparing them.

(3) The Council may refuse or suspend the mediation procedure in any of the following cases: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14135, Mar. 29, 2016>

1. If one of the disputing parties refuses the mediation;

2. If a lawsuit has been already filed with the court; if a lawsuit is filed with the court after an application for mediation is filed; or if the disputing parties reach an arbitration agreement under the Arbitration Act after filing an application for mediation;

3. If the mediation has no practical benefit because the contents of the

Article 23

application are verified by t relevant statutes or objective data, and any event specified by Presidential Decree occurs.

(4) The Council shall terminate the mediation procedure in any of the following cases: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14135, Mar. 29, 2016>

1. If the mediation is successfully concluded because the disputing parties accept the Council's recommendation or mediation proposals, or reconcile with one another, etc.;

2. If 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. If the mediation is suspended pursuant to paragraph (3) and the continuance of the mediation procedure has no practical benefit.

(5) Where the mediation is refused or suspended pursuant to paragraph (3) or the procedure thereof is terminated pursuant to paragraph (4), the Council shall report in writing the mediation details, the grounds on which the mediation is refused or suspended, or terminated, along with relevant documents to the Fair Trade Commission without delay, and notify the disputing parties accordingly. <Amended by Act No. 14135, Mar. 29, 2016>

Article 23

(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 by Act No. 14135, Mar. 29, 2016>

(7) The Fair Trade Commission shall not recommend or order that the disputing parties take corrective measures regarding the mediation until the mediation procedure is completed: Provided, That the foregoing shall not apply to cases being investigated by the Fair Trade Commission pursuant to Article 32. <Amended by Act No. 14135, Mar. 29, 2016>

Article 24 (Preparation and Effects of Mediation Protocols)

(1) When the mediation is successfully concluded for matters dealt with in the mediation, the Council shall prepare a mediation protocol to which the Council members who have participated in the mediation and the disputing parties affix their names and seals or write down their names. <Amended by Act No. 14135, Mar. 29, 2016; Act No. 15610, Apr. 17, 2018>

(2) Where the disputing parties reconcile with one another and request the preparation of a mediation protocol before the commencement of mediation procedure, the Council shall prepare the mediation protocol. <Amended by Act No. 14135, Mar. 29, 2016>

(3) Where the mediation protocol has been prepared under Article 1 or 2, the protocol shall have the same effect as a judicial reconciliation.

Article 24

Article 25 (Provisions Governing Organizational Structure, etc. of Council)

Necessary matters concerning the organizational structure and operation of the Council and mediation procedures shall be prescribed by Presidential Decree in addition to the provisions of Articles 16 through 24.

Article 26 Deleted. <by Act No. 8630, Aug. 3, 2007>

Article 27 (Franchise Traders)

(1) Any person who successfully passes the franchise trader qualifying examination conducted by the Fair Trade Commission and who completes on-the-job training, as prescribed by Presidential Decree, shall be qualified for a franchise trader. <Amended by Act No. 7109, Jan. 20, 2004; Act No. 8630, Aug. 3, 2007>

(2) No person who falls under any of the following subparagraphs shall be qualified for a franchise trader: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14812, Apr. 18, 2017>

1. A minor or a person under adult guardianship or limited guardianship;

2. A person declared

Article 25 ~ 27

bankrupt but not reinstated yet;

3. A person in whose case two years have not passed since his/her imprisonment without labor or any heavier punishment as sentenced by a court was completely executed (or is deemed to be completely executed) or exempted;

4. A person who is under the suspension of the execution of his/her imprisonment without labor or any heavier punishment as sentenced by a court;

5. A person in whose case two years have not passed since his/her registration as a franchise trader was revoked.

(3) Where a person who has applied for the examination referred to in paragraph (1) engages in cheating, the relevant examination shall be nullified, and he/she shall be disqualified for the examination for five years from the date he/she applied for the examination. <Newly Inserted by Act No. 14135, Mar. 29, 2016>

(4) Necessary matters concerning the qualifying examination and on-the-job training for franchise traders, such as the subjects and the method of testing for the examination and the period of on-the-job training shall be prescribed by Presidential Decree. <Newly Inserted by Act No. 7109, Jan. 20, 2004; Act No. 8630, Aug. 3, 2007>

Article 28 (Business of Franchise Traders)

Each franchise trader shall undertake the following duties: <Amended by

Article 28

Act No. 12094, Aug. 13, 2013; Act No. 14812, Apr. 18, 2017>

1. Review on the business profitability of franchising;

2. Preparation and modification of information disclosure statements and franchise agreements or provision of advice and suggestions thereon;

3. Provision of advice and suggestions on charges on franchisers and terms and conditions of business activities of franchising;

4. Provision of education and training of franchisees and advice and suggestions thereon;

5. Acting as an agent for filing an application for mediation of disputes arising from franchise business transactions and stating opinions;

