– Corrective orders imposed for requiring disclosure of sales figures and restricting supply channels for consumables –
The Korea Fair Trade Commission (KFTC), chaired by Han Ki-jeong, has decided to issue corrective orders against Hankook Tire & Technology Co., Ltd. (hereafter “Hankook Tire”) for violating the Fair Transactions in Franchise Business Act (hereafter “Franchise Act”) by:
- Unjustifiably requiring all dealerships to submit confidential sales information, and
- Restricting Tire Shop (TTS) dealerships to procure consumables only from suppliers designated by Hankook Tire.
TTS (The Tire Shop) dealerships are specialized outlets for passenger car and light truck tires, accounting for approximately 20% of all Hankook Tire dealerships as of the end of 2023.
From September 2019 to November 2024, Hankook Tire required dealerships to input sales data—including final consumer prices—into a proprietary software program it developed, called the “Smart System.” Through this, the company acquired sensitive sales information.
When a headquarters obtains dealership sales data, it can expose the dealership’s profit margins (sales price – supply price), potentially placing the dealership at a disadvantage during future supply price negotiations. Such information is considered a trade secret and should be protected, but Hankook Tire demanded its disclosure without just cause.
Furthermore, Hankook Tire contractually restricted dealerships from sourcing consumables from suppliers other than those it designated. Dealerships wishing to use alternative suppliers were required to obtain prior approval.
Contracts also stipulated that violations of these sourcing restrictions could result in suspension of certain product supplies, thereby increasing the burden on dealerships.
The KFTC judged these actions to be a violation of Article 10, Paragraph 1 of the Franchise Act, which prohibits franchisors from unjustly interfering in the management activities of their dealers by abusing their superior bargaining position.
Article 10 (Prohibition of Interference in Management Activities)
Paragraph 1: “A supplier shall not unjustly interfere in the business activities of a dealership by abusing its superior trading position, nor cause any affiliated company or third party to do so.”
This action by the KFTC marks an important case where a tire and auto parts manufacturer was sanctioned for unfairly interfering in dealership management. It is expected to safeguard the autonomy of dealerships and promote fair trading practices between headquarters and dealers in the future.