Antitrust chief mulls lowering minimum-member bar for franchisee groups

The Korea Fair Trade Commission is considering lowering the minimum number of members required for franchisees to register as an official group.

The move comes as critics say the current 30-member minimum — set separately from a 10% participation requirement — makes it difficult for franchisees affiliated with smaller franchise headquarters to register as a group, ahead of the enforcement of a revised franchise business law that introduces a group registration system and requires registered groups to be consulted in good faith.

Korea Fair Trade Commission Chairperson Joo Byung-gi held a meeting with franchise headquarters representatives on strengthening franchisees' bargaining power at the Korea Fair Trade Mediation Agency in Jung-gu, Seoul, on Friday. "Large franchise headquarters need to bear responsibility commensurate with their scale, given their impact on the franchise industry," Joo said.

Regarding the proposed revision to the enforcement decree of the franchise business law, he said, "I find it regrettable that the positions of franchise headquarters and franchisees have remained opposed and the gap between them has not narrowed since the proposal was announced for public comment." He added, "While it is important to faithfully implement the intent of the revised law, it is equally important to ensure that it is willingly accepted and operates smoothly on the ground."

Under the proposed revision to the enforcement decree, which the commission announced for public comment on Aug. 3, franchisees of the same brand can formally register a franchisee group with the commission if they make up 10% or more of that brand's outlets, or if the group has 1,000 or more members. The commission set the minimum membership at 30, taking into account the burden on smaller franchise headquarters.

As a result, brands with fewer than 30 franchise outlets cannot meet the minimum membership requirement and are unable to register a group. Brands with between 30 and 299 outlets also need a participation rate higher than 10% to clear the 30-member threshold.

Earlier, at a meeting with franchisee representatives on Wednesday, Joo had said the commission was considering lowering the minimum-member threshold for group registration.

"Our intent was to exempt smaller headquarters with relatively few affiliated franchisees from the regulation while imposing responsibilities commensurate with scale on larger headquarters," Joo said. "But we recognize that, contrary to that intent, there are concerns that the registration requirement becomes more burdensome for franchisees under smaller headquarters. We sympathize with that concern and are considering lowering the minimum threshold."

He added that the commission would continue to explore various compromise measures "to maximize win-win synergy within the franchise industry while still achieving the intent of the revised law," and said he was willing to reflect the opinions raised at the meetings in the final revision.

The commission held two additional meetings because a range of opinions emerged from franchise industry stakeholders after the proposal was announced for public and administrative comment.

Franchisee groups, including the Korea Alliance of Franchisee Associations, raised concerns that the minimum-member requirement limits franchisees' bargaining power, and that the broad interpretation of grounds for restricting consultation requests could be exploited by franchise headquarters.

Franchise headquarters, including the Korea Franchise Industry Association, countered that authorities should consider the potential side effects of minimizing the group registration ratio requirement — namely, a proliferation of groups and the risk of applying consultation outcomes reached with groups that have low representativeness to all franchisees.

The commission plans to collect opinions on the proposed enforcement decree revision through Monday, and to complete the related rulemaking process within the year to ensure the revised franchise business law takes effect without delay. The revised law is set to take effect Dec. 31.