[Alpha Biz= Reporter Kim Jisun] Kyochon F&B is set to face sanctions from the Fair Trade Commission (FTC) for unilaterally lowering the distribution margin on cooking oil used exclusively for its chicken franchise, resulting in significant losses for its partner supplier.
On October 13, the FTC announced that it would impose a corrective order and a fine of 283 million won on Kyochon F&B for abusing its trading position to reduce the distribution margin of its partner's exclusive cooking oil.
Kyochon F&B had previously agreed to transactions with its partner under conditions that ensured "minimum distribution margin guarantees" and "annual contract renewals." However, in May 2021, following a surge in the price of exclusive cooking oil due to the impact of COVID-19, Kyochon unilaterally reduced the distribution margin per can from 1,350 won to zero, even though the contract period was still ongoing.
As a result, the partner supplier incurred a loss of approximately 715 million won in distribution margins from May 2021 until the end of that year. Interestingly, the distribution margin for Kyochon F&B’s exclusive cooking oil showed little change, rising only slightly from 4,343 won to 4,364 won before and after the margin cut.
The FTC determined that while Kyochon F&B's actions may have eased the financial burden on franchisees regarding the purchase of exclusive cooking oil, the fact that Kyochon’s own distribution margin increased slightly during the same period indicated that the burden was disproportionately placed on its partners. The Fair Trade Act prohibits unfair practices that abuse one’s trading position.
The FTC expressed hope that this sanction would help improve unfair trading practices affecting disadvantaged partners and contribute to the promotion of a cooperative culture. It also emphasized its commitment to continue monitoring unfair trading practices in essential sectors, such as the chicken franchise business.
In response to the FTC's decision, Kyochon F&B expressed regret, stating, “This case was a policy aimed at improving the benefits for franchise owners, not the head office, which did not gain any unfair profits.”
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
