[1] Whether a franchisor can demand a franchisee to meet the quality standards for goods and services in a franchise business

[2] Whether the provisions of the franchise store contract that a franchisor may implement and execute a sales promotion event without consultation with a franchisee constitute "unfairly unfavorable clause against a customer" under Article 6 (2) 1 of the Regulation of Standardized Contracts Act

[3] The standard for determining whether a franchisor's act of distributing advertising leaflets advertising promotional events to a franchisee's business area while holding a nationwide sales promotional event and bearing expenses for the advertising complex's expenses to a franchisee constitutes an act of disadvantageous offer under Article 36 (1) [Attachment 1] Item 6 (d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act

[4] In addition to the method of manufacturing, selling, storing, packing goods in the franchise store manual, whether the contents for embodying the obligations imposed on the franchisee under the franchise store agreement can be included in the franchise store manual

[5] The case holding that when a franchisor concludes a franchise business agreement with a franchise business operator, the franchisor does not have a duty to clearly explain and explain the same as providing ancillary food, such as information leakage, at free of charge, when the franchisee sells the franchising product

[6] Requirements for the suspension or refusal of the supply of goods or services or business support to a franchisee in franchise business transactions to constitute an unfair trade practice

[1] It is reasonable to view that the franchise business requires a franchisee to observe the quality standards set by the franchiser for commodities and services sold by the franchisee within the extent reasonably necessary to maintain the unity of the franchise business and the reputation of the franchiser, and that the franchisor may demand the use of the commodities and services provided by the franchiser, if necessary to meet such quality standards.

[2] Franchise business means a continuous transaction in which a franchisor allows a franchisee to sell goods (including raw materials and auxiliary materials) or services in accordance with a certain quality standard using its own trade mark, service mark, trade name, signboard, or any other business mark, and provides support, education, and control for management, business activities, etc., and a franchisee refers to a continuous transaction in which a franchisor pays franchise fees to a franchiser in return for the use of business marks, etc., support and training for management, business activities, etc. Accordingly, franchise business has a common interest, such as the protection of individual interests of a franchisee and the maintenance and development of a general franchise organization including a franchisee, based on a trust relationship as a mutually-beneficial business method between a franchisor and a franchisee, and the promotion of sales in a franchise business is for the purpose of increasing the profits of a franchisee through the increase in sales of a franchisee even if it is nationwide, and thus, a franchisor and a franchisee gain profits from the increase in sales of raw and subsidiary materials supplied to a franchisee. Thus, if a franchisee agreement provides for reasonable expenses incurred in the promotion of sales between a franchisor and a franchisee in accordance with Article 6(2).

[3] Whether a franchisor’s act of distributing advertising leaflets advertising the sales promotional event to a franchisee’s business area while holding a nationwide sales promotional event and bearing the expenses of such advertising complex constitutes an act of disadvantageous provision under Article 36(1) [Attachment Table 1] subparag. 6(d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act shall be determined by specifically considering the characteristics of franchise business, the purpose of a nationwide sales promotional event, the purpose of a nationwide sales promotional event, the contents of a franchise agreement, the process of establishing and executing a sales promotional event, the prior consultation with the franchisee, and the propriety

[4] The franchise store manual is established and operated by the franchisor as part of the rules on the operation of the franchise in accordance with the franchise agreement to maintain the unity, quality control, and reputation of the product. Therefore, it is reasonable to view that the method by which the franchisee manufactures, sells, stores, packages the product and the contents to specify the obligations imposed on the franchisee under the franchise agreement as well as the contents to specify the obligations imposed on the franchisee.

[5] The case holding that, in light of the characteristics of Hein's franchise business transactions and the price-fixing structure of Hein's products, since the type of business, such as the provision of auxiliary food such as a blance water leakage, free of charge, when a franchisee sells Hein products, is general and common in Hein's franchise business transactions, it can be sufficiently anticipated that a franchisor may not give a separate explanation to a franchisee in entering into a franchise agreement with a franchisee, and thus, the franchisee cannot be deemed to have a duty to specify and explain such matters.

[6] In order for a franchiser to constitute an unfair trade refusal to suspend or refuse the provision of goods or services or business support to a franchisee in light of the characteristics of franchise business, such act shall be deemed to have been committed as a means to deprive the franchisee of opportunities for continuous trading, making it difficult for the franchisee to conduct business activities or to secure effectiveness in order to achieve the objectives of unfair control over the franchisee, even though there are no significant circumstances that make it difficult to continue the franchise business transaction due to the franchisee’s failure to comply with the franchise agreement.