6. Acting as an agent for registering an information disclosure statement.

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

Article 29 (Registration of Franchise Traders)

(1) Any person who is qualified as a franchise trader and intends to commence business as a franchise trader under Article 28 shall be registered with the Fair Trade Commission, as prescribed by Presidential Decree. <Amended by Act No. 7109, Jan. 20,

Article 29

2004; Act No. 8630, Aug. 3, 2007>

(2) Each franchise trader who is registered pursuant to paragraph (1) shall renew his/her registration every five years, as prescribed by the Fair Trade Commission. <Amended by Act No. 8630, Aug. 3, 2007>

(3) Any person who is not a franchise trader registered pursuant to paragraph (1) shall neither represent him/her as a franchise trader under Article 27 nor use any similar title. <Amended by Act No. 8630, Aug. 3, 2007>

Article 30 (Responsibilities of Franchise Traders)

(1) Each franchise trader shall perform his/her duties in good faith and maintain decency. <Amended by Act No. 8630, Aug. 3, 2007>

(2) No franchise trader shall intentionally conceal the truth or make a false report in performing his/her duties. <Amended by Act No. 8630, Aug. 3, 2007>

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

(1) The Fair Trade Commission may, if a franchise trader registered pursuant to Article 29 falls under any of the following subparagraphs, revoke the registration: Provided, That the registration must be revoked in the case of subparagraph 1 or 2: <Amended by Act No. 8630, Aug. 3, 2007>

Article 30 ~ 31

1. If the franchise trader is registered or renews registration by fraud or other improper means;

2. If the franchise trader comes to be disqualified under Article 27 (2);

3. If the franchise trader divulges confidential information known to him/her in the course of performing his/her duties to any third party;

4. If the franchise trader lends his/her registration certificate to any third party;

5. If the franchise trader inflicts serious damage upon any third party by intention or gross negligence.

(2) Any franchise trader who fails to renew his/her registration under Article 29 (2) shall lose his/her qualification. In such cases, his/her qualification shall be reinstated when the franchise trader receives in-service training and completes renewal of registration, as prescribed by Public Notification of the Fair Trade Commission. <Amended by Act No. 8630, Aug. 3, 2007>

(3) Where the Fair Trade Commission intends to revoke the registration of a franchise trader pursuant to paragraph (1), it shall hold a hearing. <Newly Inserted by Act No. 11323, Feb. 17, 2012>

Article 31-2 (Education, etc. on Franchise Business Transactions)

Article 31-2

(1) In order to establish a fair trading order for franchise business, the Fair Trade Commission may carry out the following activities:

1. Education and training of franchisers;

2. Education and training of prospective franchisees and franchisees;

3. Education and training of franchise traders (including on-the-job training under Article 27 (1));

4. Distribution and diffusion of voluntary compliance programs to induce franchisers to voluntarily observe this Act;

5. Other activities considered necessary for establishing a fair trading order for franchise business.

(2) The Fair Trade Commission may entrust business under paragraph (1) to institutions or organizations designated by the Fair Trade Commission (hereinafter referred to as "education institutes, etc."), which are corporations meeting the standards for facilities, human resources, and provision of education prescribed by Presidential Decree.

(3) In order to raise financial resources required for carrying out business under paragraph (1), education institutes, etc. may engage in any business for profit.

Article 31-2

(4) If any education institute, etc. fails to carry out business referred to in paragraph (1) in good faith or fails to meet the standards prescribed by Presidential Decree, the Fair Trade Commission may revoke the designation or suspend the efficacy of such designation for a prescribed period of not more than three months.

(5) Necessary matters concerning the procedure for, and the method of, designating education institutes, etc. and business for profit under paragraph (3) shall be determined and publicly notified by the Fair Trade Commission.

[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007]

CHAPTER V THE KOREA FAIR TRADE COMMISSION INVESTIGATION AND ENFORCEMENT PROCEDURE, ETC.

Article 32 (Limitation on Activities subject to Investigation)

Franchise business transactions subject to investigation by the Fair Trade Commission pursuant to this Act shall be limited to those for which three years have not passed since such transactions were closed: Provided, That the foregoing shall not apply to franchise business transactions reported within three years after the transactions were closed.

Article 32-2 (Written Fact-finding Surveys)

Article 32 ~ 32-2

(1) The Fair Trade Commission shall conduct fact-finding surveys in written form on trade between a franchiser and franchisees and publish the results thereof in order to establish fair trade order in franchising trade. <Amended by Act No. 14454, Dec. 20, 2016>

(2) Where the Fair Trade Commission intends to conduct a fact-finding survey in written form pursuant to paragraph (1), it shall formulate a plan on the scope of persons subject to the survey, the period, content, method of and procedure for the survey, and the scope of publication of the results of the survey, and may request persons subject to the survey to submit data necessary for the survey, such as the actual conditions of trade.

