Final Confirmation of Fair Trade Commission's Consent Decision
First Application in the Franchise Sector
The Fair Trade Commission avoided sanctions by accepting remedial measures for abuses of superior bargaining position, such as forcing franchisees to bear interior construction costs. Hansot pledged to support franchisees with IT equipment and maintain advertising and promotional expenses without increase for the next five years to promote mutual growth.
On the 12th, the Fair Trade Commission announced the final approval of Hansot's consent decree regarding violations of the Franchise Business Act. The consent decree is a system that swiftly concludes cases without determining legal violations, based on voluntary corporate correction and victim compensation. Hansot applied for the consent decree in September 2022 after being investigated for abusive practices, including shifting interior construction costs onto franchisees.
In the finalized consent decree, Hansot promised to fully pay the interior construction costs amounting to 294 million KRW that it was responsible for to compensate the victims.
Additionally, to prevent future violations, Hansot will complete education on the Franchise Business Act and, reflecting franchisees’ opinions, will support improvements in food service quality by covering signboard cleaning costs (82 million KRW), uniforms and kitchen supplies (109 million KRW), and IT equipment such as barcode scanners and card readers (332 million KRW). Hansot also committed to maintaining advertising and promotional expenses without increase for the next five years.
The Fair Trade Commission explained, "This consent decree includes a cooperative plan to promptly and effectively compensate franchisees for damages related to Hansot’s recommendation or demand for interior construction at 36 franchise stores without paying the legally required construction costs."
This decision is the first case to apply the consent decree system since its introduction and enforcement in the Franchise Business Act in July 2022.
The Fair Trade Commission evaluated, "From the franchisees’ perspective, they can immediately receive interior construction costs and monetary compensation through the consent decree without civil procedures, while from the franchisor’s perspective, Hansot has voluntarily prepared comprehensive support measures for franchisees."
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