[1] Article 5 and Article 6 subparag. 3 and 4 of the Fair Transactions in Franchise Business Act / [2] Article 23 subparag. 4 of the Monopoly Regulation and Fair Trade Act, Article 36(1) [Attachment Table 1] subparag. 6(d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, Article 6(2)1 of the Regulation of Standardized Contracts Act / [3] Article 12 of the Fair Transactions in Franchise Business Act, Article 23(1)4 of the Monopoly Regulation and Fair Trade Act, Article 36(1) [Attachment Table 1] subparag. 6(d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act / [4] Article 12 of the Fair Transactions in Franchise Business Act, Article 23(1)4 of the Monopoly Regulation and Fair Trade Act, Article 36(1) [Attachment Table 1] subparag. 6(d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, Article 6(2)1 of the Regulation of Standardized Contracts Act / [5] Article 236(1) of the Monopoly Regulation and Fair Trade Act

Jae-si Co., Ltd. (Attorneys Lee Im-soo et al., Counsel for the plaintiff-appellant)

Fair Trade Commission (Law Firm Lee, Attorneys Lee Won-young et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2001Nu1484 delivered on May 22, 2003

The appeal is dismissed. The costs of appeal are assessed against the defendant.

1. Regarding ground of appeal No. 1

In the franchise business, it is reasonable to view that it is necessary to require a franchisee to observe the quality standards set by the franchiser for commodities and services sold by the franchisee within the extent reasonably necessary to maintain the unity of the franchise business and the reputation of the franchiser and to require the franchiser to use commodities and services provided by the franchiser, if necessary to meet such quality standards.

According to the facts and records duly confirmed by the court below, since the plaintiff takes a business structure using the difference between the original and subsidiary materials supplied to the plaintiff's franchisee and its purchase price, it is impossible for the plaintiff to purchase all raw materials and components individually, and the subsidiary food that can be provided to the plaintiff's franchising so that it can be less than that of the plaintiff's main products or franchising products than that of the plaintiff's franchising products for the supply of safe franchising products (this can be seen as safe franchising products and quality of safe franchising products that can be used for the supply of safe franchising products, and safe franchising products can be used for the supply of safe franchising products, and safe franchising products can be used for the provision of safe franchising products at free of charge after the provision of safe franchising products (this can be seen as franchising products.

The judgment of the court below to the same purport is just and acceptable, and there is no error in the misapprehension of legal principles as to the scope necessary to attain the objectives of the franchise business.

2. Regarding ground of appeal No. 2

A. Franchise business means a continuous transaction in which a franchisor allows a franchisee to sell goods (including raw materials and auxiliary materials) or services in accordance with a certain quality standard using its own trade mark, service mark, trade name, signboard, or any other business mark, and provides support, education, and control for management, business activities, etc.; and a franchisee refers to a continuous transaction in which a franchisor pays franchise fees to a franchiser in return for the use of business marks, etc. and the support and training for management, business activities, etc.; thus, franchise business has a common interest, such as the protection of individual interests of a franchisee and the maintenance and development of a general franchise organization including a franchisee, based on a trust relationship as a mutually-beneficial business method between a franchisor and a franchisee, and the promotion of sales in a franchise business is for the purpose of increasing the profits of a franchisee through the increase in sales of its own franchisees, even if nationwide, and thus, a franchisor and a franchisee gain profits from the increase in sales of raw and subsidiary materials supplied to a franchisee. Thus, if a franchise agreement provides for reasonable expenses incurred in facilitating sales between a franchisor and a franchisee in accordance with Article 16(2).

In light of the relevant provisions and the records, even if Article 20 of the franchise agreement allows the Plaintiff, a franchisor, to determine the distribution of the advertising complex in the business area of a franchisee without consultation with the franchisee, the lower court is justified to have agreed to share the cost in accordance with reasonable standards, and thus, it cannot be viewed as an unfair disadvantageous provision against the customer. In so doing, the lower court did not err by misapprehending the legal doctrine on Article 6(2)1 of the Regulation of Standardized Contracts Act.

B. After compiling the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that Article 20 of the franchise store agreement can serve as the basis for franchisees to bear the costs of the advertising complex.

In light of the records, the above fact-finding and judgment of the court below are justified, and there is no error of law by misconceptioning facts against the rules of evidence.

C. Whether a franchisor’s act of distributing advertising leaflets advertising a sales promotional event to a franchisee’s business area while holding a nationwide sales promotional event and bearing expenses for such advertising complex constitutes an act of disadvantageous provision under Article 36(1) [Attachment Table 1] subparag. 6(d) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act shall be determined by comprehensively considering the characteristics of franchise business, the purpose of a nationwide sales promotional event, the purpose of a nationwide sales promotional event, the contents of a franchise agreement, the establishment and execution process of a sales promotional event, the prior consultation with the franchisee, the appropriateness of bearing expenses

According to the facts and records established by the court below, sales promotion events are basically planned and executed by the plaintiff's head office or regional head office under Article 20 of the franchise store contract, and agreed to allow the franchisee to claim part of the reasonably calculated advertising expenses. The plaintiff's participation in sales promotion events and the purchase of the leaflet to distribute to the sales area of the franchisee in the event of the sales promotion events of this case at the request of the franchisee in advance. The plaintiff, the franchisor, as part of the sales promotion events of this case, bears all the expenses for newspaper and television advertising and the design of the advertising complex, and only KRW 5,482,00,000,000,000,000 won, excluding the design expenses of the advertising complex, was borne by the franchisee, and all the expenses for the design of the advertising complex were collected by the franchisee. In light of the facts and the purpose of the sales promotion events of this case, the plaintiff's act of bearing the advertising complex expenses to the franchisee in the event of the sales promotion of this case cannot be deemed an act of disadvantageous to the other party during the performance of transaction

The judgment of the court below to the same purport is just and acceptable, and there is no error in the misapprehension of legal principles as to the scope of control necessary to attain the objectives of the franchise business.

