Court Upholds $1.5 Million Fine Against Dunkin' Operator for Forced Purchases

A South Korean court has upheld a 2.1 billion won (approximately $1.5 million) fine imposed on BR Korea, the operator of Dunkin' Donuts in the country. The fine was issued by the Korea Fair Trade Commission (KFTC) for forcing franchisees to purchase specific display shelves and other items, a practice deemed unfair. BR Korea had challenged the KFTC's decision, arguing that it did not compel franchisees to buy these items exclusively from designated suppliers and that the items were essential for maintaining a consistent brand image and product quality. However, the Seoul High Court ruled against BR Korea, stating that the company's actions unduly restricted franchisees' business activities. The court pointed to information disclosure documents provided by BR Korea, which stated that franchisees needed prior written approval from the company to purchase these "mandatory transaction items" from suppliers other than those designated. This requirement, the court concluded, effectively bound the franchisees' choice of suppliers and constituted a violation of operational standards, potentially leading to sanctions or contract termination. Furthermore, the court determined that BR Korea's coercive purchasing practices exceeded the scope necessary for achieving the objectives of a franchise business. The judges suggested that BR Korea could have adequately ensured the visual consistency and quality of its stores by setting objective specifications and standards, allowing franchisees to purchase and install items directly, and then conducting post-installation inspections. The court dismissed BR Korea's lawsuit, affirming the KFTC's corrective order and fine.