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STATUTES

THE REPUBLIC OF KOREA

Volume

FAIR TRANSACTIONS IN FRANCHISE BUSINESS ACT

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

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

Article 2 (Definitions)

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

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

Article 1 ~ 2

to their franchiser in return for the use of trademarks and the support and training provided for their management, business activities, etc.;

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

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

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

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

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

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

Article 2

payments, 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;

(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;

(d) Consideration that a franchisee pays to a franchiser, on a regular or irregular basis, for the use of trademarks licensed under an agreement with the franchiser, support for and training on business activities, etc., and that is prescribed 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 affairs of a franchiser within a specific area under an agreement with the franchiser, such as the solicitation of franchisees, maintenance

Article 2

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 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") in respect of the specific details and conditions of the franchise;

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

(a) The general status of a franchiser;

(b) The current status of the franchise 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 6 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) falls under any of the

Article 2

following, relevant fact:

(i) Where it, he or 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, he or she has lost a civil suit or has come to an amicable settlement 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, he or 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 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

Article 2

stor of a franchis by thos with a nw dsign 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 territory" means an area where a franchisee sells products 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 on Feb. 17, 2012; Aug. 13, 2013>

1. Where the total required payment that a franchisee pays to a franchiser during the period of up to six months from the date of the initial payment of the required payment 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 on Aug. 13, 2013>

Article 3

CHAPTER II BASIC PRINCIPLES FOR FRANCHISE TRANSACTIONS

Article 4 (Principle of Good Faith)

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

Article 5 (Obligations of Franchisers)

Each franchiser shall observe the following obligations:

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

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;

Article 4 ~ 5

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

7. To endeavor 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 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

Article 6

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

7. To maintain and provide data necessary to establish strategies for the integrated management and sales activities of the franchiser, 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 trademarks and provide appropriate cooperation as necessary for preventing infringement where a third party's infringement of trademarks is discovered.

Article 6

CHAPTER III FAIR TRANSACTIONS IN FRANCHISE

Article 6-2 (Registration of Franchise Disclosure Documents)

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

(2) Where a franchiser intends to alter matters prescribed by Presidential Decree among matters included in a franchise disclosure document registered pursuant to paragraph (1), it shall register an alteration of included matters with the Korea Fair Trade Commission or with the competent 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 on Aug. 13, 2013; Jan. 16, 2018>

(3) The Korea Fair Trade Commission and a Mayor/Do Governor shall disclose any franchise disclosure document which was registered, the alteration of which was registered or which was reported pursuant

Article 6-2

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 on Aug. 13, 2013; Dec. 20, 2016; Jan. 16, 2018>

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

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

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

[This Article Newly Inserted on Aug. 3, 2007]

Article 6-3 (Refusal of Registration of Franchise Disclosure Docum

Article 6-3

ents and Other Relevant Matters)

(1) Where an application for registration of franchise disclosure documents prescribed in Article 6-2 falls under any of the following cases, the Korea Fair Trade Commission and a Mayor/Do Governor may refuse the registration of the franchise disclosure document or request the modification thereof: <Amended on Dec. 20, 2016; Jan. 16, 2018>

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

2. Where the details of franchise in a franchise disclosure document include matters prohibited by other Acts.

(2) The Korea Fair Trade Commission and a Mayor/Do Governor shall, when it registers a franchise disclosure document, issue a registration certificate to the franchiser. <Amended on Dec. 20, 2016; Jan. 16, 2018>

[This Article Newly Inserted on Aug. 3, 2007]

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

(1) Where any franchise disclosure document falls under any of the following cases, the Korea Fair Trade Commission and a Mayor/Do Governor may revoke its registration: Provided, That where it

Article 6-4

falls under subparagraphs 1 and 2, he Korea Fair Trade Commission shall revoke its registration: <Amended on Aug. 13, 2013; Dec. 20, 2016; Jan. 16, 2018>

1. Where a franchise disclosure document is registered by fraud or other improper means;

2. Where a franchise disclosure document 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 10 of Article 2;

4. Where a franchiser reports the cessation of business;

5. Where a franchiser requests the Korea Fair Trade Commission to revoke the registration of a franchise disclosure document.