3. As to the third ground for appeal

A. The franchise store manual is established and operated as part of the rules on the operation of the franchise store in accordance with Article 21 of the franchise store agreement in order to maintain the unity, quality control, and reputation of the products. Therefore, it is reasonable to view that the method by which a franchisee manufactures, sells, stores, packages the products and the contents for specifying the obligations imposed on a franchisee under Article 6 of the franchise store agreement as well as the methods by which a franchisee manufactures, sells, stores, packages the products.

After compiling the adopted evidence and recognizing the facts as stated in its reasoning, the lower court determined that the content of the franchise store manual on the provision of safe leakage in double-slives should be construed as including not only the method of manufacturing, selling, keeping, and packing knives but also the meaning of providing safe knives to consumers free of charge when selling knives.

In light of the records, the above fact-finding and judgment of the court below are justified, and there is no error of law by misconceptioning facts against the rules of evidence.

B. According to the facts and records established by the court below, the plaintiff's franchise business is an important business content that cooks and sells dental products. The plaintiff's franchising is required to purchase the franchising franchising frans and the fransing franssing fransing franssing franssing fransing fransing fransing franssing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing fransing franssing frans and products standardization. In light of the fact that the frans frans' fransing frans and fransing fing fsing fransing fssing fing fing ging f.

The judgment of the court below to the same purport is just and acceptable, and there is no error in the misapprehension of legal principles as to Article 6 (2) 1 of the Regulation of Standardized Contracts Act.

C. In light of the characteristics of dental franchising and price-fixing structure, the type of business, such as providing ancillary food such as a white-scale or double-bracker at free of charge when a franchisee sells dental products, is general and common in dental franchising, and thus, it can be sufficiently anticipated that a franchisor may not give a separate explanation to a franchisee when entering into a franchise agreement with a franchisee. Therefore, there is no obligation to specify and explain such matters.

The court below's decision that when a franchisor sells a franchise store contract with a franchisee, it is important that the franchisor should provide a consumer with auxiliary food, such as a water leakage range or water leakage safe, free of charge, on the premise that the franchisee has an obligation to explain it. However, the conclusion that the franchisor did not violate the obligation to explain and explain in concluding a franchise store contract is just and acceptable, and there is no error of law by misunderstanding facts against the rules of evidence or by misunderstanding the legal principles on the duty to explain and explain under the Regulation of Standardized Contracts Act, which affected the conclusion of the judgment.

D. The lower court’s determination on the premise that the franchise store manual on the free provision of water leakage is valid can be deemed to have rejected the Defendant’s assertion that the franchise store manual was invalidated, and therefore, the lower court did not err in the misapprehension of judgment.

4. As to the fourth ground for appeal

In light of the characteristics of franchise business, the suspension or refusal of the supply of goods or services or business support to a franchisee constitutes an unfair trade practice, it should be said that the suspension or refusal of the franchise business transaction is caused by the means to deprive the franchisee of opportunities for continuous trading or to secure effectiveness in order to achieve the objectives of unfair control, etc., even though there is no serious reason that it is difficult to continue the franchise business transaction due to reasons attributable to the franchisee, such as breach of the franchise agreement.

The court below acknowledged the facts as stated in its reasoning after comprehensively taking account of the adopted evidence. The court below determined that the non-party representative of the Plaintiff's franchise store and the non-party's franchisee's trust relation with the Plaintiff and the non-party's franchisee had already been collapsed due to the series of acts such as the non-party's above acts, and that the Plaintiff's act of suspending physical distribution or cancelling the franchise contract purchased from other enterprises constitutes grounds for suspending physical distribution under Article 6 (3) 3 and (1) of the franchise agreement, and that the act of using back-scale and sprinks constitutes grounds for termination of the franchise contract under Article 9 (1), 3, 4, 6, and 6 (1) of the franchise agreement, and that the act constitutes grounds for termination of the franchise agreement, and thus, it constitutes a ground for termination of the franchise agreement under Article 9 (1) 1, 3, 4, 6, and 6 (1) of the franchise agreement and thus, it can be seen that the act of refusing physical distribution or termination of the franchise agreement constitutes abuse of the non-party's.

In light of the relevant laws and the above legal principles and records, the above fact-finding and judgment of the court below are justified, and there is no error in the misapprehension of facts against the rules of evidence or in the misapprehension of legal principles as to the rejection of transaction.

5. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Young-ran (Presiding Justice)