Agency Collective Bargaining Rights Expansion, Triple Compensation Increase, and Introduction of Consent Resolution System

Fair Trade Commission Announces Legislative Notice for Agency Act Amendment from August 28 to September 7

Fair Trade Commission Chairman Cho Sung-wook is giving a speech at the site visit and meeting with exemplary companies in the dealership sector related to COVID-19, held on April 28 at the Maeil Dairies headquarters in Jongno-gu, Seoul. Chairman Cho visited the site to encourage Maeil Dairies' efforts for mutual growth with its dealerships. Previously, Maeil Dairies increased the promotional support amount for milk products to its nationwide dealerships by four times, provided masks and hand sanitizers, and supported fuel expenses. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission announced on the 28th that it will publicly notify the amendment to the Agency Act, which includes provisions to codify the collective organization rights of agencies and introduce a consent decision system, until September 7.

The core aim is to enhance the bargaining power of agencies with lower transactional status and to encourage autonomous improvement and prevention of trading practices with headquarters (suppliers).

The Fair Trade Commission judged that concerns still exist about agencies continuing unfair trade practices due to headquarters abusing their transactional status even after the Agency Act was enforced in December 2016.

According to the agency transaction survey results from 2018 to last year, about 34.9% of agencies responded that they had experienced unfair trade practices.

Accordingly, the amendments include ▲ codifying the right of agencies to form collective organizations ▲ introducing triple damages for 'retaliatory measures' ▲ and introducing a consent decision system.

Until now, it has been difficult for agencies to increase their bargaining power through agency organizations. According to the agency transaction surveys from 2017 to last year, the membership rate of agencies in business organizations was only 14.9% to 23%.

Thanks to the constitutional freedom of association, agencies can freely form groups without the Agency Act, but the Fair Trade Commission believes that explicitly stipulating it in the law will have the effect of supporting the formation of such groups.

In the future, agency organizations are expected to serve as channels for conveying difficulties to suppliers and responding to unfair practices.

The scope of triple damages will be expanded to include retaliatory measures. Triple damages mean that if a party causes damage through unfair practices such as forced purchases or coercion to provide economic benefits, they are liable to compensate up to three times the damage.

Retaliatory measures refer to acts that disadvantage agencies for reasons such as filing dispute mediation requests, reporting to the Fair Trade Commission, or cooperating with investigations. Although it is considered the most malicious among prohibited acts under the Agency Act, it was excluded from the scope of triple damages.

Triple damages have already been introduced in Fair Trade Commission-related laws where retaliatory measures are prohibited acts, such as the Fair Trade Act, Subcontracting Act, Franchise Act, and Distribution Industry Development Act.

The Fair Trade Commission explained, "Retaliatory measures obstruct agencies' rights remedies and entrench unfair practices," adding, "It is necessary to induce the eradication of such acts through the introduction of triple damages."

A consent decision system will be introduced for prohibited acts under the Agency Act. This system allows a business subject to investigation and deliberation by the Fair Trade Commission to submit a corrective plan to the Commission and, upon approval, conclude the case without determining illegality.

The Fair Trade Commission expects that once the Agency Act is fully enforced, the demand for using the consent decision system in agency transactions will increase.

With the introduction of the system, it will be possible to swiftly and effectively compensate agency victims, and the legal instability of suppliers is also expected to be resolved early, according to the Fair Trade Commission.

Additionally, the amendment includes ▲ establishing grounds for recommending model transaction standards ▲ introducing a bottom-up procedure for the establishment and revision of standard agency contracts ▲ and establishing grounds for conducting and entrusting agency-related education and counseling.

Suk Dong-su, head of the Agency Transaction Division at the Fair Trade Commission, said, "This will contribute to strengthening the bargaining power of agencies in a weaker transactional position, enhancing victim relief systems, and improving autonomous trading practices, thereby creating a fair trading foundation and an inclusive gap relationship in the agency sector." He added, "Considering the impact of the novel coronavirus (COVID-19), the amendment was prepared in a way that minimizes the burden on the industry while improving unfair practices, and it is expected to contribute to revitalizing the market economy."

The Fair Trade Commission plans to collect opinions from stakeholders (suppliers and agencies, etc.) and related ministries during the public notification period, then submit the amendment to the National Assembly within this year after regulatory and legislative reviews and approval through vice ministerial and Cabinet meetings.

This content was produced with the assistance of AI translation services.