(2) The Korea Fair Trade Commission and a Mayor/Do Governor may disclose a list of franchisers whose registration of a franchise disclosure document has been revoked. <Newly Inserted on Aug. 13, 2013; Jan. 16, 2018>

[This Article Newly Inserted on Aug. 3, 2007]

Article 6-5 (Deposit of Required Payments)

(1) Each franchiser shall require its franchisees (including prospective franchisees;

Article 6-5

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

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

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

1. When a franchisee commences business;

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

Article 6-5

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

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

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

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

3. If a franchisee reports to the Korea Fair Trade Commission that the franchiser

Article 6-5

violates Article 10;

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

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

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

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

[This Article Newly Inserted on Aug. 3, 2007]

Article 7 (Duty to Provide Franchise Disclosure Documents)

(1) Each franchiser (including cases where a master franchisee or a franchise broker finds franchisees; hereinafter the same shall apply) shall provide its prospective franchisees with a franchise disclosure document which was registered or the alteration of

Article 7

which was registered pursuant to Article 6-2 (1) and (2) by methods prescribed by Presidential Decree, such as certified mail, by which the point in time of providing the franchise disclosure document may be objectively confirmed. <Amended on Aug. 3, 2007; Aug. 13, 2013>

(2) Where a franchiser provides a franchise disclosure document pursuant to paragraph (1), it shall provide the franchise disclosure document along with a document (hereinafter referred to as "document stating the current status of neighboring franchisees") stating trade names, locations and telephone numbers of 10 franchisees most adjacent to the place planned for a future store of a prospective franchisee (where the number of franchisees conducting business in a metropolitan local government to which the place planned for the future store of the prospective franchisee belongs is less than 10 at the time the franchisor provides the franchise disclosure document, 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 franchise disclosure document, it shall provide the franchise disclosure document as soon as the prospective franchisee determines the place planned for the future store. <Newly Inserted on Aug. 13, 2013>

(3) Unless a franchiser has provided an information disclosure document registered and a document stating the current status of neighboring franchisees (hereinafter referred to as "franchise disclosure document, etc.") by method referred to in paragraph (1) or 14 days (where a prospective franchisee has been given advice

Article 7

and suggestions by an attorney-at-law or franchise trader under Article 27 on a franchise disclosure document) have passed from the date it provides the franchise disclosure document, etc., it shall not engage in any of the following acts: <Newly Inserted on Aug. 3, 2007; Aug. 13, 2013>

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

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

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

[Title Amended on Aug. 3, 2007]

Article 8 Deleted. <Aug. 3, 2007>

Article 9 (Prohibition on Providing False or Exaggerated Information)

(1) No franchiser

Article 8 ~ 9

shall engage in the following acts when it provides prospective franchisees or franchisees with information: <Amended on Aug. 13, 2013>

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

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

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

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

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

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

(4) Each franchisor

Article 9

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

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

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

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

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

Article 9

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

Article 10 (Return of Required Payments)

(1) Where any franchiser falls under any of the following cases, it shall return the relevant required payment to a prospective franchisee or franchisee within one month from the date the prospective franchisee or franchisee makes a written request describing matters prescribed by Presidential Decree: <Amended on Aug. 3, 2007; Aug. 13, 2013>

1. If the franchiser violates Article 7 (3) and the prospective franchisee or franchisee requests the return of the required payment 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 required payment before the franchise agreement is entered into;

3. If the franchiser violates Article 9 (1) and the franchisee requests the return of the required payment 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

Article 10

effect on the execution of the agreement;

4. If the franchiser unilaterally ceases the franchise without good cause and a franchisee requests the return of the required payment within four months from the cessation date of the franchise prescribed by Presidential Decree.

(2) In determining the amount of the required payment 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 shall be taken into account. <Amended on Aug. 3, 2007>

Article 11 (Matters to Be Included 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 on Aug. 3, 2007; Apr. 18, 2017>

1. Receiving a required payment from a prospective franchisee. In such cases, if a prospective franchisee has deposited his or her franchise deposit in the depository, it shall be deemed

Article 11

that the franchiser has received such franchise deposit on the date the first deposit is made (or the date a perspective franchisee agrees with the franchiser to make the first deposit of a required payment if the agreement on such date exists);

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

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

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

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

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

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

5. Matters concerning the demarcation of sales territory;

6. Matters concerning the term of the agreement;

7. Matters concerning the transfer of business;

8. Matters concerning

Article 11

the grounds for termination of the agreement;

9. The fact that a franchise deposit shall be deposited in the depository by up to two months from the date the prospective franchisee or franchisee enters into the franchise agreement (or by the date of commencement of the franchise, where the franchisee commences the franchise before such two months ends): Provided, 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-at-law or a franchise trader under Article 27, if it is the case;

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

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

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

Article 11

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

[Title Amended on Aug. 3, 2007]

Article 12 (Prohibition on Unfair Trade Practices)

(1) No franchiser shall engage in, or cause any other business entity to engage in, any of the following acts that are likely to hamper fair franchise transactions: <Amended on Aug. 3, 2007; Aug. 13, 2013; Mar. 29, 2016>

1. Unreasonably 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; <Aug. 13, 2013>

5. Unreasonably

Article 12

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.