(3) Where the Fair Trade Commission requests persons subject to survey to submit data pursuant to paragraph (2), it shall notify them in writing, specifying the scope and content of data, grounds for request, deadline for submission, etc.

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013]

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

(2) Where the Fair

Article 32-2

Trade Commission intends to conduct a fact-finding survey in written form pursuant to paragraph (1), it shall formulate a plan on the scope of persons subject to the survey, the period, content, method of and procedure for the survey, and the scope of publication of the results of the survey, and may request persons subject to the survey to submit data necessary for the survey, such as the actual conditions of trade.

(4) No franchiser shall prevent a franchisee from submitting data provided for in paragraph (2) nor request a franchisee to submit false data. <Newly Inserted by Act No. 15610, Apr. 17, 2018>

[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] <<Enforcemenet Date : Oct. 18, 2018>>

Article 32-3 (Reporting on Offenses and Other Relevant Matters)

(1) Any person who finds a fact contravening this Act may report such fact to the Fair Trade Commission. In such cases, the Fair Trade Commission shall, if the reporting person agrees, notify the franchiser or the master franchisee of the fact that it has received such report.

(2) Where receiving a report mentioned in the former part of paragraph (1)

Article 32-3

or making an allegation that there is a violation of this Act, the Fair Trade Commission may conduct an investigation necessary therefor.

(3) Where the Fair Trade Commission gives notice to a franchiser or a master franchisee pursuant to the latter part of paragraph (1), peremptory notice prescribed in Article 174 of the Civil Act shall be considered to have been given: Provided, That the same shall not apply where the fact reported is not governed by this Act; the Fair Trade Commission has decided not to proceed with the procedures for deliberation due to the lapse of the deadline for limitation on activities subject to investigation prescribed in the main sentence of Article 32; the Fair Trade Commission has dropped the charges against the fact reported; or the reporting person has withdrawn the report.

(4) Where the Fair Trade Commission conducts an investigation pursuant to paragraph (2), it shall notify the persons concerned with the incident of the results thereof in writing (if intending to issue an order for corrective measure or other dispositions based on the results of the investigation, including the details of the disposition).

[This Article Newly Inserted by Act No. 14454, Dec. 20, 2016]

Article 33 (Corrective Measures)

(1) The Fair Trade Commission may order 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

Article 33

(5) or 15- (3) or (6) to deposit franchisee fees, provide information disclosure statements, pay expenses incurred in improvements in the store environment, return franchise fees, discontinue violations, report plans or actions necessary for correcting violations, or take other measures necessary for correcting violations. <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013; Act No. 14135, Mar. 29, 2016; Act No. 15360, Jan. 16, 2018>

(2) The Fair Trade Commission shall not take any corrective measure under paragraph (1) nor make a recommendation for correction under Article 34 (1) if mediation by the Council is successfully achieved pursuant to Article 24, in the absence of extenuating circumstances. <Amended by Act No. 8630, Aug. 3, 2007>

(3) When the Fair Trade Commission issues an order for correction pursuant to paragraph (1), it may order the relevant franchiser to make a public announcement that it receives such an order for correction or to give notice thereof to the trading partners. <Amended by Act No. 8630, Aug. 3, 2007>

Article 34 (Recommendation for Correction)

(1) If the Fair Trade Commission has no time to order a franchiser that violates this Act to take corrective measures under Article 33, it may prepare a correction scheme and recommend the franchiser to comply with such scheme, as prescribed by Presidential Decree. In such cases, the Fair Trade Commission shall also notify that the franchiser will be deemed to have taken corrective measures upon accepting the recommendation. <Amended

Article 34

by Act No. 14135, Mar. 29, 2016>

(2) A franchiser that receives a recommendation under paragraph (1) shall notify the Fair Trade Commission as to whether it accepts the recommendation within ten days from the date of receipt of notice of such recommendation. <Amended by Act No. 14135, Mar. 29, 2016>

(3) When a franchiser in receipt of a recommendation pursuant to paragraph (1) accepts the recommendation, it shall be deemed that corrective measures under Article 33 have been taken. <Amended by Act No. 14135, Mar. 29, 2016>

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, That 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 by Act No. 14135, Mar. 29, 2016; Act No. 15360, Jan. 16, 2018>

(2) Where the Fair

Article 35

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

1. The content and degree of a violation;

2. The period 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

Article 35

of a company ha is divided is merged ino anoher 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 by Act No. 12094, Aug. 13, 2013]

Article 36 (Cooperation of Heads of Relevant Administrative Agencies)

If the Fair Trade Commission deems it necessary to enforce this Act, it may seek opinions from the heads of relevant administrative agencies or request them to assign their employees to conduct investigations or provide other necessary cooperation.

