Starting a small business in Korea can be enjoyable and profitable if you get the business on the right track from the start. Too often we see those with “limited funds” (we all have limited funds -even multinationals have limited funds) choosing to forgo having the deals structured by a professional and just downloading a “partnership” agreement off the internet. Avoid the headaches and the costs in the future and structure all right from the start. I have learned from
Continue readingCategory: Korean Franchise Law
Foreign Franchisees Joining the Korean Franchise Association
The Korean Franchise Association is an organization that is authorized/licensed by the Korean Ministry of Trade, Industry & Energy. All domestic and foreign franchises that have registered Franchise Disclosure Statements with the Korean Fair Trade Commission can apply to the Korean Franchise Association. IPG Legal believes, most foreign franchisors, should join the Korean Franchise Association. The KFA is an excellent resource for market intelligence and an excellent conduit to understand the unique aspects of the Korean franchise market and Korea’s
Continue readingMaterial Omissions in Korean Franchise Disclosure Documents in South Korea
In April of 2015, the Supreme Court of Korea ruled that under Article 4; Article (9)(1); and Article 41(1) of the prior version of the Fair Transactions in Franchise Business Act (“Franchise Act”) damages may be obtained, from a franchisor, for all material omissions (Supreme Court 2014 DA 84824,84831, April 9, 2015) within Korean Franchise Disclosure Documents. Thus, we advise all franchises in Korea to review and update their franchise agreements, thoroughly, on a yearly basis. Damages for Material Omissions
Continue readingRequire a Injunction in a Korean Court Against your Former Korean Franchisee for Competing Against your New Korean Franchisee?
Under the Fair Franchise Transactions Act of Korea (“Franchise Act”), a franchisee has the right, under Korean Law, to request the renewal of a Korean franchise agreement after ten years of successful operation of a franchise. In some cases this reality leads to a Former Franchisee continuing the franchise in competition with your new franchisee. We wrote about termination of a Korean franchise in other articles including: Termination of a Franchise in Korea. Also, you can view other articles on
Continue readingInternational Arbitrations in Korea under the IBA Rules
Procedural Arbitration rules are key to the efficient and effective adjudication of arbitration disputes in Korea and, also, worldwide. These arbitration rules govern and set out the framework for the arbitration process. Evidence gathering and presentation are important aspects of the above procedure, and yet, institutional and ad hoc rules that provide arbitration guidelines on other matters such as the appointment of arbitrators and the nature of award and costs are, usually, silent on this point. Advantages of such a
Continue readingTips for Start-up Success in Korea: Korean Business Basics
Despite the economic challenges presented by the COVID pandemic, there are still plenty of opportunities for start-up companies in South Korea. Many of the long-term foreign attorneys in Korea shall advise that South Korea remains a perfect testbed for foreign companies in the East Asian marketplace. Local and national governments remain committed to fostering long-term partnerships with foreign start-ups within Korea. The attorneys at IPG Legal have put together a list of their top tips to help your start-up succeed
Continue readingKorea Focuses on Greater Control over Imported Food – Amendment to the Special Act on Imported Food Safety Control 2019
The Special Act on Imported Food Safety Control was recently amended and shall strengthen the on-site inspections of foreign establishments, which already export food to Korea, as well as those, which apply for registration of the importation of overseas food. The Amendment was proposed in early April 2019 and shall become effective upon promulgation. We expect substantially heightened risk for importers and an increase in the price of many imported goods. Major Provisions of the Korean Amendment to the Special
Continue readingKorean Patent Law’s Trade Secret Protection: Amendment to Trade Secret Law in Korea
The amended Patent Act of Korea (“Korean Patent Act”) and the amended Unfair Competition Prevention and Trade Secret Protection Act (“Korean Trade Secret Protection Act”) of Korea shall enter into force on July 9, 2019. The most important key developments are great criminal penalties for trade secret misappropriations; damage awards up to three times of the actual damage regarding infringements of patent rights or trade secret rights; eased litigation requirements for the claimants; and revised basis for calculating royalty damages.