(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)

(1) No franchiser shall compel a franchisee to improve the store environment without good 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

Article 12-2

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 or her.

(3) The calculation of, claim for, and procedures for payment of costs to be borne by the franchiser pursuant to paragraph (2), and other necessary matters shall be prescribed by Presidential Decree.

[This Article Newly Inserted on 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

Article 12-3

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

[This Article Newly Inserted on Aug. 13, 2013]

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

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

(2) Where a franchiser intends to change the existing sales territory 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 or she shall reach an agreement with the franchisee. <Amended on Jan. 16, 2018>

(3) No franchiser

Article 12-4

shall open a direct retail store or a franchise store (referring to an affiliated company under subparagraph 12 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 territory for the franchisee during the period of franchise agreement without good cause. <Amended on Jan. 16, 2018; Dec. 29, 2020>

[This Article Newly Inserted on 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 Korea Fair Trade Commission, prescribed in Article 32-2;

3. Rendering cooperation

Article 12-5

with reporting prescribed in Article 32-3 (1) and investigations conducted by the Korea Fair Trade Commission prescribed in paragraph (2) of the same Article.

[This Article Newly Inserted on Jan. 16, 2018]

[Previous Article 12-5 moved to Article 12-7 <Jan. 16, 2018>]

Article 12-6 (Notification 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 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 on 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 Korea Fair Trade Commission may establish the basis for

Article 12-6 ~ 12-7

desirable transactions for each type of business and recommend franchisers to comply with such basis.

[This Article Newly Inserted on Aug. 13, 2013]

[Moved from Article 12-5 <Jan. 16, 2018>]

Article 13 (Renewal of Franchise Agreement)

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

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

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

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

(a) Matters concerning the securing of business premises and facilities necessary for the operation of a franchise store or the acquisition of necessary qualifications,

Article 13

licenses, or permits under relevant statutes and regulations;

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

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

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

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

(4) If a franchiser fails to give notice of refusal under paragraph (3) or fails to give written notice of change in terms and conditions or written notice that it is not willing to renew the franchise agreement to a franchisee during the period between 180 days and 90 days prior to the expiration date of the agreement, the franchise agreement is deemed to be renewed under the same terms and conditions as those of the franchise agreement effective before the expiration of the agreement: Provided,

Article 13

That this shall not apply where a franchisee raises an objection not later than 60 days before the expiration of the agreement or where a natural disaster or other unavoidable causes prescribed by Presidential Decree occurs to a franchiser or franchisee.

[This Article Newly Inserted on 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 this shall not apply to cases prescribed by Presidential Decree as it is difficult to continue franchise transactions. <Amended on 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 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.

Article 14 ~ 14-2

(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 preferentially hold a consultation with a franchisees association composed of the majority of franchisees.

(4) With regard 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

Article 14-2

Inserted on Aug. 13, 2013]

Article 15 (Voluntary Code of Practice)

(1) In order to maintain fair trading practices for franchise, 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 Korea Fair Trade Commission to examine whether any provision of such code violates Article 12 (1).

(3) The Korea 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 60 days from the date of such request.

Article 15-2 (Indemnity Insurance Contract 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 on 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 of Financial Services Commission for securing the payment of indemnity for franchisees;

Article 15 ~ 15-2

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 or 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 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 matters

Article 15-2

necessary for an indemnity insurance contract, etc., for franchisees shall be prescribed by Presidential Decree.

[This Article Newly Inserted on Aug. 3, 2007]

Article 15-3 (Establishment of Mutual Aid Association)

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

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

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

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

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

(6) Matters necessary for the standards and procedure for the authorization of incorporation of a mutual aid association, matters to be included

Article 15-3

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 Korea 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 provided in this Act, provisions applicable to incorporated associations of the Civil Act shall apply mutatis mutandis to mutual aid associations.

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

[This Article Newly Inserted on Aug. 3, 2007]

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

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

Article 15-4

mutual support an cooperation.

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

(3) The Korea 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 on Aug. 13, 2013]

Article 15-5 (Monetary Rewards for Reporting)

(1) The Korea 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 the budget.

