Hello, this is attorney Eom Sang-yoon of Cheongchul Law Firm.

On 30 April the Korea Fair Trade Commission (KFTC) amended its Notice on Detailed Standards for the Imposition of Administrative Fines, raising sanction levels across Fair Trade Act violations such as cartels and unfair support. On 4 August, the fine-calculation notices for three further areas — subcontracting, franchising and agency distribution — were amended and took effect together. Where the April amendment focused on the effectiveness of cartel sanctions, the August amendment concentrates on abusive practices by prime contractors, franchisors and suppliers.

This article reviews the detail of each amended notice and then considers how the landscape is likely to shift in subcontracting, franchising and agency practice.

The context of the amended fine notices

The three notices amended together are those on the calculation of fines for violations of (i) the Subcontracting Act, (ii) the Franchise Business Act and (iii) the Agency Distribution Act. The Large Retail Business Act notice was excluded from this round but is scheduled separately for the second half of 2026, so sanction levels across all four distribution statutes are effectively being reset.

Equally significant is that amendments to the Enforcement Decrees of the Subcontracting Act and the Franchise Business Act passed the Cabinet on 28 July 2026 and took effect on the same 4 August. Those amendments raised the ceiling for aggravation based on repeat violations from 50% to 100%, and the notices amended here set the detailed standards that allow that new range to be applied in practice. The Agency Distribution Act Enforcement Decree already provided for a 100% ceiling and so is used as it stands.

In short, the strengthening of Fair Trade Act sanctions through the April amendment is now flowing through to the enforcement decrees and notices under the three distribution statutes — an expression of policy intent to overturn the conventional view that "a fine is just part of the cost of doing business".

What the amendments actually change

The changes fall into three groups: (i) higher base rates and base amounts with gravity subdivided into four tiers, (ii) recalibrated aggravation for repeat violations and retaliation, and (iii) narrowed and partly abolished grounds for reduction.

1. Across-the-board increases in percentage and fixed fines

The previous three-tier structure (very serious / serious / less serious) has been subdivided into four tiers, with the base rates raised as follows.

- Subcontracting Act

The base rate for very serious violations rises from 60–80% to 90–100%, for serious violations from 40–60% to 75–90%, and the less serious band of 20–40% is restructured into a new upper band of 50–75% and a lower band of 40–50%. The base amount for very serious violations rises from KRW 0.9–2 billion to KRW 1.8–2 billion, more than doubling the floor.

- Agency Distribution Act: increases of a similar magnitude to the Subcontracting Act.

- Franchise Business Act: because the base is turnover, the increase is comparatively modest — very serious violations 1.8–2.0%, serious violations 1.5–1.8%, and less serious violations 0.1–1.5%.

The detailed assessment tables also change. Under the Franchise Business Act, the reference point for assessing the franchisor's size moves from the business year immediately preceding the violation to the business year immediately preceding the end of the violation. Under the Agency Distribution Act, the type of violation and the supplier's size are added to the factors considered, expanding the list from four items to six.

2. Recalibrated aggravation for repeat violations and retaliation

Across all three statutes, a single violation in the past five years can now trigger aggravation of up to 50%, rising in steps to a maximum of 100% as violations accumulate: (i) one or more violations and two or more points, above 40% up to 50%; (ii) two or more and three or more points, above 50% up to 70%; (iii) three or more and five or more points, above 70% up to 90%; and (iv) four or more and seven or more points, above 90% up to 100%. This exactly doubles the former ceiling of 50% and means a history of violations now weighs on a business at an entirely different order of magnitude.

Aggravation for retaliation has also been strengthened. Where a business retaliates against a counterparty for filing a complaint with the KFTC or applying for dispute mediation, the uplift rises from 20% to 30% under the Agency Distribution Act, and a new 30% uplift has been introduced under the Franchise Business Act, which previously had no such provision. Retaliation against a complainant can therefore add up to 30% of the calculation base if later detected.

3. Narrowed and partly abolished grounds for reduction

Cooperation reductions of 10% at the investigation stage and 10% at the deliberation stage — up to 20% in total — are now capped at 10% in total, and only where the business cooperates consistently from investigation through deliberation. The reduction for voluntary remediation falls from a maximum of 50% to a maximum of 10%, and only where the effects of the violation have been substantially removed. The 10% reduction for minor negligence under the Franchise Business Act has been abolished outright. The room for a business to obtain reductions through after-the-fact cooperation and remediation has therefore been cut to less than half of what it was.

How the practical landscape shifts

With sanction levels raised substantially across the board, prime contractors, franchisors and suppliers subject to these statutes will need to exercise a markedly higher standard of care.

For prime contractors, the calculation base for a single subcontract payment violation — non-payment, unfair reduction, unfair cancellation of an order — has nearly doubled, and a single violation in the past five years adds up to 50% on top. A matter that previously produced a base of KRW 500 million may now yield a base above KRW 1 billion, exceeding KRW 1.5 billion once repeat aggravation applies. The familiar practice of securing reductions of around 70% through cooperation and voluntary remediation is no longer viable, so the relative weight of prevention — ensuring the violation never occurs — has grown far greater than that of after-the-fact response.

For franchisors, the rise in base rates is modest, but the change in the turnover reference point will have a subtle effect. Because the turnover of the business year immediately preceding the end of the violation governs, growth in the franchisor's size during a prolonged violation feeds directly into the gravity assessment. The new 30% retaliation uplift should also operate as a strong deterrent against adjusting terms with franchisees after a complaint.

For suppliers operating agency networks, adding the type of violation and supplier size to the factors considered opens the way for conduct that previously attracted little attention to be assessed more severely. Larger suppliers may face a heavier calculation base for the same type of violation, so reviewing Agency Distribution Act risk at the stage of designing and standardising agency terms becomes a matter of business strategy.

The most important change is that, with the scope for after-the-fact adjustment through reductions effectively exhausted, prevention and early response are the only remaining line of defence. For violation types common to subcontracting, franchising and agency distribution — payment, contract terms, refusal to deal, demands for information — responses confined to individual business units are inadequate; legal and compliance functions need to be involved from the contracting stage to screen out likely violations in advance. Businesses can no longer treat fines as "a cost to be absorbed if caught".