Burger King Korea Penalized for Forcing Franchisees Into Exclusive Supply Deals (Image courtesy of Yonhap)
SEOUL, Aug. 13 (Korea Bizwire) — South Korea’s antitrust regulator has fined the operator of Burger King Korea 300 million won ($217,000) for forcing franchisees to buy tomatoes and cleaning products from designated suppliers without proper disclosure — even imposing penalties up to store closure for noncompliance.
The Fair Trade Commission (FTC) said on Wednesday it issued a corrective order and fine against BKR, Burger King’s local franchisor, for violating the Fair Transactions in Franchise Business Act by restricting trade partners and providing deceptive information.
Since 2013, BKR’s franchise disclosure documents listed 15 types of cleaning agents and tomatoes as “recommended” items that franchisees could purchase freely if they met company specifications.
In reality, the company required the use of specific hard-to-source U.S. brand cleaners and approved Korean-grown tomatoes, sold exclusively through its internal supply system.
Inspections checked whether outlets used these approved products, deducting points from store evaluations for violations. In some cases, deductions led to penalties such as suspension of delivery services.
For non-approved tomatoes, BKR applied an automatic “zero” inspection score, enabling it to close stores or terminate contracts.
The FTC ruled that cleaning agents, unrelated to burger taste or brand integrity, could not reasonably be classified as essential items. It deemed the supplier restrictions a form of coercion and the misleading disclosure a deceptive omission of critical information.
The regulator called the case a rare example of penalizing a franchisor for indirectly forcing the purchase of non-essential items and noted the decision would allow franchisees to substitute equivalent domestic products, reducing costs.
BKR said the FTC’s action appeared to stem from incomplete information provided to prospective franchisees and that it is reviewing systemic changes.
The company added that “store closure” language resulted from a translation of English operating rules and in practice referred to a two-hour business suspension, claiming no actual closures had occurred.
M. H. Lee (mhlee@koreabizwire.com)
