The Fair Trade Commission has suspended its investigation into Adidas Korea. Adidas Korea has been under investigation by the Fair Trade Commission's Seoul office and headquarters since last year, based on a report from the franchisee association that claimed the company unilaterally terminated contracts with franchisees.
According to the competition authority on the 16th, the Adidas franchisee association has withdrawn its report against Adidas Korea for allegedly violating the 'Law on the Fairness of Franchise Transactions.' This occurred after the franchisee association and Adidas Korea, unable to narrow their differences for three years, dramatically reached a settlement. When the complainant withdraws the report, the Fair Trade Commission suspends the investigation.
The agreement between the two parties was facilitated by the National Assembly. In April, the Democratic Party of Korea's Euljiro Committee hosted a win-win agreement ceremony, bringing together the Adidas franchisee association and Adidas Korea. At this meeting, Adidas Korea promised to withdraw all cancellations of franchisees' contract renewals that had sparked the complaint.
As a result of this measure, the dealership contracts of 22 out of the 63 stores that had requested contract renewals will be extended, excluding those that have closed due to financial issues. Additionally, Adidas Korea has agreed to supply popular products such as Superstar and Samba at its stores for consumers to purchase.
The Euljiro Committee has decided to verify whether Adidas Korea adheres to the agreement every six months over a total period of two years. Consequently, the conflict between Adidas Korea and the Adidas franchisee association, which had arisen since 2022, has come to a close.
The Fair Trade Commission's investigation was inconclusive. It had yet to determine whether Adidas Korea's actions constituted a violation of the Franchise Act.
However, the standards regarding what constitutes a franchisee have become clearer during this investigation process. Unlike franchisees, franchise stores are guaranteed contract renewals for 10 years, making the classification of a store as a franchise store or not a critical factor in judging Adidas Korea's legality.
Under the law, a franchisee operates by using the franchisor's trademarks and selling products according to certain quality standards or business methods. The Adidas franchisee association has claimed that they are franchise stores, not franchisees.
However, the Fair Trade Commission concluded that the Adidas stores are franchisees, not franchise stores, focusing on the level of 'franchisor control.' The basis for this judgment was that the stores were not subject to the franchisor's control regarding operations like opening and closing hours.