Will the exclusive contract between Costco and Hyundai Card disappear?

Representative Park Hong-geun Proposes Amendment to the Electronic Financial Transactions 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 has been introduced that fundamentally prohibits franchise stores from entering into exclusive contracts with specific card companies, such as Costco. 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.

According to the National Assembly and industry sources on the 17th, Park Hong-geun, a member of the Democratic Party of Korea, has taken the lead in proposing 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 list of prohibited acts for credit card franchise stores.

An official from the lawmaker’s office explained, "There have often been complaints about inconvenience because some credit card franchise stores only accept specific cards," adding, "This bill aims to resolve consumer inconvenience caused by restrictions on payment methods."

Costco, a warehouse-style discount mart operated on a membership basis, is a representative example. Since entering the domestic 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.

The card industry pointed out that such a bill could have side effects by infringing on the freedom of franchise store contracts. An industry official said, "If exclusive contracts are banned, the franchise store’s bargaining power over contract terms such as franchise fees could 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 do not have contracts."

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 proposed an amendment to the Specialized Credit Finance Business Act mandating multiple card contracts for franchise stores, but concerns were raised at the time about infringement on contract freedom and consumer backlash due to reduced additional services. It was pointed out that the franchise store’s bargaining power could weaken, leading to increased fees or reduced additional services. However, some argue that banning exclusive contracts could increase card companies’ opportunities to secure customers.

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