(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 on Jan. 16, 2018]

CHAPTER IV MEDIATION OF DISPUTES

Article 15-5

Article 16 (Establishment of Franchise Transaction Dispute Mediation Council)

(1) There shall be established in the Korea Fair Trade Mediation Agency under Article 72 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "KOFAIR"), a Franchise Transaction Dispute Mediation Council (hereinafter referred to as the "Council") in order to mediate disputes on franchise. <Amended on Mar. 27, 2018; Dec. 29, 2020>

(2) Each Mayor/Do Governor may establish each Council in the competent Special Metropolitan City, Metropolitan City, Special Self-Governing City, Do, or Special Self-Governing Province (hereinafter referred to as "City/Do"). <Newly Inserted on Mar. 27, 2018>

[This Article Newly Inserted on Aug. 3, 2007]

Article 17 (Composition of Council)

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

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

(3) Members of the Council established in KOFAIR (hereinafter referred to as

Article 16 ~ 17

the "Council of KOFAIR") hall be appointed or commiioned by the Chairperson of the Korea Fair Trade Commission, from among persons recommended by the head of KOFAIR and persons falling under any of the following subparagraphs; and members of each Council established in each City/Do (hereinafter referred to as "City/Do Council") shall be appointed or commissioned by the competent Mayor/Do Governor, from among persons recommended by the head of KOFAIR and persons falling under any of the following subparagraphs: <Amended on Dec. 29, 2005; Aug. 3, 2007; Mar. 27, 2018>

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

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

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

(4) The chairperson of the Council of KOFAIR shall be appointed or commissioned by the Chairperson of the Korea Fair Trade Commission, from among members representing public interest and the chairperson

Article 17

of each City/Do Council shall be appointed or commissioned by the competent Mayor/Do Governor, from among members representing public interest. <Amended on Aug. 3, 2007; Mar. 27, 2018>

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

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

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 Chairperson of the Korea Fair Trade Commission and a Mayor/Do Governor 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 on Aug. 3, 2007; Mar. 27, 2018>

Article 19 (Meetings of Council)

Article 18 ~ 19

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

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

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

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

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

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

(4) Plenary meetings of the Council shall be presided over by the chairperson, which a majority of the members of the Council shall constitute

Article 19

a quorum, and any decision thereof shall require the concurring vote of a majority of those present. <Amended on Aug. 3, 2007; Aug. 13, 2013>

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

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

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

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

(1) Any of the

Article 20

following members shall be disqualified from the mediation: <Amended on Mar. 29, 2016>

1. If the member or his or 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;

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 with 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 to such member with the Council. <Amended on Mar. 29, 2016>

(3) Any member who has an excuse under paragraph (1) or (2) may recuse himself or herself from participating in the mediation of the dispute. <Amended on Mar. 29, 2016>

Article 21 (Matters Subject to Mediation of Council)

Article 21

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

Article 22 (Application for Mediation)

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

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

1. The Council of KOFAIR;

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

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

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

(4) The Council upon receipt of an application for mediation of a dispute pursuant

Article 22

to paragraph (1), shall immediately notify the disputing parties of the matters brought for mediation. <Amended on Aug. 3, 2007; Mar. 27, 2018>

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

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

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

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

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

Article 23 (Mediation)

(1) The Council shall initiate a dispute mediation procedure without delay pursuant to Presidential Decree, upon receipt of an application

Article 23

for mediat under Article 22 (1) or a request for mediation under paragraph (2) of the same Article. <Newly Inserted on Mar. 29, 2016>

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

(3) The Council shall reject an application for mediation in any of the following cases: <Amended on Aug. 3, 2007; Mar. 29, 2016; Dec. 31, 2018>

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

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

3. Where the application for mediation is filed in connection with a case into which the Korea Fair Trade Commission has commenced an investigation pursuant to Article 32-3 (2) before the filing of the application for mediation.

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

1. Where the mediation

Article 23

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

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

3. Where there is no practical benefit in proceeding with the mediation procedure because a disputing party refuses mediation or files a lawsuit with the court on the relevant matter dealt with in the mediation.

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

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

(7) The Korea Fair

Article 23

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 this shall not apply to cases into which the Korea Fair Trade Commission has commenced an investigation pursuant to Article 32-3 (2). <Amended on Mar. 29, 2016; Dec. 31, 2018>

Article 24 (Preparation and Effects of Mediation Protocols)

(1) Where the mediation is successfully concluded for matters dealt with in the mediation, the Council shall prepare a mediation protocol on which the Council members who have participated in the mediation and the disputing parties affix their names and seals or put their signatures. <Amended on Mar. 29, 2016; 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 on Mar. 29, 2016>

(3) The disputing parties shall implement an agreement reached through mediation under paragraph (1) or (2) and submit the outcomes of implementation to the Korea Fair Trade Commission. <Newly Inserted on Dec. 31, 2018>

(4) Where an agreement is implemented under paragraph (3), the Korea Fair Trade Commission shall not issue an order to take corrective measures under Article 33 (1) nor make a recommendation for correction under Article 34 (1). <Newly Inserted on Dec.