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

(1) Articles 42,

Article 36 ~ 37

43 43-2 44 45 50 (1) through (4) 52 52-2 53 53-2 and 55-2 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to any investigation, deliberation, resolution, and recommendation for correction under this Act. <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14454, Dec. 20, 2016>

(2) Articles 55-4 through 55-8 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to the imposition and collection of penalty surcharges under this Act. <Amended by Act No. 7315, Dec. 31, 2004; Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

(3) Articles 53, 53-2, 54, and 55 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to any appeal, institution of lawsuits, and exclusive jurisdiction over lawsuits for appeal under this Act. <Amended by Act No. 8630, Aug. 3, 2007; Act No. 14135, Mar. 29, 2016; Act No. 14812, Apr. 18, 2017>

(4) Article 62 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to Commissioners of the Fair Trade Commission or public officials who were engaged in, or are currently engaged in, duties under this Act, or persons who were or are currently in charge of mediation of disputes arising from franchise business transactions in the Council.

(5) Deleted. <by Act No. 8630, Aug. 3, 2007>

Article 37-2 (Liability for Losses)

(1) If a franchiser

Article 37-2

causes any loss to a franchisee as a consequence of the franchiser’s violation of any of the provisions of this Act, the franchiser shall be liable for the loss to the franchisee: Provided, That the foregoing shall not apply where the franchiser proves that the loss was caused neither intentionally nor through negligence.

(2) Notwithstanding paragraph (1), where a franchiser has caused any loss to a franchisee by violating Articles 9 (1), 12 (1) 1, and 12-5, the franchiser shall be liable to compensate the loss to the extent not exceeding three times the loss caused to the franchisee: Provided, that the foregoing shall not apply where the franchiser proves that the loss was caused neither intentionally nor through negligence. <Amended by Act No. 15360, Jan. 16, 2018>

(3) The court shall determine damages pursuant to paragraph (2), based upon the following matters:

1. The degree of perception of intent or possibility of causing the loss;

2. The severity of damage caused to the franchisee by the violation;

3. Economic benefits that the franchisor acquired by committing the violation;

4. The fine and penalty surcharges imposed for the violation;

Article 37-2

5. The duration and frequency of the violation;

6. The franchisor’s financial standing;

7. The degree of the franchisor’s efforts to remedy damage.

(4) Where a lawsuit is filed for liability for losses in accordance with paragraphs (1) and (2), Articles 56-2 and 57 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis.

[This Article Wholly Inserted by Act No. 14812, Apr. 18, 2017]

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

@Article 23 (1) 1 (limited to unfair refusal to make transactions), 3 (limited to the unfair induction of customers of competitors to trade with oneself), 4, and 5 (limited to making of transactions on condition of placing unfair restraints on business activities of a certain transacting partner) and Article 29 (1) of the Monopoly Regulation and Fair Trade Act shall not apply to matters governed by this Act in relation to franchise business transactions. <Amended by Act No. 8630, Aug. 3, 2007>

Article 39 (Delegation and Entrustment of Authority)

(1) Part of the authority granted to the Fair Trade Commission pursuant to

Article 38 ~ 39

this Act may be delegated to the heads of its affiliate agencies or the Special Metropolitan City Mayor, any Metropolitan City Mayor, Do Governor, or the Governor of a Special Self-Governing Province, or may be entrusted to the heads of other administrative agencies, as prescribed by Presidential Decree. <Amended by Act No. 8630, Aug. 3, 2007>

(2) The Fair Trade Commission may entrust the Korea Fair Trade Mediation Agency established pursuant to Article 48-2 of the Monopoly Regulation and Fair Trade Act, or a related corporation or organization with any of the following business affairs, as prescribed by Presidential Decree. In such cases, it may subsidize all or some of expenses incurred in entrusted management under subparagraph 1: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 11323, Feb. 17, 2012>

1. Affairs concerning the registration, refusal of registration, and disclosure of an information disclosure statement under Articles 6-2 and 6-3;

2. Affairs concerning the implementation and management of qualifying examinations for franchise traders under Article 27 (1).

Article 40 (Reporting)

The Fair Trade Commission may require a person delegated or entrusted with administrative affairs pursuant to Article 39 to make reports as necessary.

CHAPTER VI PENALTY PROVISIONS

Article 40

Article 41 (Penalty Provisions)

(1) Any 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 by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

(2) Any 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 by Act No. 8630, Aug. 3, 2007; Act No. 15360, Jan. 16, 2018>

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 62 of the Monopoly Regulation and Fair Trade Act, which is applicable mutatis mutandis pursuant to Article 37 (4).

(3) Any 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 fifty million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>▷

Article 41

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 franchise fee 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) Any 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. <Newly Inserted by Act No. 8630, Aug. 3, 2007>

Article 42 (Joint Penalty Provisions)

When a representative of a corporation, or an agent, employee or other worker of a corporation or private individual commits the offensive acts in Article 41 in connection with a business of the corporation or private individual, not only shall the offender be punished, but also the corporation or private individual shall be punished by a fine as prescribed in the relevant Article: Provided, That the same shall not apply to cases where the corporation or private individual paid considerable attention or diligently supervised the concerned business to prevent such offensive acts.

