[비즈한국] Companies sometimes make decisions that are difficult to explain based on money alone. Understanding the underlying laws and systems can provide deeper insight into these matters. 'Useful Business Law' introduces clues that help explain business dynamics.
Headquarters want their agencies and franchisees to always do their best to achieve maximum performance. The demand or hope for such results is not inherently wrong. Establishing sales policies and encouraging stakeholders to implement them is normal business activity.
However, it is a different matter when, in situations where the counterpart cannot realistically refuse the headquarters' demands due to exclusive dealing, the headquarters imposes unreasonable targets and inflicts disadvantages for failing to meet them. The difficulty lies in drawing the line between normal business policy and unfair coercion. This is especially true when sales policies are so intertwined with the core competitiveness of the headquarters that they are difficult to separate, making it unclear whether demanding compliance is unfair.
The Fair Trade Act, the Franchise Business Act, and the Agency Act all prohibit the coercion of sales targets. Furthermore, Fair Trade Commission (FTC) notifications and guidelines provide examples of acts that constitute such coercion. The examples of violations cited in these notifications and guidelines converge on a single structural commonality: setting sales targets and unilaterally inflicting disadvantages on the counterparty for failing to meet them. The nature of these disadvantages simply varies slightly by area, as shown below:
1. Suspension of supply of goods or services, or refusal to renew or terminate a contract.
2. Refusal of returns despite conditional return agreements, arbitrary allocation of unsold stock, or shifting losses after dumping.
3. Non-payment, reduction, or deferment of commissions, or unfavorable changes to payment terms (credit periods, late interest rates, etc.).
4. Significant reduction or delay of supply without reasonable cause, or application of less favorable supply prices or discount rates compared to other trading partners.
Meanwhile, there are numerous rulings stating that if the headquarters' actions do not reach the level of the disadvantages mentioned above—such as mere warnings or requests for self-rescue plans—and do not significantly restrict the counterparty's freedom of decision-making, it cannot be considered coercion of sales targets.
Synthesizing statutes, precedents, and notifications, the requirements for illegal coercion of sales targets are as follows:
① Bargaining Power: The supplier must hold a superior position over the counterparty, or at least a position that can significantly influence business activities. Its existence is judged by considering the market situation, the gap in business capabilities between the two parties, and the characteristics of the product. The aforementioned 'exclusive dealing that is difficult to refuse' falls within this realm.
② Presentation of Sales Targets: Targets related to the supply of goods or services must be presented. Even if not specified in the contract, presentation via internal networks or orally is sufficient.
③ Coercion: This is the key. Coercion is recognized if the structure involves imposing disadvantages such as contract termination, supply suspension, or withholding of commissions upon failure to meet the target. Conversely, as seen in previous rulings, if the headquarters' actions are limited to simple requests or encouragement (like warnings or asking for self-rescue plans) such that it is difficult to see them as restricting the counterparty's freedom of choice, coercion cannot be recognized.
④ Unfairness: Unfairness is recognized if a business with superior bargaining power imposes coercive sales targets. However, if the increased efficiency or consumer welfare resulting from that coercion significantly outweighs the negative effects on fair trade, or if other reasonable grounds exist, it may not be viewed as illegal. The presence of unfairness is ultimately judged by whether it is 'likely to impede fair trade by deviating from normal business practices' by comprehensively considering the intent, purpose, effects, product characteristics, trade situation, degree of superior position, and the nature and degree of disadvantage suffered.
Even with the above explanation, it is difficult to distinguish what 'unfairness' truly means. This is precisely why it is difficult to distinguish between normal business policy and unfair trade practices. Even with this framework, judging individual cases remains challenging.
If a headquarters monitors an underperforming agency for several years and then notifies the agency of contract termination without a specific reason, the headquarters will cite private autonomy as justification, while the agency will argue that it is de facto coercion based on poor performance. It is difficult to decide whose side to take in such cases. Therefore, I inevitably look at cases from two perspectives:
First, procedural legitimacy. This is a sign of coercion. I consider whether the headquarters engaged in sincere and continuous consultation with the counterparty before and after the disadvantageous measure, and whether they provided an opportunity to recover. Unilateral presentation is highly likely to be recognized as coercion, while sufficient consultation and grace periods suggest otherwise.
Second, substantive legitimacy. This relates to the 'nature and degree of disadvantage' under unfairness. I consider whether the counterparty made an overall profit through the basic transaction and whether they had the opportunity to recover invested capital by continuing the trade for several years. If they earned sufficient profit from the basic transaction, it is difficult to view their parting ways due to differing views on performance as unfair. However, when assessing that 'profit,' one must check whether the normal margins that should have been received were instead conditional under the name of 'incentives.'
These two perspectives do not fit every case, and practices vary by field and industry. Nevertheless, if one breaks down rationality (unfairness) into procedural and substantive legitimacy and examines them one by one, seemingly complex cases often resolve themselves. If you are an aggrieved party, do not simply claim unfairness vaguely; you must objectively prove the unfairness based on the two axes of coercion and unfairness.