Article 24

31, 2018>

(5) Where the mediation protocol has been prepared under paragraph (1) or (2), the protocol shall have the same effect as a judicial reconciliation. <Newly Inserted on Mar. 29, 2016; Dec. 31, 2018>

Article 25 (Provisions Governing Organizational Structure 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. <Aug. 3, 2007>

Article 27 (Franchise Traders)

(1) Any person who successfully passes the franchise trader qualifying examination conducted by the Korea Fair Trade Commission and who completes on-the-job training, as prescribed by Presidential Decree, shall be qualified for a franchise trader. <Amended on Jan. 20, 2004; Aug. 3, 2007>

(2) No person who falls under any of the following subparagraphs shall be qualified for a franchise trader: <Amended on Aug. 3, 2007; Apr. 18, 2017; Apr. 20, 2021>

1. A minor or a person under adult guardianship;

Article 25 ~ 27

2. A bankrupt person who has not been reinstated;

3. A person in whose case two years have not passed since his or 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 or 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 or 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 or she shall be disqualified for the examination for five years from the date he or she applied for the examination. <Newly Inserted on Mar. 29, 2016>

(4) Matters necessary for 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 on Jan. 20, 2004; Aug. 3, 2007; Mar. 29, 2016>

[Title Amended

Article 27

on Aug. 3, 2007]

Article 28 (Business of Franchise Traders)

Each franchise trader shall undertake the following affairs: <Amended on Aug. 13, 2013; Apr. 18, 2017>

1. Review on the business profitability of franchising;

2. Preparation and modification of franchise disclosure documents 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 transactions and stating opinions;

6. Acting as an agent for registering a franchise disclosure document.

[This Article Newly Inserted on Aug. 3, 2007]

Article 29 (Registration of Franchise Traders)

(1) Any person

Article 28 ~ 29

who is qualified as a franchise trader and intends to commence business as a franchise trader under Article 28 shall be registered with the Korea Fair Trade Commission, as prescribed by Presidential Decree. <Amended on Jan. 20, 2004; Aug. 3, 2007>

(2) Each franchise trader who is registered pursuant to paragraph (1) shall renew his or her registration every five years, as determined by the Korea Fair Trade Commission. <Amended on Aug. 3, 2007>

(3) Any person who is not a franchise trader registered pursuant to paragraph (1) shall neither represent him or her as a franchise trader under Article 27 nor use any similar title. <Amended on Aug. 3, 2007>

[Title Amended on Aug. 3, 2007]

Article 30 (Responsibilities of Franchise Traders)

(1) Each franchise trader shall perform his or her duties in good faith and maintain decency. <Amended on Aug. 3, 2007>

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

[Title Amended on Aug. 3, 2007]

Article 31 (Revocation of Registration of Franchise Traders and Su

Article 30 ~ 31

spension of Qualification)

(1) The Korea 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 on Aug. 3, 2007>

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 or her in the course of performing his or her affairs to any third party;

4. If the franchise trader lends his or 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 or her registration under Article 29 (2) shall lose his or her qualification. In such cases, his or 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 Korea Fair Trade Commission. <Amended on Aug. 3, 2007>

Article 31

(3) Where the Korea Fair Trade Commission intends to revoke the registration of a franchise trader pursuant to paragraph (1), it shall hold a hearing. <Newly Inserted on Feb. 17, 2012>

[Title Amended on Aug. 3, 2007]

Article 31-2 (Education on Franchise Transactions)

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

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 affairs considered necessary for establishing a fair trading order for franchise.

(2) The Korea Fair Trade Commission may entrust affairs under paragraph (1) to

Article 31-2

institutions or organizations designated by the Korea 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 affairs under paragraph (1), education institutes, etc. may engage in any business for profit.

(4) If any education institute, etc. fails to carry out affairs referred to in paragraph (1) in good faith or fails to meet the standards prescribed by Presidential Decree, the Korea 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) Matters necessary for 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 Korea Fair Trade Commission.

