[1] When the Fair Trade Commission calculates and imposes a penalty on a large franchise and retail business operator who violates the duty imposed on a large franchise and retail business operator under Articles 6 through 18 of the Fair Transactions in Large Franchise and retail Business Act, the matters to be asserted and proved, and the method of determining the scope of the goods related to the violation

[2] In a case where a large franchise and retail business operator did not enter into a written agreement with a supplier, etc. on the dispatch of employees, etc. from a supplier, etc. and had them work at its workplace, but the dispatch of such employees, etc. falls under any of subparagraphs 1 through 4 of Article 12 (1) of the Act on Fair Transactions in Large Franchise and Retail Business, whether it can be readily concluded that a large franchise and retail business operator had a direct or indirect impact on the transaction of the goods traded with the supplier by taking advantage of his superior position (negative in principle)

[1] The Act on Fair Transactions in Large Franchise and Retail Business (hereinafter “Large Franchise and Retail Business Act”) provides that, in order to realize administrative objectives by which large franchise and retail business operators are subject to the imposition of duties on large franchise and retail business operators under Articles 6 through 18 of the same Act (hereinafter “violation”), deprivation of illegal economic benefits and sanction violations, the Fair Trade Commission may impose a penalty surcharge on a violator within the scope not exceeding the amount of supplied goods according to the calculation method prescribed by Presidential Decree or annual rent (the main sentence of Article 35(1)), and where it is difficult to calculate the amount thereof, etc., the Fair Trade Commission may impose a penalty surcharge within the extent not exceeding KRW 50 million (the proviso of Article 35(1)). In addition, Article 28 of the former Enforcement Decree of the Act on Fair Transactions in Large Franchise and Retail Business (amended by Presidential Decree No. 2850, Jan. 9, 2018) provides that “The amount of supplied goods according to the calculation method prescribed by Presidential Decree means the amount of goods purchased during the pertinent period of a large franchise and retail business operator.”

In full view of the language, structure, purport, etc. of the Act on Large Franchise and Retail Business, when the Fair Trade Commission calculates and imposes penalty surcharges on a large franchise and retail business operator who has committed an offense, the amount of the purchase of the goods related to the offense that the large franchise and retail business operator purchased during the period of the offense, or the amount equivalent thereto, or the annual rent should be specifically asserted and proved. The scope of the goods related to the offense should be determined individually and specifically by type of act, taking into account the type and nature of the goods directly or indirectly affected by the offense

[2] In light of the language, purport, etc. of Article 12(1) of the Act on Fair Transactions in Large Franchise and Retail Business (hereinafter “Large Franchise and Retail Business Act”), a large franchise and retail business operator’s act of having a supplier, etc. work at his/her workplace without having made a written agreement with a supplier, etc. as prescribed by Presidential Decree in advance may constitute a violation of Article 12(1) of the Large Franchise and Retail Business Act; however, in cases where the dispatch of such employee, etc. falls under any of subparagraphs 1 through 4 of the proviso of the same paragraph, barring any other circumstance, it cannot be readily concluded that there is no written agreement that the large franchise and retail business operator had a direct or indirect impact on the transaction relationship of the goods traded with the supplier

[1] Articles 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 15-2, 16, 17, 18, and 35(1) of the Fair Transactions in Large Franchise and Retail Business Act; Article 28 of the former Enforcement Decree of the Fair Transactions in Large Franchise and Retail Business Act (Amended by Presidential Decree No. 28580, Jan. 9, 2018) / [2] Article 12(1) of the Fair Transactions in Large Franchise and Retail Business Act

Home Pler Co., Ltd and one other (Law Firm LLC, Attorneys Park Jae-sik et al., Counsel for the plaintiff-appellant)

Home Puss Co., Ltd. (Law Firm LLC, Attorneys Park Jae-sik et al., Counsel for the plaintiff-appellant)

Fair Trade Commission (Law Firm Associate, Attorneys Kim Jong-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Nu55600 decided February 26, 2016

The judgment of the court below is reversed, and the case is remanded to the Seoul High Court. The motion for taking over the lawsuit by the plaintiff Home Plus Business Corporation is dismissed. The cost of the motion for taking over the lawsuit is borne by the plaintiff Home Plus Business Corporation.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

A. The lower court acknowledged the following facts: (a) the Plaintiffs entered into an agreement on consignment transaction with the head of Suwon Frans Co., Ltd. to sell the goods under the names of the Plaintiffs, and pay the sales commission after deducting the sales commission to Suwon Frans; (b) the Plaintiffs were dispatched from Suwon Frans without a written agreement from April 2013 to February 2014; and (c) the lower court determined that the Defendant’s act constitutes a violation of Article 12 of the Act on Fair Transactions in Large Distribution Business (hereinafter “Large Distribution Business”), which provides that the terms and conditions of dispatch are written to enable the suppliers to engage in the sales of the goods supplied by the suppliers, etc. (hereinafter “large Franchise Frans”), and that the Defendant’s act constitutes a violation of Article 12 of the Act on Fair Transactions in Large Franchise & Distribution Business (hereinafter “the instant violation”); and (c) the Defendant’s act of violating the Act, which provides that the terms and conditions of dispatch are clearly demanded by Article 12 of the Large-Scale Distribution Business Act, and that the Defendant’s market share of this case is inappropriate.