Article 42

[This Article Wholly Amended by Act No. 10168, Mar. 22, 2010]

Article 43 (Administrative Fines)

(1) A franchiser falling under subparagraph 3 or 4 shall be punished by an administrative fine not exceeding 100 million won, and a franchiser falling under subparagraph 1 or 2 shall be punished by an administrative fine not exceeding 50 million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

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

2. A person who fails to make an appearance twice or more without any justifiable reason in violation of Article 50 (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 50 (1) 3 or (3) of the Monopoly Regulation and Fair Trade Act, which is applicable mutatis mutandis pursuant to Article 37 (1) without a justifiable ground, or who submits a false report, data or goods;

4. A person who refuses, interferes with, or evades an investigation conducted pursuant to Article 50 (2) of the Monopoly Regulation and Fair Trade Act without a justifiable ground,

Article 43

which is applicable mutatis mutandis pursuant to Article 37 (1).

(2) A franchisee falling under paragraph (1) 2 or 3 shall be punished by an administrative fine not exceeding 100 million won, and a franchisee falling under subparagraph 1 of the aforesaid paragraph shall be punished by an administrative fine not exceeding 10 million won.

(3) An executive officer of a franchiser or franchisee shall be punished by an administrative fine not exceeding 50 million won, if he/she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he/she falls under subparagraph 1 or 2 of the aforesaid paragraph.

(4) An employee of a franchiser or franchisee or a person who has any similar legal interest shall be punished by an administrative fine not exceeding 50 million won, if he/she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he/she falls under subparagraph 2 of the aforesaid paragraph, or by an administrative fine not exceeding five million won, if he/she falls under subparagraph 1 of the aforesaid paragraph.

(5) A person who fails to comply with an order issued pursuant to Article 43 of the Monopoly Regulation and Fair Trade Act to maintain the order, which is applicable mutatis mutandis pursuant to Article 37 (1), shall be punished by an administrative fine not exceeding one million won. <Amended by Act No. 8630, Aug. 3, 2007>

Article 43

(6) A person falling under any of the following subparagraphs shall be punished by an administrative fine not exceeding 10 million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

1. A person who fails to register an alteration within a period, in violation of the main sentence 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 the aforesaid 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 falling under any of the following subparagraphs shall be punished

Article 43

by an administrative fine not exceeding three million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

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 similar title, in violation of Article 29 (3).

(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. <Newly Inserted by Act No. 8630, Aug. 3, 2007>

(9) through (11) Deleted. <by Act No. 10168, Mar. 22, 2010>

#Article 43 (Administrative Fines)

(1) A franchiser falling under subparagraph 3 or 4 shall be punished by an administrative fine not exceeding 100 million won, and a franchiser falling under subparagraph 1, 1-2, or 2 shall be punished by an administrative fine not exceeding 50 million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013; Act No. 15610, Apr. 17, 2018>

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

Article 43

a franchisee to submit false data, in violation of Article 32-2 (4);

4. A person who refuses, interferes with, or evades an investigation conducted pursuant to Article 50 (2) of the Monopoly Regulation and Fair Trade Act without a justifiable ground, which is applicable mutatis mutandis pursuant to Article 37 (1).

(2) Deleted. <by Act No. 15610, Apr. 17, 2018>

(3) An executive officer of a franchiser shall be punished by an administrative fine not exceeding 50 million won, if he/she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he/she falls under subparagraph 1, 1-2, or 2 of the aforesaid paragraph. <Amended by Act No. 15610, Apr. 17, 2018>

Article 43

(4) An employee of a franchiser or a person who has any legal interest equivalent thereto shall be punished by an administrative fine not exceeding 50 million won, if he/she falls under paragraph (1) 3, or by an administrative fine not exceeding 10 million won, if he/she falls under subparagraph 2 of the aforesaid paragraph, or by an administrative fine not exceeding five million won, if he/she falls under subparagraph 1 or 1-2 of the aforesaid paragraph. <Amended by Act No. 15610, Apr. 17, 2018>

(6) A person falling under any of the following subparagraphs shall be punished by an administrative fine not exceeding ten million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

1. A person who fails to register an alteration within a period, in violation of the main sentence 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 the aforesaid paragraph;

Article 43

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 falling under any of the following subparagraphs shall be punished by an administrative fine not exceeding three million won: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>

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 similar title, in violation of Article 29 (3).

(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. <Newly Inserted by Act No.

