The Franchise Encroachment － An Analysis of the revised KFFA －

Korea Fair Franchising Act, (hereinafter, "KFFA") was revised on August 13, 2013, the statute No. 12094 and will come into force on February 14, 2014. The enactment of the Enforcement Decree of KFFA followed on February 14, 2014, the statute No 25175. The revised KFFA contains various new clauses for adapting itself to new social and economic circumstances. The most important clause in the revised KFFA is an exclusive sales territory protection clause. This article deals with the system and issues of Companies Act contained in the revised KFFA. Franchise Encroachment has been one of the most vital legal debates in the field of Korea franchise law. Encroachment is the phenomenon in which the franchisor establishes a new franchise unit in unreasonable proximity to its existing franchisee. Over the years, there has been much debates whether encroachment should be restricted by law. In the revised KFFA, franchisor must contractually guarantee a franchisee an exclusive sale territory where the franchisor neither establishes a company-owned unit nor authorizes a new franchise unit in unreasonable proximity to its existing franchisee. The strong protection clause is good for franchisee but not for consumer welfare. Because encroachment enhances consumer welfare by increasing price and service competition. So the revised KFFA and the Enforcement Decree thereof still has a number of systematic and analytical problems. These problems arose mainly due to the lack of empirical economic analysis and review of the legislations before their revision. I hope meaningful progress in these revised KFFA discussion.