This photo provided by Adidas Korea shows its outlet in southern Seoul.
SEOUL, July 26 (Korea Bizwire) — With backlash from franchisees growing over the South Korean unit of German sports brand Adidas’s decision to unilaterally terminate franchise contracts, lawmakers have stepped in to scrutinize the issue.
The office of Rep. Choi Seung-jae, a member of the ruling People Power Party and the National Assembly’s National Policy Committee, is investigating whether Adidas Korea’s unilateral notification of contract termination violates the Fair Trade Act and the Franchise Business Transaction Act.
The Adidas Franchisee Association appealed the unfairness of the contract termination process to the members of the National Policy Committee, including Rep. Choi’s office.
Consequently, this issue is expected to be addressed during the fall session of the National Assembly audit.
In January, Adidas Korea restructured its business, emphasizing online and company-owned stores. Out of approximately 100 franchisees, it decided to keep only 19 and close or consolidate the remaining stores.
For the remaining franchisees, it sent a formal notice stating that it would only supply products until 2024.
In response to the unilateral notification of contract termination, 76 franchisees from across the country established an association to address the issue.
Earlier this year, the association filed for dispute mediation with the Gyeonggi Province Fair Trade Support Center.
Rep. Choi’s office is also investigating whether Adidas Korea avoided disclosure obligations when it converted to a limited liability company in 2017.
According to the revision of the External Audit Act that took effect in 2019, companies with paid-in capital exceeding 50 billion won (US$39 million) must disclose their audit reports.
However, limited liability companies have no disclosure obligation.
Ashley Song (ashley@koreabizwire.com)
