South Korea fines eyeglass franchise Davich Eye $1.1 million for forcing private brand sales

Davich Eye, a prominent South Korean eyeglass franchise, has been fined approximately 1.477 billion won ($1.1 million) by the Fair Trade Commission (FTC) for pressuring its franchisees to sell private brand (PB) products. The company enforced sales targets for its own branded items and threatened to terminate franchise agreements if these goals were not met.

According to the FTC's findings, Davich Eye began setting specific sales targets for certain products for each franchise in October 2022. Franchisees who failed to meet these targets faced consequences, including mandatory attendance at workshops. Those who missed targets for two consecutive months were required to submit a recovery plan, and stores failing for three consecutive months risked contract termination.

The FTC determined that Davich Eye's actions constituted an abuse of its dominant trading position to boost sales of its private brand products. The commission stated that mandating sales targets, not just for overall revenue but for specific product ratios, falls under the category of forced sales. This ruling is significant as it represents the first instance of a franchise headquarters being penalized for enforcing sales targets on specific products.

Davich Eye's practices were scrutinized for leveraging its position to push its own brands. The company's strategy aimed to increase the sales volume of its PB items through these coercive measures. The FTC's decision highlights regulatory efforts to ensure fair practices within franchise systems in South Korea.