[This Article Newly Inserted on Aug. 3, 2007]

CHAPTER V INVESTIGATION AND ENFORCEMENT PROCEDURE OF THE KOREA FAIR TRADE COMMISSION

Article 32 (Limitation on Objects Subject to Investigation)

Article 32

(1) Franchise transactions subject to investigation by the Korea 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 this shall not apply to franchise transactions for which an application for mediation under Article 22 (1) or a report under Article 32-3 (1) is filed within three years after the transactions were closed. <Amended on Dec. 31, 2018>

(2) Where a period classified in the following subparagraphs elapses, the Korea Fair Trade Commission shall not issue an order to take corrective measures nor impose a penalty surcharge pursuant to this Act for violations of this Act: Provided, That this shall not apply where a corrective measure or imposition of penalty surcharge is revoked by a judgment of a court and a new disposition is issued based on the reason for the judgment: <Newly Inserted on Dec. 31, 2018>

1. Where the Korea Fair Trade Commission has received a report under the former part of Article 32-3 (1) on a violation of this Act and commenced an investigation pursuant to paragraph (2) of the same Article: Three years from the date on which such report was filed;

2. Where the Korea Fair Trade Commission has commenced an investigation into a violation of this Act pursuant to Article 32-3 (2), except in the case of subparagraph 1: Three years from the date on which such investigation commenced.

Article 32

[Title Amended on Dec. 31, 2018]

Article 32-2 (Written Fact-finding Surveys)

(1) The Korea 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 on Dec. 20, 2016>

(2) Where the Korea 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 Korea 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.

(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 on Apr. 17, 2018>

[This Article Newly Inserted on Aug. 13, 2013]

Article 32-3 (Reporting on Offenses)

Article 32-2 ~ 32-3

(1) Any person who finds a fact contravening this Act may report such fact to the Korea Fair Trade Commission. In such cases, the Korea 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) or making an allegation that there is a violation of this Act, the Korea Fair Trade Commission may conduct an investigation necessary therefor.

(3) Where the Korea 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 Korea 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 clause of Article 32 (1); the Korea Fair Trade Commission has dropped the charges against the fact reported; or the reporting person has withdrawn the report. <Amended on Dec. 31, 2018>

(4) Where the Korea 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

Article 32-3

based on the results of the investigation, including the details of the disposition).

[This Article Newly Inserted on Dec. 20, 2016]

Article 33 (Corrective Measures)

(1) The Korea 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 (5) or 15-2 (3) or (6) to deposit requirement payment, provide franchise disclosure documents, pay expenses incurred in improvements in the store environment, return required payments, discontinue violations, report plans or actions necessary for correcting violations, or take other measures necessary for correcting violations. <Amended on Aug. 3, 2007; Aug. 13, 2013; Mar. 29, 2016; Jan. 16, 2018>

(2) Deleted. <Dec. 31, 2018>

(3) Where the Korea Fair Trade Commission issues an order for correction pursuant to paragraph (1), it may order the relevant franchiser to publish that it receives such order for correction or to give notice thereof to the trading partners. <Amended on Aug. 3, 2007>

Article 34 (Recommendation for Correction)

(1) If the Korea Fair Trade Commission has no time to order a franchiser that has violated this Act to take corrective measures under Article

Article 33 ~ 34

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 Korea Fair Trade Commission shall also notify that the franchiser will be deemed to have taken corrective measures upon accepting the recommendation. <Amended on Mar. 29, 2016>

(2) A franchiser that receives a recommendation under paragraph (1) shall notify the Korea Fair Trade Commission as to whether it accepts the recommendation within 10 days from the date of receipt of notice of such recommendation. <Amended on 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 on Mar. 29, 2016>

Article 35 (Penalty Surcharges)

(1) The Korea 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,

Article 35

the Korea Fair Trade Commission may impose a penalty surcharge to the extent not exceeding 500 million won. <Amended on Mar. 29, 2016; Jan. 16, 2018>

(2) Where the Korea Fair 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 Korea 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 Korea Fair Trade Commission may impose a penalty surcharge on such company and collect the penalty surcharge therefrom:

1. A company that is divided;

Article 35

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

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

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

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

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

Article 36 (Cooperation of Heads of Relevant Administrative Agencies)

If the Korea 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 Regulatio

Article 36 ~ 37

n and Fair Trade Act)

(1) Articles 64 through 68, 81 (1), (2), (3), (6), and (9), 93, 95 through 97, and 101 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 on Aug. 3, 2007; Dec. 20, 2016; Dec. 29, 2020>

(2) Articles 103 through 107 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to the imposition and collection of penalty surcharges under this Act. <Amended on Dec. 31, 2004; Aug. 3, 2007; Aug. 13, 2013; Dec. 29, 2020>

(3) Articles 96, 97, 99, and 100 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to raising of objections, filing of lawsuits, and exclusive jurisdiction over lawsuits for appeal under this Act. <Amended on Aug. 3, 2007; Mar. 29, 2016; Apr. 18, 2017; Dec. 29, 2020>

(4) Article 119 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to Commissioners of the Korea 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 transactions in the Council. <Amended on Dec. 29, 2020>

(5) Deleted. <Aug. 3, 2007>

Article 37

[Title Amended on Aug. 3, 2007]

Article 37-2 (Liability for Damage)

(1) If a franchiser 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 this shall not apply where the franchiser proves that there was no intent or negligence on his or her part.

