Representative Park Hong-geun Proposes Amendment to the Eojunbeop Act
Main Points: Multiple Card Contracts Between Franchisees and Card Companies
Concerns Over Infringement of Franchisee Contract Freedom
[Asia Economy Reporter Ki Ha-young] A bill that fundamentally prohibits franchise stores from entering into exclusive contracts with specific card companies, like Costco, has been introduced. Given the significant inconvenience to consumers, attention is focused on whether this will bring changes to the contracting practices of franchise stores by requiring transactions with multiple card companies.
On the 17th, according to the National Assembly and industry sources, Park Hong-geun, a member of the Democratic Party of Korea, officially proposed a partial amendment to the Specialized Credit Finance Business Act, which mandates multiple card contracts for card franchise stores. The bill adds "entering into a franchise contract with only one credit card company causing consumer inconvenience" to the prohibited acts for credit card franchise stores.
An official from the lawmaker's office explained, "There have been frequent complaints about some credit card franchise stores only accepting specific cards, causing inconvenience," adding, "This bill aims to resolve consumer inconvenience caused by restrictions on payment methods."
Costco, a warehouse discount mart operated on a membership basis, is a representative example. Since entering the Korean market, Costco has dealt with only one card company. It signed a contract with Samsung Card in 1999 and accepted only Samsung Card until 2019, after which it has accepted only Hyundai Card. The logic is that by dealing with only one card company, the franchise store reduces card franchise fees and passes the savings on to consumers as benefits. This is not legally problematic. The current Specialized Credit Finance Business Act prohibits credit card franchise stores from refusing card payments but does not regulate exclusive contracts.
Mandatory Multiple Card Contracts May Infringe on Franchise Contract Freedom
The card industry pointed out that such a bill could have side effects by infringing on the freedom of franchise contract agreements. An industry official said, "If exclusive contracts are banned, the franchise store's bargaining power over contract terms such as franchise fees may weaken," adding, "Franchise owners bear the costs, but even now, if they use the franchise shared network, they can accept cards from other card companies with which they have no contract."
Previously, at the end of 2018, Je Yoon-kyung, then a member of the Democratic Party of Korea, proposed a similar bill known as the 'Costco Prevention Act,' but it did not pass the National Assembly. Je stated, "Allowing only one card to be used ultimately forces consumers to use a specific card," and officially proposed an amendment to the Specialized Credit Finance Business Act mandating multiple card contracts for card franchise stores. However, concerns were raised at that time about infringement on franchise contract freedom and consumer backlash due to reduced additional services. It was pointed out that the franchise store's bargaining power might weaken, leading to increased fees or reduced additional services.
However, some argue that banning exclusive contracts could not only increase payment convenience for consumers but also broaden the customer acquisition opportunities for card companies.
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