Continue readingDigital Forensic Reviews at the Korean Fair Trade Commission
The Fair Trade Commission of Korea (“KFTC”) implemented in April 2018 rules governing the review of digital evidence in investigations of businesses at the KFTC. The rules are entitled the Regulations on Collection, Analysis and Management of Digital Evidence (“Digital Forensic Evidence Review Rules”). The rules have changed the manner of executing investigations at the KFTC in cases where the KFTC perceives a need for a detailed forensic audit. As of 2017, the KFTC has engaged in digital investigations via a
Continue readingKorean FTC Criminal Referral Guidelines: Monopoly & Franchise Korean Law Updates
The Fair Trade Commission of Korea (“Korean FTC” or “KFTC”) amended the Korean FTC’s Criminal Referral Guidelines (“Amended Guidelines”) to motivate more active and aggressive enforcement of Korea’s Franchise, Monopoly and other related laws. We have seen a much more active enforcement of Korean law by the Korean FTC and expect more criminal referrals. The Amended KFTC’s Criminal Referral Guidelines places a very low threshold for referring a case for a criminal prosecution of employees and companies. The Amended Guidelines
Continue readingBarriers to Trade in the Korean Franchising Industry
The Office of the United States Trade Representative issues an annual report that details issues that concern the ability of United States companies to do business abroad. One interesting component of the this report, that may concern some international franchise systems in Korea, is addressed in the report. The 2018 National Trade Estimate Report on Foreign Trade Barriers notes under Korean Franchising that: “U.S. stakeholders have raised concerns for several years about the activities of the National Commission on Corporate Partnership, now
Continue readingPrivity of Contract in Franchise Agreements in Korea: Korean Franchise Law Updates
Normally, in Korea, a contract/agreement cannot confer rights nor impose obligations upon a person who is no a party to the contract/agreement. One interesting case, in franchise law, applied this principle to the benefit of the franchisor and the detriment to a supplier. A Supplier delivered food through a Distributor to a Franchisee based on a franchisee requirement iterated in a franchise agreement with a franchisor. The case brings to light, also, the potential liability of franchisors for acts of Korean franchisees. The
Continue readingKorean Franchisors’ Obligations in Korea to File Annual Report to Korean FTC
Korea’s Franchise Law imposes an obligation to report to the Fair Trade Commission of Korea, yearly, specific information relating to your franchise business worldwide. A franchisor’s disclosure document may be de-registered or a fine may be imposed if this Yearly Franchise Report is not accepted by the Korean Fair Trade Commission within 120 days of the closing of the year. The Yearly Franchise Report, in Korea, is intended to notify franchisees and prospective franchisees of changes in the operations of
Continue readingEnglish-speaking Korean lawyers and International Lawyers at International Law Firm in Korea discussing issues of Korean Law
IPG Legal is a leading client-focused international law firm with offices in Korea that is, often, selected over the ubiquitous Korean Law Firms when success is essential and success depends on nuanced street-smart advice, proactive and unconflicted representation. Our attorneys are, intentionally. different from the crowd. From our retired judge partners to our junior associates, we are all trained with an intense focus on client success, lawyer proactivity, and to understand the nexus between your commercial and legal needs. Our attorneys
Continue readingFranchising in South Korea: Practical Law’s Franchising Global Guide Korean Chapter by IPG Legal
This Global Guide Q&A on South Korean Franchise Law provides an overview of the main practical issues concerning Korean franchising, including current market activity; regulation of franchising in Korea; contractual issues relating to franchising agreements in Korea (including pre-contract disclosure requirements, formalities, parties’ rights and obligations, fees and payments, term of agreement and renewal, termination, and choice of law and jurisdiction); Korean Operations Manual; liability issues; intellectual property; real estate; competition law; employment issues; dispute resolution; exchange control and withholding;
Continue readingTermination of a Franchise Agreement in Korea: Korean Franchise Law Basics
The Fair Franchising Transactions Act of Korea (“Franchise Act”) and its Enforcement/Presidential Decree, the Commercial Law of Korea and the Korea Franchise Promotion Act are the main bodies of law regulating the relationship between franchisors and franchisees in Korea. The law is enforced by the Korea Fair Trade Commission and the Korean courts. Franchise Termination in Korea Korea’s Franchise Act, facially, limits the power of the franchisor to terminate a franchise. The Franchise Act notes that: “Article 14 of the
Continue readingA “Franchise” Defined under Korean Law: Franchise Law Basics
Korea Franchise Law Korea has a very broad definition for a “franchise.” The definition of a franchise is noted in Korea’s Franchise Act and has been fairly consistently applied by the courts and Korea’s Fair Trade Commission. Korea’s Franchise Act defines a franchise as: “a continuous business relationship in which the franchisor allows the franchisee to sell goods or services under certain quality standards and business method using its trademarks, service marks, trade name, signs and other business marks
Continue readingWill McDonald’s Korea Franchise in Korea?
In early April this year, chief executive and president of McDonald’s, Steve Easterbrook, announced that the company was seeking a “strategic partner” in Korea, as part of the company’s implementation of a “global turnaround strategy.” A report on the announcement can be found at: McDonald’s seeks strategic partner in Korea. At the time, the company did not elaborate as to what exactly was meant by “strategic partner” though McDonald’s did say that the company was “open to all possibilities” including
Continue readingEnforcement of Sales Promotions by Franchisors under Korean Franchise Law
Can an international franchisor force a local Korean franchise to cut the prices of a product via a sales event? This issue was addressed by the Korean Supreme Court in 2003Du7484. In this Supreme Court of Korea case, a franchisor, among other things, mandated via the franchise agreement for a franchisee to hold sales events. The franchise agreement did not specify the specific details of the sales events. The franchisor elected to utilize the clause in the franchise agreement to
Continue readingA Franchisor may be Unable to Prosecute a Franchisee for Embezzlement in Korea
Article 355 of Korea’s Criminal Act defines embezzlement as: “a person who, having the custody of another’s property, embezzles or refuses to return the property shall be punished by imprisonment for not more than five years or a fine not exceeding fifteen million won.” In a landmark case in Korea’s Franchise Jurisprudence, the Supreme Court ruled a franchisee may not be held criminally liable for embezzlement for “arbitrary spending of funds” and not paying franchise fees under the franchise agreement,
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