B. Examining the reasoning of the lower judgment in light of the relevant statutes and the record, the lower judgment did not err by misapprehending the legal doctrine on the imposition of penalty surcharges under the Act on Large Franchise and Retail Business, including the grounds of appeal.

2. As to the calculation of "relevant price of supply" in the ground of appeal No. 2

A. The purpose of the Large Franchise and Retail Business Act is to contribute to the balanced growth and development of the national economy by establishing a fair trading order in large franchise and retail business and by enabling large franchise and retail business operators, suppliers, or sales floor tenants (hereinafter “suppliers, etc.”) to develop on an equal footings. To this end, the following obligations, namely, delivery of documents and preservation of documents, etc. (Article 6), prohibition of reduction of the price of goods (Article 7), payment of the sales amount (Article 8), prohibition of refusal and delay of the receipt of goods (Article 9), prohibition of return of goods (Article 10), prohibition of return of goods (Article 11), prohibition of exclusive transaction (Article 13), prohibition of demand for provision of management information (Article 14), prohibition of demand for provision of economic benefits (Article 15), prohibition of unfair restriction on business hours (Article 15-2), prohibition of provision of sales expenses (Article 16), prohibition of provision of compensation for sales expenses) and prohibition of use of suppliers, etc. (Article 17).

Furthermore, Article 35(1) of the Large Franchise and Retail Business Act provides that a large franchise and retail business operator may impose a penalty surcharge within the scope not exceeding the amount of supplied goods according to the calculation method prescribed by Presidential Decree or annual rent on a violator, in order to realize the administrative purpose that a large franchise and retail business operator deprives a violator of any of the above obligations (hereinafter “violation”) and imposes a penalty surcharge within the scope not exceeding KRW 500 million (the proviso to Article 35(1)). In addition, Article 28 of the former Enforcement Decree of the Act on Fair Transactions in Large Franchise and Retail Business (Amended by Presidential Decree No. 28580, Jan. 9, 2018) provides that “The amount of supplied goods according to the calculation method prescribed by Presidential Decree means the amount of goods purchased by the large franchise and retail business operator during the period of the violation or the amount equivalent thereto.”

In full view of the language, structure, purpose, etc. of the Act on Large Franchise and Retail Business, when the Fair Trade Commission calculates and imposes a penalty surcharge on a large franchise and retail business operator who has committed an offense, the amount of the purchase of the goods related to the offense that the large franchise and retail business operator purchased during the period of the offense, or the amount equivalent thereto, or the annual rent should be specifically asserted and proved. The scope of the goods related to the offense should be determined individually and specifically by type of act in consideration of the type and nature of the goods directly or indirectly affected by the offense, transaction area

B. The lower court determined that the Defendant’s calculation of the penalty surcharge is lawful on the ground that the Defendant’s act of violation of the instant case, on the following grounds: (a) the Plaintiff’s purchase of the chickens was caused by the Plaintiff’s purchase of the chickens and the purchase of it from Suwon Franchis; (b) the employees dispatched without written agreement obtained profits equivalent to the sales commission for the said purchase of the chickens; and (c) the Plaintiff’s compensation for cooking and sales at the store of the Plaintiffs constituted “related products”; and accordingly, (d) the remainder of the amount calculated by deducting sales commission from the amount of value-added tax, out of the amount of sales of the chickens Franchis supplied

C. However, we cannot accept the judgment of the court below for the following reasons.

(1) According to Article 12(1) of the Act on Large Franchise and Retail Business, a large franchise and retail business operator is prohibited from having a supplier or any other person (hereinafter “employee, etc.”) dispatched from a supplier, etc. to work at his/her place of business. However, in cases falling under any of subparagraphs 1 through 4 of the proviso of the same paragraph, where a supplier, etc. agreed in writing with the supplier, etc. on the terms and conditions of dispatch in advance and made the dispatched employee, etc. engaged in the sales and management of the goods supplied by the supplier, etc.,

