SEOUL, KOREA - National Assemblymen are busy preparing to propose a bill to raise punitive damage award amounts by several folds. Although many welcome the new bill, some in the conservative quarters oppose it on the grounds that it is excessive and anti-business. National Assemblymen Lee Jong Kul (Democratic Party) proposed on May 21 a bill "for fairer franchise contracts." Dubbed as the Namyang bill, named after the notorious Namyang Dairy Products that forced its franchisees to access unfair contract terms, the bill has been signed by 17 congressmen including Lee.
The bill contained provisions recommending the use of standard franchise contract forms and mandating the preparation of disclosure documents. According to the bill, any franchiser failing to do so will be subject to penalties up to 3 percent of its annual sales revenue. If the disclosure documents turn out to be misleading, the corporate leader will be liable for up to five years of imprisonment or up to a 300-million-won fine.
It also has a provision stipulating punitive damages three times more than the actual harm from unfair practices. Examples of unfair practice include forcing sales revenue target without regard to the franchisee's circumstances, rejection to allow for legitimate returns of unsold items, and unreasonable demand to extend business hours.
Meanwhile, the opposition New Frontier Party is pushing forward with its own version of bill to protect small business franchisees by raising the punitive damage level by ten times.
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