Seoul City Resolved 123 Franchise and Agency Disputes Last Year

Among 128 Cases Submitted to the 2020 ‘Seoul Franchise and Agency Dispute Mediation Committee,’ 123 Cases Processed
Dispute Mediation Processing Period Reduced from Legal 60 Days to 32 Days, Economic Effect Approximately 880 Million KRW

[Asia Economy Reporter Lim Cheol-young] Mr. A, who operates a convenience store, requested early closure due to poor sales and inability to fulfill the 5-year contract period agreed with the franchisor. However, he was notified of a high penalty fee including full repayment of the support fund. Mr. A applied for dispute mediation to the Seoul Dispute Mediation Council, which, through the mediation process, reached an agreement to reduce the penalty fee by only paying a portion of the residual facility value without requiring repayment of the support fund.

It was revealed that Seoul City resolved a total of 123 franchise and agency disputes last year. Since 2019, when local governments (Seoul, Gyeonggi, Incheon, Busan) were delegated dispute mediation duties by the Fair Trade Commission, Seoul has resolved the highest number of dispute cases nationwide for two consecutive years.

According to Seoul City on the 18th, a total of 128 cases were filed with the Franchise and Agency Dispute Mediation Council last year, of which 123 were processed and 5 were still under mediation. Among the 123 processed cases, 44 were settled, 9 were not settled, and 70 were closed (dismissed, withdrawn, filed in court, etc.).

Excluding cases closed due to dismissal or withdrawal, the settlement rate was 83%, which is evaluated as effective victim relief through field-oriented mediation. Last year, the settlement rate of the Korea Fair Trade Mediation Agency was 76%.

Among the types of disputes processed, in the ‘franchise business sector (108 cases)’, ‘unfair burden of compensation for damages (28 cases)’ was the most common, followed by ‘abuse of trading position (13 cases)’ and ‘violation of disclosure obligations such as providing information disclosure documents (10 cases)’. In the ‘agency transaction sector (15 cases)’, ‘return, change of transaction conditions, and other disadvantageous acts (7 cases)’ were the most frequent mediation requests. Especially last year, as many franchise stores closed due to COVID-19, disputes related to unfair burden of compensation for damages such as penalty fees between franchisors and franchisees surged.

The dispute mediation processing period was also significantly reduced. The previous statutory processing period was 60 days, but as of last year, Seoul City conducted franchise dispute mediation in 32 days and agency disputes in 27 days, proceeding swiftly.

Economic benefits from successful mediation also followed. Seoul City analyzed that the cost savings and mediation amounts when franchise and agency owners resolved disputes through mediation instead of litigation reached approximately 880 million KRW.

Park Ju-seon, Seoul City’s Fair Economy Officer, said, “We are working to simplify the dispute mediation procedure and shorten the period to achieve quick agreements. In addition, we will continue to provide preemptive education and legal counseling to prevent unfair damages to franchise and agency owners and strive to establish a fair trade order.”

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