Even if the Large Franchise and Retail Business Act falls under subparagraphs 1 through 4 of Article 12 (1), the purport of allowing a large franchise and retail business operator to dispatch employees, etc. only when he/she agreed in writing on the terms of dispatch as prescribed by Presidential Decree is to ensure transparency in the use of the dispatch relationship, since a large franchise and retail business operator is likely to dispatch employees, etc. in a situation where a large franchise and retail business operator is dispatched employees, etc. by making a verbal request to a supplier by taking advantage of his/her superior position, and it is likely that the dispatch of employees, etc. would not properly meet the specific terms and conditions and restrict fair trade order. In other words, to prevent the conditions on the dispatch of employees, etc. between large franchise and retail business operators and suppliers, etc., or to prevent disputes on the terms and conditions of dispatch between them, etc., as well as to prevent the disadvantages

In light of the language, purport, etc. of Article 12(1) of the Act on Large Franchise and Retail Business, only an act of a large franchise and retail business operator to have his/her workplace work at its own workplace without making a written agreement with the supplier, etc. as prescribed by Presidential Decree, shall be deemed to constitute a violation of Article 12(1) of the Act on Large Franchise and Retail Business. However, in cases where the dispatch of his/her employees, etc. falls under any of subparagraphs 1 through 4 of the proviso of the same paragraph, unless any other circumstance exists, it cannot be readily concluded that a large franchise and retail business operator had a direct or indirect impact on the transaction of the goods traded with

(2) Review of the reasoning of the lower judgment and the record reveals the following circumstances.

① From April 2013 to February 2014, the Plaintiffs committed the instant violation in which they were dispatched from Suwon Frans to employees, etc. without a written agreement, but further, there was no circumstance that the Plaintiffs committed a separate large franchise and retail business violation in relation to the consignment transaction for which they were supplied by Suwon FranS for the said period.

② The Defendant did not dispose of the following facts: (a) the Plaintiffs were dispatched to the employees, etc. and there was no prior written agreement on the terms of dispatch; and (b) it did not constitute a disposition under the proviso to Article 12(1) of the Large-Scale Distribution Business Act.

③ In order to deem that the act of violation constitutes either the purchase amount or the equivalent amount of goods directly or indirectly affected by the act of violation, the circumstances that directly or indirectly affected the transaction relation of the goods themselves or the transaction relation of the goods should be revealed due to the act of violation, in comparison with the absence of the pertinent act of violation. However, during the period of the violation of this case, the Plaintiffs appear to have traded the goods in accordance with the previous transaction terms and conditions, and there are no other circumstances to deem that the act of violation of this case directly or indirectly affected the purchase price of the goods in question, the scale of transaction, or other transaction terms and conditions.

④ Furthermore, even from the perspective of selling the chill and steel products to the general consumers who found the store of the Plaintiffs, there is also no circumstance to acknowledge that the act of violation of this case had direct or indirect impact on them.

(3) Examining these circumstances in light of the legal principles as seen earlier, it is difficult to readily conclude that the dispatched employees were directly or indirectly affected by the instant violation, on the basis of the circumstances that the Plaintiffs did not simply agree in writing regarding the use of the dispatched employees, etc., and that the amount of sales commission and value-added tax was directly or indirectly affected by the instant violation, or that there was no proof to acknowledge otherwise.

D. Nevertheless, the lower court determined that the Defendant’s penalty surcharge was lawful on the erroneous premise that the employees dispatched without a written agreement constituted “related goods” in the store of the Plaintiffs. In so determining, the lower court erred by misapprehending the legal doctrine on “related goods for supply” in violation of the Large-Scale Distribution Business Act and failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point is with merit.

3. As to a request for resumption of a lawsuit

On December 2, 2019, Plaintiff Home Plus Corporation was merged with Plaintiff Home Plus Corporation and dissolved on December 2, 2019, and the Plaintiff Home Plus Corporation filed an application to resume the lawsuit with the Supreme Court on December 5, 2019.

However, according to the records, the plaintiffs' appeal and the statement of the grounds for appeal are revealed after being filed, that the plaintiff Home Plus Corporation was merged with the plaintiff Home Plus Corporation, and as long as the proceedings of the court of final appeal were entered the same phase, the plaintiff Home Plus Corporation does not accept the request for taking over the lawsuit since it is not necessary to take over the lawsuit (see, e.g., Supreme Court Decision 2014Hu713, Dec. 29, 2016): Provided, That it is pointed out by the court below that it is necessary to take the above proceedings

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for further proceedings consistent with this Opinion. The application for taking over the lawsuit by the claimant for taking over the lawsuit by the plaintiff Home Plus Corporation is dismissed, and the cost incurred by taking over the lawsuit is borne by the plaintiff Home Plus Corporation. It is so decided as per Disposition by the assent of all participating Justices.

Justices Ahn Jae-chul (Presiding Justice)