(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 this shall not apply where the franchiser proves that there was no intent or negligence on his or her part. <Amended on 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;

Article 37-2

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

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 seeking damages is filed in accordance with paragraph (1) or (2), Articles 110 and 115 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis. <Amended on Dec. 29, 2020>

[This Article Wholly Inserted on Apr. 18, 2017]

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

@Article 45 (1) 1, 4, 6, and 7 and Article 46 of the Monopoly Regulation and Fair Trade Act shall not apply to matters governed by this Act in relation to franchise transactions. <Amended on Aug. 3, 2007; Dec. 29, 2020>

[Title Amended on Aug. 3, 2007]

Article 39 (Delegation and Entrustment of Authority)

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

Article 38 ~ 39

to this Act may be delegated to the heads of its affiliated agencies or Mayors/Do Governors; or may be entrusted to the heads of other administrative agencies, as prescribed by Presidential Decree. <Amended on Aug. 3, 2007; Mar. 27, 2018>

(2) The Korea Fair Trade Commission may entrust the Korea Fair Trade Mediation Agency established pursuant to Article 72 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 on Aug. 3, 2007; Feb. 17, 2012; Dec. 29, 2020>

1. Affairs concerning the registration, refusal of registration, and disclosure of a franchise disclosure document 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 Korea 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 on Aug. 3, 2007; 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 on Aug. 3, 2007; Jan. 16, 2018; Dec. 29, 2020>

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

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

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

(3) 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 50 million won: <Amended on Aug. 3, 2007; Aug. 13, 2013>

1. A person who receives a franchise deposit directly from a franchisee,

Article 41

in violation of Article 6-5 (1);

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

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

(4) 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 on 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 an offense 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 offense.

[This Article Wholly Amended on Mar. 22, 2010]

Article 43 (Administrative Fines)

Article 42 ~ 43

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

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

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

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

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

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

Article 43

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

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

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

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

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

(6) A person falling under any of the following subparagraphs shall be subject

Article 43

to an administrative fine not exceeding 10 million won: <Amended on Aug. 3, 2007; Aug. 13, 2013>

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

2. A person who fails to provide information under any subparagraph of Article 9 (3) in writing, in violation of 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 subject to an administrative fine not exceeding three million won: <Amended on Aug. 3, 2007; Aug. 13, 2013>

1. A person who

Article 43

fails t make a reprt r makes a false reprt, in vilation of the proviso of 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 Korea Fair Trade Commission as prescribed by Presidential Decree. <Newly Inserted on Aug. 3, 2007>

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

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

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

Article 44 (Accusation)

(1) Public prosecution for an offense under Article 41 (1) 1, (2) 1 and 2, or (3) may be initiated only when the Korea Fair Trade Commission files an accusation. <Amended on 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 Korea Fair Trade Commission shall file an accusation in relation thereto with the Prosecutor General. <Amended on Jan. 16, 2018>

(3) The Prosecutor General may notify the Korea Fair Trade Commission that

Article 44

he or she has discovered facts constituting an accusation under paragraph (2) and request it to file an accusation in relation thereto. <Amended on Aug. 13, 2013>

(4) Even if the Korea Fair Trade Commission determines that the gravity of an offense does not meet requirements for an accusation under paragraph (2), the Chairperson of the Board of Audit and Inspection or the Minster of the SMEs and Startups may request the Korea Fair Trade Commission to file an accusation for other reasons, such as social ripple effects and the level of losses incurred by prospective franchisees or franchisees. <Newly Inserted on Aug. 13, 2013; Jul. 26, 2017>

(5) Where the Chairperson of the Korea Fair Trade Commission receives a request for filing an accusation under paragraph (3) or (4), he or she shall file an accusation with the Prosecutor General. <Newly Inserted on Aug. 13, 2013>

(6) The Korea Fair Trade Commission shall not revoke its filing of an accusation after the public prosecution is initiated. <Amended on Aug. 13, 2013>

