8/09/2015

Abuse of Superior Bargaining Power Notification by the Korea Fair Trade Commission: Distributor Risks in Korea

The Korea Fair Trade, in May of 2014, published the Notification on Specific Types of Abuse of Superior Bargaining Positions in Continuous Resale-Type Transactions (the "Notification") according to Article 23 of the Korean Monopoly Regulation and Fair Trade Law of Korea.  The Notification has made substantial changes to Korea's Antitrust Law. 

Please, promptly, review your specific situation with your attorney.  If you lawyer has not contacted you, contact the attorney immediately.  Your counsel must be capable and willing to become deeply aware of your business practices and must be knowledgeable about the Korea Fair Trade Commission.

Most Korean and international attorneys, in Korea, are, only, vaguely aware of the power of the Korea Fair Trade Commission and their Notifications - thus a guiding hand from the client is, often, necessary. 

We suggest a complete Compliance Audit, at least, every three years.  This audit, requires your attorney to stay up on the near constant updates in Employment, Environmental, Safety and Antitrust/Competition laws.

The Korea Fair Trade Commission Notification on Specific Types of Abuse of Superior Bargaining Position in Continuous Resale-type Transactions declares the following types of transactions, facially, "Unfair Transactions":
  • Refusal to Provide Statements of Transactions
    • The refusal or avoidance to provide to a distributor/supplier records of transactions between the supplier and the distributor
  • Unfair Treatment of a Distributor
    •  Unilateral modification of transaction terms
    •  Unfair payments, in event of termination, for the use of equipment provided by suppliers
    •  Prohibition, in agreements, of claims for damages in the event of a termination of the  business relationship
    • The unfair shifting of the cost of returns from the seller to the distributor
    • The unfair shifting of the cost of defects from seller to the distributor
    • The prejudicial treatment of a distributor because of the filing of a complaint to the Fair Trade Commission
  • Unfair Forced Sale of Goods
    • Unilateral supply of unwanted goods
    • Unilateral supply of unordered/non-requested goods
    • Mandatory purchase requirements for certain types of goods that are near expiry, are not proven in the market, are unpopular or are obsolete
  • Unfair Forced Economic Benefits
    • Requiring distributors to donate money to a supplier's business
    • Requiring distributors to dispatch workers to the business of the supplier
    • Requiring promotional activities/labor costs to be borne by the distributor without the agreement of the distributor
  • Unfairly Forced Sales Targets 
    • Terminating a distributorship because of not meeting sales targets
    • Withholding commissions because of not meeting sales targets
  •  Unfair Interference with the Business of the Distributor
    • Forcing a distributor to participate in supplier mandated promotional events/activities
    • Requiring the disclosure of trade secrets
    • Requiring the appointment or removal of employees of the distributor
    • Unilaterally requiring the distributor to maintain certain business hours
    • Unilaterally requiring the distributor to maintain a certain sales territory
Guys.  Get a Compliance Audit completed.  The cost is trivial when considering the risks.  
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.