Article 43

8630, Aug 3, 2007>

(9) through (11) Deleted. <by Act No. 10168, Mar. 22, 2010>

<<Enforcemenet Date : Oct. 18, 2018>>

Article 44 (Criminal Charge)

(1) Public prosecution for an offense under Article 41 (1) 1, (2) 1 and 2, or (3) may be initiated only when the Fair Trade Commission files a criminal charge. <Amended by Act No. 15360, Jan. 16, 2018>

(2) If the gravity of an offense under Article 41 (1) 1, (2) 1 and 2, or (3) is objectively deemed obvious and serious, the Fair Trade Commission shall file a criminal charge in relation thereto with the Prosecutor General. <Amended by Act No. 15360, Jan. 16, 2018>

(3) The Prosecutor General may notify the Fair Trade Commission that he/she has discovered facts constituting a criminal charge under paragraph (2) and request it to file a criminal charge in relation thereto. <Amended by Act No. 12094, Aug. 13, 2013>

(4) Even if the Fair Trade Commission determines that the gravity of an offense does not meet requirements for a criminal charge under paragraph (2), the Chairperson of the Board of Audit and Inspection or the Minster of the SMEs and Startups may request the Fair Trade Commission to file a criminal charge for other

Article 44

easons, such as social ipple effects and the level of losses incurred by prospective franchisees or franchisees. <Newly Inserted by Act No. 12094, Aug. 13, 2013; Act No. 14839, Jul. 26, 2017>

(5) Where the Chairperson of the Fair Trade Commission receives a request for filing a criminal charge under paragraph (3) or (4), he/she shall file a criminal charge with the Prosecutor General. <Newly Inserted by Act No. 12094, Aug. 13, 2013>

(6) The Fair Trade Commission shall not revoke its filing of a criminal charge after the public prosecution is initiated.

ADDENDA

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

(2) (Transitional Measures concerning Corrective Measures, Penalty Surcharges, and Penalty Provisions) The application of corrective measures, penalty surcharge, and penalty provisions to an offense committed before this Act enters into force in violation of Article 23 (1) 1 (limited to unfair refusal to make transactions), 3 (limited to the unfair induction of customers of competitors to trade with oneself), 4, and 5 (limited to making of transactions on condition of placing unfair restraints on business activities of a certain transacting partner) and Article 29 (1) of the former Monopoly Regulation and Fair Trade Act shall be governed by the provisions of the afor

Addenda

esaid Act.

ADDENDUM <Act No. 7109, Jan. 20, 2004>

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

ADDENDA <Act No. 7315, Dec. 31, 2004>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 2005. (Proviso Omitted.)

Articles 2 through 10 Omitted.

ADDENDA <Act No. 7796, Dec. 29, 2005>

Article 1 (Enforcement Date)

This Act shall enter into force on July 1, 2006.

Articles 2 through 6 Omitted.

ADDENDA <Act No. 8630, Aug. 3, 2007>

Article 1 (Enforcement Date)

This Act shall enter into force six months after the date of its promulgation: Provided, That the amended provisions of Article 37 (2) shall enter into force three months after the date of its promulgation, and the amended provisions of Articles 6-5, 15-2,

Addenda

and 15-3, one year after the date of its promulgation.

Article 2 (Applicability to Franchise Fees)

The amended provisions of subparagraph 6 of Article 2 shall be applicable to franchise fees payable after this Act enters into force.

Article 3 (Applicability to Prohibition of Unfair Trade)

The amended provisions of subparagraph 4 of Article 12 shall be applicable to franchise agreements executed or renewed on or after the entry into force of this Act.

Article 4 (Applicability to Renewal of Franchise Agreements)

The amended provisions of Article 13 shall be applicable to franchise agreements executed or renewed on or after the entry into force of this Act.

Article 5 (Applicability to Limitations on Termination of Franchise Agreements)

The amended provisions of the main sentence of Article 14 (1) shall be applicable to cases where an agreement is terminated due to a breach of the agreement on or after the entry into force of this Act.

Article 6 (Special Cases for Information Disclosure Statements)

Notwithstanding

Addenda

the amended provisions of Article 6-2 and 7 (1) and (2), franchisers may provide pre-existing information disclosure statements for six months from the entry into force of this Act.

Article 7 (Transitional Measures concerning Notice of Termination of Franchise Agreements, etc.)

A notice of termination of a franchise agreement executed or renewed before this Act enters into force shall be governed by the former provisions.

Article 8 (Transitional Measures concerning Return of Franchise Fees)

The return of franchise fees shall be governed by the former provisions if a franchiser provided false or exaggerated information in violation of former Article 9 (1), omitted an important matter provided for in former Article 8 (2), or unilaterally suspended franchise business without a justifiable ground, before this Act enters into force. In such cases, the extent of the return of franchise fees paid before this Act enters into force shall be governed by former subparagraph 6 of Article 2 and Article 10.

Article 9 (Transitional Measures concerning Council)

(1) The former Franchise Business Transaction Dispute Mediation Council at the time this Act enters into force shall be deemed the Council

Addenda

under the amended provisions of Article 16.

