- The State Council passed the amendment of the Enforcement Decree of the Act on Fairness of Affiliate Business Transactions -
If the franchise headquarters, which violated the franchise business law, voluntarily corrects violations of the law and cooperates with the Fair Trade Commission's investigation and deliberation, the penalty can be reduced by up to 70%.
The revised ordinance of the Enforcement Decree of the Affiliate Business Act, which calls for expanding the upper limit of the penalty reduction from the current 50% to 70%, will be passed by the Cabinet meeting today and be promulgated after the presidential approval.
Last year, the penalty reduction rate was raised to 50% when the franchise headquarters voluntarily corrected violations of the law to help franchisees quickly relieve damage, but the current enforcement ordinance stipulated that the upper limit of the penalty reduction was 50%, raising concerns that voluntary correction could not be sufficiently induced. This is because even if illegal acts are voluntarily corrected (up to 50%) and cooperated in investigation and deliberation (up to 20%), fines can be reduced only by 50%, the upper limit of the enforcement ordinance, which weakens the incentive for voluntary correction or investigation cooperation of law-breakers.
Accordingly, the FTC will raise the upper limit of the enforcement ordinance's penalty reduction to 70% to provide sufficient incentives for voluntary correction.
The revision also included allowing the franchise headquarters to provide information disclosures to prospective members using mobile applications such as text messages and KakaoTalk as part of deregulation.
The revision is expected to boost the self-correction of illegal activities, enhancing the convenience of franchise headquarters and prospective members by diversifying the method of providing information disclosures and the effect of quickly getting relief from franchisees.