Fines Imposed on 7 Companies Including Ottogi and LG Uplus for "Violation of Dealer Contract Laws"

[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission announced on the 18th that seven companies in the food and beverage, clothing, and telecommunications sectors, including Ottogi, LG Uplus, and KT, were fined for violating the agency contract law. This is part of a soft law initiative to establish a fair contract culture by expanding the distribution of standard contracts.

Source=Korea Fair Trade Commission

The Fair Trade Commission announced the results of an inspection of the written contract practices of 11 companies, including Namyang Dairy Products, Binggrae, CJ CheilJedang, Ottogi, SPC Samlip (all food and beverage), Descente Korea, K2 Korea, Hyungji Apparel (clothing), SK Telecom, LG Uplus, and KT.

The Fair Trade Commission stated that the inspection was conducted to reduce cases where suppliers use their superior position to change contract terms or fail to comply with contracts after only verbal agreements or providing insufficient contracts.

Source=Korea Fair Trade Commission

Due to insufficient contract terms, cases have occurred such as ▲ furniture manufacturers forcing dealerships to bear promotional event costs without prior agreement, ▲ food distributors accepting returns without specifying return conditions in contracts, and ▲ franchisors charging franchise regional headquarters fees without contractual basis.

For these reasons, the Fair Trade Commission mandates suppliers to prepare and keep dealership transaction contracts according to the agency contract law.

The inspection revealed that Hyungji, SK Telecom, and KT were not using the Fair Trade Commission’s standard contracts revised in June last year.

Binggrae, Descente, K2, and Hyungji had not introduced electronic contract systems and were still using handwritten contracts.

Source=Korea Fair Trade Commission

Seven companies including Ottogi, LG Uplus, and KT had introduced electronic contract systems, but usage rates varied widely from less than 20% to 100%. It was also confirmed that these companies violated contract-related laws by failing to provide contracts, delaying delivery, or omitting important details.

Accordingly, the Fair Trade Commission imposed fines of 10 million KRW on Ottogi, 8.75 million KRW on LG Uplus, 8 million KRW each on KT and K2 Korea, 7 million KRW each on SPC and CJ CheilJedang, and 6.25 million KRW on Namyang Dairy Products.

Source=Korea Fair Trade Commission

Other violations included ▲ providing contracts missing contract periods or return conditions, ▲ conducting transactions without contracts due to lack of agreement on some terms, ▲ contracts lacking signatures or seals from suppliers or dealerships, ▲ failure to provide contracts upon renewal citing automatic renewal clauses, and ▲ failure to provide contracts to non-exclusive dealerships or middle managers.

According to the Fair Trade Commission, all suppliers who failed to provide dealership contracts or omitted important details voluntarily corrected the violations by providing or supplementing contracts.

Source=Korea Fair Trade Commission

The Fair Trade Commission announced plans to conduct additional contract inspections on 177 other companies in three industries (91 in food and beverage, 59 in clothing, and 27 in telecommunications). It also plans to expand the target industries.

This year, six industries?furniture, book publishing, boilers, home appliances, petroleum distribution, and medical devices?will be added to the standard contract target industries. Currently, six industries including food and beverage, clothing, telecommunications, automobile sales and parts, and pharmaceuticals have adopted contracts.

Furthermore, the commission plans to find ways to encourage the adoption of electronic contract systems, such as awarding extra points during evaluations of fair trade agreements in the dealership sector.

Seok Dongsu, head of the Fair Trade Commission’s Dealership Transaction Division, expressed expectations that "by inspecting contract usage in the three industries with significant dealership transactions and disclosing major types of legal violations, unfair trade practices in the dealership sector can be prevented and improved."

He added, "The Fair Trade Commission will continue to inspect contract practices in the dealership sector and plans to expand and introduce various soft laws to establish a fair contract culture, including the distribution of standard contracts and the conclusion of fair trade agreements."

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