ADDENDA <Act No. 6704, May 13, 2002>

(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 me

Addenda

asures, 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 aforesaid 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

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

Article 2 (Applicability to Required Payments)

The amended provisions of subparagraph 6 of Article 2 shall begin to apply from required payments 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 begin to apply from 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 begin to apply from 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)

Addenda

The amended provisions of the main clause of Article 14 (1) shall begin to apply from 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 Franchise Disclosure Documents)

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

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

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 Required Payments)

The return of required payments 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 without good cause, before this Act enters into force. In such cases, the extent of the return of required

Addenda

payments 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 Transaction Dispute Mediation Council at the time this Act enters into force shall be deemed the Council under the amended provisions of Article 16.

(2) Cases for which an application is filed or mediation proceedings are pending with the former Franchise 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 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 Counsellors)

(1) A person who has successfully passed the franchise counsellor qualifying examination, who holds a franchise counsellor license, or who has completed registration as a franchise counsellor in

Addenda

accordance with the former provisions at the time this Act enters into force shall be deemed a person who has successfully passed the franchise 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 counsellor has been revoked 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 promulg

Addenda

ation.

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

Article 2 (Transitional Measures concerning Registration of Franchise Disclosure Documents)

A franchise disclosure document 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 Territories)

Where matters concerning the establishment of the sales territory 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

Addenda

12-4 (1): Provided, That where a franchisor renews the first franchise agreement after this Act enters into force, it shall establish the sales territory under the amended provisions of Article 12-4 (1) and mention such sales territory in the franchise agreement.

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

Article 1 (Enforcement Date)

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

Article 2 (Applicability to Change of Sales Territory)

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

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

The amended provisions of Article 12-6 (1) shall begin to apply from 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 begin to apply from the first

Addenda

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 begin to apply from the first compensation lawsuit filed after this Act enters into force.

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

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 begin to apply 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)

Addenda

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

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

The amended provisions of Article 22 (4) through (6) shall begin to apply from an application for mediation of dispute first filed after this Act enters into force.

Article 4 (Applicability to Liability for Damage)

The amended provisions of Article 37-2 shall begin to apply from 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)

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)

Addenda

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 <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, 2018>

Article 2 (Applicability to Change of Sales Territories)

The Amended provisions of Article 12-4 (2) shall begin to apply 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 begin to apply 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.

Addenda

Article 4 (Applicability to Liabilities for Damage)

The amended provisions of Article 37-2 shall begin to apply 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.

ADDENDA <Act No. 15547, Mar. 27, 2018>

Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 2019.

Article 2 (Applicability to Application for Mediation and Relevant Matters)

The amended provisions of Articles 22 and 23 shall begin to apply from the first application for dispute mediation filed by a disputing party after this Act enters into force.

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

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 <Act No. 15853, Oct. 16, 2018>

Article 1 (Enforcement Date)

Addenda

This Act shall enter into force on January 1, 2019.

Article 2 (Applicability to Matters to Be Included in Franchise Agreement)

The amended provision of Article 11 (2) 11 shall begin to apply from the first franchise agreement concluded or renewed after this Act enters into force.

ADDENDA <Act No. 16176, Dec. 31, 2018>

Article 1 (Enforcement Date)

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

Article 2 (Applicability to Exceptions to Limitation on Objects Subject to Investigation)

The amended provisions of the proviso of Article 32 (1) shall begin to apply from a franchise transaction for which an application for mediation is filed pursuant to Article 22 (1) after this Act enters into force.

Article 3 (Applicability to Limitation on Period for Corrective Measure or Imposition of Penalty Surcharge for Violations)

(1) The amended provisions of Article 32 (2), with the exception of its subparagraphs,

Addenda

and subparagraph 1 of the same paragraph shall begin to apply from cases where the Korea Fair Trade Commission receives a report under the former part of Article 32-3 (1) after this Act enters into force.

(2) The amended provisions of Article 32 (2), with the exception of its subparagraphs, and subparagraph 2 of the same paragraph shall begin to apply from cases where the Korea Fair Trade Commission commences an investigation pursuant to Article 32-3 (2) after this Act enters into force.

Article 4 (Transitional Measures concerning Mediation Procedures)

Notwithstanding the amended provisions of Article 23 (3) through (5), the previous provisions shall apply to mediation for which an application has been filed before this Act enters into force.

ADDENDA <Act No. 17799, Dec. 29, 2020.>

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation. (Proviso Omitted.)

Articles 2 through 26 Omitted.

ADDENDUM <Act No. 18113, Apr. 20, 2021>

This Act 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