(2) Cases for which an application is filed or mediation proceedings are pending with the former Franchise Business Transactions Disputes Mediation Council at the time this Act enters into force shall be deemed cases for which an application is filed or mediation proceedings are pending with the Council under the amended provisions of Article 16.

(3) Members of the former Franchise Business Transaction Dispute Mediation Council at the time this Act enters into force shall be deemed persons appointed or commissioned pursuant to the amended provisions of Article 17 (3). In such cases, the term of office of such members shall be the remaining term of their office.

Article 10 (Transitional Measures concerning Franchise Business Counsellors)

(1) A person who has successfully passed the franchise business counsellor qualifying examination, who holds a franchise business counsellor license, or who has completed registration as a franchise business counsellor in accordance with the former provisions at the time this Act enters into force shall be deemed a person who has successfully passed the franchise business trader qualifying examination, who holds a franchise trader license, or who has completed registration as a franchise trader in accordance with this Act.

(2) A person whose registration as a franchise business counsellor has been revoked

Addenda

or whose qualification has been suspended pursuant to the former provisions at the time this Act enters into force shall be deemed a person whose registration as a franchise trader has been revoked or whose qualification has been suspended pursuant to this Act.

Article 11 (Transitional Measures concerning Penalty Provisions and Administrative Fines)

The application of penalty provisions to, and the imposition of administrative fines upon, an act committed before this Act enters into force shall be governed by the former provisions.

ADDENDUM <Act No. 10168, Mar. 22, 2010>

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

ADDENDUM <Act No. 11323, Feb. 17, 2012>

This Act shall enter into force three months after the date of its promulgation.

ADDENDA <Act No. 12094, Aug. 13, 2013>

Article 1 (Enforcement Date)

This Act shall enter into force six months after the date of its promulgation: Provided, That the amended provisions of Article 12-4 shall

Addenda

enter into force one year after the date of its promulgation.

Article 2 (Transitional Measures concerning Registration of Information Disclosure Statements)

An information disclosure statement registered before this Act enters into force shall be deemed registered pursuant to the amended provisions of subparagraph 10 of Article 2 and Article 6-2 (1): Provided, That where a franchisor registers the first alteration after this Act enters into force, it shall register the alteration including matters added pursuant to the amended provision of subparagraph 10 of Article 2.

Article 3 (Transitional Measures concerning Establishment of Sales Areas)

Where matters concerning the establishment of the sales area are included in a franchise agreement pursuant to Article 11 (2) 5 before this Act enters into force, the former provisions shall apply thereto notwithstanding the amended provisions of Article 12-4 (1): Provided, That where a franchisor renews the first franchise agreement after this Act enters into force, it shall establish the sales area under the amended provisions of Article 12-4 (1) and mention such sales area in the franchise agreement.

ADDENDA <Act No. 14135, Mar. 29, 2016>

Article 1 (Enforcement Date)

Addenda

This Act shall enter into force six months after the date of its promulgation.

Article 2 (Applicability to Change of Sales Area)

The amended provisions of Article 12-4 (2) shall apply beginning with the first franchise agreement renewed after this Act enters into force.

Article 3 (Applicability to Notification, etc. of Execution Details regarding Advertising or Promotional Events)

The amended provisions of Article 12-6 (1) shall apply beginning with the first franchise advertising or promotional event held after this Act enters into force.

Article 4 (Applicability to Effect of Mediation or Mediation Protocol)

The amended provisions of Articles 23 and 24 shall apply beginning with the first dispute mediation applied for or requested after this Act enters into force.

Article 5 (Applicability to Compensation)

The amended provisions of Article 37 (3) shall apply beginning with the first compensation lawsuit filed after this Act enters into force.

ADDENDA <Act No. 14454, Dec. 20, 2016>

Addenda

Article 1 (Enforcement Date)

This Act shall enter into force three months after its promulgation.

Article 2 (Applicability to Effects of Peremptory Notice)

The amended provisions of Article 32-3 (3) shall apply starting from the first offense reported after this Act enters into force.

ADDENDA <Act No. 14812, Apr. 18, 2017>

Article 1 (Enforcement Date)

This Act shall enter into force six months after the date of its promulgation.

Article 2 (Applicability to Timing for Provision of Franchise Agreement)

The amended provisions of Article 11 (1) shall apply beginning with franchise agreements concluded or renewed after this Act enters into force.

Article 3 (Applicability concerning Effect of Interruption of Extinctive Prescription)

The amended provisions of Article 22 (4) through (6) shall apply beginning with

Addenda

an application for mediation of dispute first filed after this Act enters into force.

Article 4 (Applicability concerning Liability for Losses)

The amended provisions of Article 37-2 shall apply beginning with a claim filed for seeking compensation for a loss which a franchiser has first caused to a franchisee by violating Articles 9 (1) and 12 (1) 1 after this Act enters into force.

Article 5 (Transitional Measures concerning Incompetent Persons, etc.)

