'Termination of Group Activity Franchise Contract' bhc Loses Fair Trade Commission Fine Cancellation Lawsuit

Seoul High Court, Seocho-gu, Seoul. / Photo by Moon Honam munonam@

[Asia Economy Reporter Kim Daehyun] Chicken franchise bhc lost the lawsuit it filed in response to the fine imposed by the Fair Trade Commission.

According to the legal community on the 14th, the Seoul High Court Administrative Division 6-2 (Presiding Judges Wi Gwangha, Hong Seonguk, Choi Bonghee) recently ruled against bhc in the lawsuit seeking cancellation of the corrective order and fine payment order filed against the Fair Trade Commission.

Earlier, bhc terminated contracts with seven franchisees who led the establishment and activities of the nationwide bhc Franchisee Council, and in May last year, was fined 500 million KRW by the Fair Trade Commission for violating the Franchise Business Act.

The bhc Franchisee Council raised issues through the media starting August 2018, claiming that the prices of chicken and sunflower oil supplied by the company were expensive relative to their quality. bhc claimed defamation and other reasons to terminate the contracts, but the Fair Trade Commission judged it as an unfair contract termination due to collective activities.

bhc filed an administrative lawsuit against the Fair Trade Commission's disposition, but the court reached the same conclusion as the commission. The court stated, "The franchisees did not make baseless claims; they raised suspicions based on some grounds," and added, "It cannot be concluded that there is a justifiable reason to justify refusal to transact." It also emphasized that one of the purposes of the Franchise Business Act is to guarantee bargaining power against the superior position of franchisors like bhc, thus strong sanctions are necessary in light of the legislative intent.

Meanwhile, a different judgment was made in the fine cancellation lawsuit filed by BBQ. BBQ was fined 1.76 billion KRW for giving disadvantages such as refusal to renew contracts to six stores that led the 'Nationwide BBQ Franchisee Council,' but the Seoul High Court Administrative Division 6-1 (Presiding Judges Choi Bonghee, Wi Gwangha, Hong Seonguk) ruled in favor of BBQ, stating there is no basis to consider the refusal to renew contracts was due to the franchisees' collective activities.

The court considered that BBQ notified the refusal to renew contracts more than 10 months after the Franchisee Council was launched, and that some franchisees had been under contract for over 10 years, giving BBQ discretion over renewal. However, it judged that requiring flyers to be produced only through a specific company violated the Franchise Business Act, and upheld 1.265 billion KRW of the fine as justified.

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