Persons under adult guardianship or limited guardianship provided for in the amended provisions of Article 27 (2) 1 shall be deemed to include persons for whom the judicial declaration of incompetence or quasi-incompetence remains valid under Article 2 of the Addenda to the Civil Act (Act No. 10429).

ADDENDA <Act No. 14839, Jul. 26, 2017>

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation: Provide, That the amended provisions of each Act which was promulgated before this Decree enters into force, but the enforcement date of which has not yet arrived, among the Acts amended under Article 5 of the Addenda, shall enter into force on the date such Act is to enter into force.

Articles 2 through 6 Omitted.

Addenda

ADDENDA <Act No. 15360, Jan. 16, 2018>

Article 1 (Enforcement Date)

This Act shall enter into force six months after its promulgation: Provided, That the amended provisions of Articles 6-2 through 6-4 shall enter into force one year after its promulgation. <Amended by Act No. 15547, Mar. 27>

Article 2 (Applicability to Change of Sales Areas)

The Amended provisions of Article 12-4 (2) shall apply, starting from franchise agreements to be renewed after this Act enters into force.

Article 3 (Applicability to Payment of Monetary Rewards)

The amended provisions of Article 15-5 shall apply, starting from the first case of reporting or informing of offenses against this Act and presenting evidential materials to prove such report or information after this Act enters into force.

Article 4 (Applicability to Liabilities for Losses)

The amended provisions of Article 37-2 shall apply, starting from the first claim for compensation, where a franchiser causes a loss to a franchisee by violating the amended provisions of Article 12-5 after this Act enters into force.

ADDENDUM <Act No. 15610, Apr. 17, 2018>

Addenda

This Act shall enter into force six months after its promulgation: Provided, That the amended provisions of Article 24 (1) shall enter into force on the date of its promulgation.

Addenda

FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT
- Articles
- Addenda

1. 가맹사업거래의 공정화에 관한 법률

2026-08-04 / 제21857호 / 시행 2026-10-02
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

2. 가맹사업거래의 공정화에 관한 법률

2025-01-21 / 제20712호 / 시행 2025-01-21
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

3. 가맹사업거래의 공정화에 관한 법률

2024-02-06 / 제20239호 / 시행 2024-08-07
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

4. 가맹사업거래의 공정화에 관한 법률

2024-01-02 / 제19912호 / 시행 2024-07-03
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

5. 가맹사업거래의 공정화에 관한 법률

2023-06-20 / 제19507호 / 시행 2023-06-20
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

6. 가맹사업거래의 공정화에 관한 법률

2022-01-04 / 제18709호 / 시행 2022-07-05
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

7. 가맹사업거래의 공정화에 관한 법률

2021-04-20 / 제18113호 / 시행 2021-04-20
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

8. 가맹사업거래의 공정화에 관한 법률

2020-12-29 / 제17799호 / 시행 2021-12-30
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

9. 가맹사업거래의 공정화에 관한 법률

2018-12-31 / 제16176호 / 시행 2019-07-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

10. 가맹사업거래의 공정화에 관한 법률

2018-10-16 / 제15853호 / 시행 2019-01-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

11. 가맹사업거래의 공정화에 관한 법률

2018-04-17 / 제15610호 / 시행 2018-04-17
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

12. 가맹사업거래의 공정화에 관한 법률

2018-03-27 / 제15547호 / 시행 2019-01-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

13. 가맹사업거래의 공정화에 관한 법률

2018-01-16 / 제15360호 / 시행 2018-07-17
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

14. 가맹사업거래의 공정화에 관한 법률

2017-07-26 / 제14839호 / 시행 2017-07-26
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

15. 가맹사업거래의 공정화에 관한 법률

2017-04-18 / 제14812호 / 시행 2017-10-19
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

16. 가맹사업거래의 공정화에 관한 법률

2016-12-20 / 제14454호 / 시행 2017-03-21
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

17. 가맹사업거래의 공정화에 관한 법률

2016-03-29 / 제14135호 / 시행 2016-09-30
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

18. 가맹사업거래의 공정화에 관한 법률

2013-08-13 / 제12094호 / 시행 2014-02-14
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

19. 가맹사업거래의 공정화에 관한 법률

2010-03-22 / 제10168호 / 시행 2010-03-22
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

20. 가맹사업거래의 공정화에 관한 법률

2007-08-03 / 제8630호 / 시행 2008-02-04
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

21. 가맹사업거래의 공정화에 관한 법률

2005-01-29 / 제7796호 / 시행 2006-07-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

22. 가맹사업거래의 공정화에 관한 법률

2004-12-31 / 제7315호 / 시행 2005-04-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

23. 가맹사업거래의 공정화에 관한 법률

2004-01-20 / 제7109호 / 시행 2004-01-20
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

24. 가맹사업거래의 공정화에 관한 법률

2002-05-13 / 제6704호 / 시행 2002-11-01
FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT