Administrative

Agency Act Lawyer

Agency Act Lawyer | Practical guidance for suppliers and agencies

Summary

The Fair Transactions in Agency Act (대리점거래의 공정화에 관한 법률, commonly the "Agency Act") regulates the relationship between a supplier and the agencies that sell its goods or services, aiming to correct structural imbalances in bargaining power. It prohibits specific conduct such as forcing agencies to purchase unwanted goods, imposing unreasonable sales targets, unfairly restricting business activity, or terminating contracts without proper process (대리점법 제5조부터 제9조). Both suppliers designing distribution policies and agencies facing pressure from a supplier need to know where the legal line sits, because violations can trigger corrective orders, penalty surcharges, and civil damages claims.

Administrative · Fair Trade Governing law: Fair Transactions in Agency Act Supplier-Agency Disputes

Agency Act | What counts as an unfair trade practice under the Agency Act

The Act lists several specific categories of prohibited conduct rather than a single general clause, so the first step in any dispute is identifying which category the conduct falls into.

Purchase coercion (구입강제)

A supplier may not force an agency to buy goods it did not order or in quantities beyond what it requested (대리점법 제5조). This frequently arises through disguised methods such as bundling slow-moving stock with popular items or setting unrealistic sales quotas that effectively force excess ordering.

Unfair imposition of sales targets

Setting sales targets is not itself unlawful, but imposing targets with disadvantageous treatment for failing to meet them, without reasonable grounds, can be an unfair practice (대리점법 제6조). Whether a target was 'reasonable' is assessed against industry norms, the agency's actual capacity, and how the target was set.

Unfair restriction on business activity

Restricting an agency's sales territory, customers, or the goods it can carry beyond what is necessary to protect legitimate business interests may violate the Act (대리점법 제7조). Courts and the Fair Trade Commission look at whether the restriction has a reasonable business justification or is primarily aimed at extracting leverage over the agency.

Retaliatory conduct

Suppliers are prohibited from taking retaliatory action against an agency because it lodged a complaint, cooperated with a Fair Trade Commission investigation, or exercised rights under the Act (대리점법 제9조). Documenting the timeline between a complaint and any adverse treatment (e.g., sudden order cuts) is often central to proving retaliation.

Agency Act | Contract termination and notice requirements

Because an agency often builds its entire business around a single supplier relationship, abrupt termination can be devastating — the Act imposes procedural requirements before a supplier can end the contract.

Advance notice obligation

A supplier generally must notify the agency in advance before terminating, suspending, or refusing to renew a contract, and specify the reasons (대리점법 제10조). Whether the notice period given was sufficient depends on the contract terms and how long the relationship has lasted.

Reviewing whether termination grounds are legitimate

Even where a contract clause allows termination for cause, the underlying facts matter — a termination triggered by an agency's refusal to accept unfair purchase demands may itself be challenged as retaliatory or in bad faith. Agencies facing termination should preserve order records, communications, and sales data before responding.

Agency Act | Choosing between mediation, FTC complaint, and litigation

Because agency relationships are ongoing business relationships, the appropriate response often depends on whether the goal is to preserve the relationship, extract compensation, or exit cleanly.

Agency Transaction Dispute Mediation

Disputes may be brought to the Agency Transaction Dispute Mediation Council for a faster, less adversarial resolution before resorting to formal proceedings (대리점법 제23조). Mediation can be useful where the agency intends to continue the business relationship.

Fair Trade Commission complaint

An agency can report suspected violations to the Fair Trade Commission, which can investigate and issue corrective orders or penalty surcharges against a supplier found to have violated the Act (대리점법 제25조, 제33조). An FTC finding can also support a subsequent civil damages claim, though the agency does not receive compensation directly through this route.

Civil damages claim

An agency that suffered losses from a violation may separately claim damages in civil court (대리점법 제34조). Because proving both the violation and the resulting loss requires documentation, this path is generally pursued alongside or after an FTC finding rather than as a first step.

Agency Act | From Initial Consultation to Resolution

Initial Review
We review the agency contract, order/communication records, and the specific conduct at issue to identify which provisions of the Act may be implicated.

Strategy Selection
Depending on whether the client wants to preserve the business relationship or resolve the dispute decisively, we discuss whether mediation, an FTC complaint, or direct negotiation is the more suitable starting point.

Evidence Organization
We help organize order history, sales targets, internal communications, and termination notices into a timeline that supports the client's position.

Filing or Negotiation
We proceed with mediation application, FTC complaint, negotiation with the counterparty, or civil complaint drafting as chosen.

Resolution and Follow-up
Once a mediation agreement, FTC decision, or settlement is reached, we advise on implementation and, where relevant, follow-on civil claims for damages.

Agency Act | How Fees Are Determined

Consultation Fee
An initial consultation fee may apply depending on the complexity of the contract and documentation to be reviewed; this is discussed upfront.

Retainer Fee
The retainer varies depending on whether the matter proceeds as mediation, an FTC complaint, or civil litigation, and on the volume of evidence and contract terms to be analyzed.

Success Fee
Where a civil damages claim or settlement results in a monetary recovery, a success fee calculated as a percentage of the amount recovered may apply, agreed in advance.

Disbursements
Filing fees, document authentication costs, and expert or accounting review fees (where sales-loss calculations are needed) are billed separately as actually incurred.

※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.

Agency Act | Self-Check Before You Consult

1️⃣ For Agencies Facing Purchase Pressure

Did the supplier ship goods or quantities you did not actually order?
Were you told that future orders or contract renewal depend on accepting unwanted stock?
Do you have written records (emails, messages) showing the pressure to purchase?
Has your inventory of unsold, supplier-imposed stock been growing?

2️⃣ For Agencies Facing Termination

Did the supplier give advance notice and state specific reasons for termination?
Does the stated reason match the actual notice period required in your contract?
Did the termination follow shortly after you complained or refused a demand?
Have you preserved your sales records and communications before responding?

3️⃣ For Suppliers Reviewing Distribution Policy

Are your sales targets for agencies based on documented, reasonable criteria?
Do your standard agency contracts specify clear notice periods for termination?
Have you reviewed whether territorial or brand restrictions on agencies are necessary and proportionate?
Do you have a documented, non-retaliatory process for handling agency complaints?

Frequently Asked Questions

Q. Does the Agency Act apply to every distributor or franchise relationship?

A. The Act applies specifically to 'agency transactions' where a supplier sells goods or services through an agency that resells them in its own name, and certain thresholds and definitions in the Act determine coverage (대리점법 제2조). Franchise relationships are generally governed by a separate statute, the Fair Transactions in Franchise Business Act, so the first step is confirming which framework actually applies to your contract.

Q. My supplier keeps sending stock I never ordered — is that illegal?

A. This may constitute purchase coercion, which is prohibited under the Act (대리점법 제5조). Documenting order requests versus what was actually shipped, along with any pressure communications, is important to establishing this claim.

Q. Can I be terminated for refusing to meet a sales target?

A. It depends on whether the target itself was reasonably set and whether termination for failing to meet it was proportionate; unreasonable targets or retaliatory termination can be challenged under the Act (대리점법 제6조, 제9조). Reviewing how the target was communicated and whether similar agencies were treated the same way is usually part of the analysis.

Q. How much notice does a supplier have to give before ending my agency contract?

A. The Act requires advance notice of termination, suspension, or non-renewal along with stated reasons, though the exact required period is not fixed by a single number and depends on the contract and the relationship's history (대리점법 제10조). Contracts often specify a notice period, and any deviation from it can itself be a point of dispute.

Q. What is the difference between going to the Fair Trade Commission and filing a mediation request?

A. Mediation through the Agency Transaction Dispute Mediation Council is generally faster and aimed at a negotiated resolution while preserving the business relationship, whereas an FTC complaint can lead to corrective orders or penalty surcharges against the supplier but does not by itself deliver compensation to the agency (대리점법 제23조, 제25조). Many agencies pursue mediation first and reserve an FTC complaint or civil suit for cases where mediation fails.

Q. If the FTC finds a violation, do I automatically get compensated?

A. No — an FTC corrective order or penalty surcharge is a regulatory sanction against the supplier, not compensation to the agency. To recover losses, the agency generally needs to file a separate civil damages claim, for which the FTC's findings can serve as useful supporting evidence (대리점법 제34조).

Q. I run a small agency — is it worth challenging a large supplier under this Act?

A. The Act was specifically enacted to address the bargaining power imbalance between suppliers and agencies, so the size disparity itself is part of what the law is designed to address rather than a reason to avoid a claim. That said, whether a claim is worth pursuing depends on the strength of the documentation and the practical goals — continuing the relationship versus exiting and recovering losses.

Q. Can a supplier restrict which other brands I sell alongside theirs?

A. Some restriction may be permissible if it has a legitimate business justification, but a restriction that goes beyond what is necessary to protect the supplier's legitimate interests may be an unfair restriction on business activity under the Act (대리점법 제7조). This is evaluated case by case, looking at the scope, duration, and stated purpose of the restriction.

Q. What evidence should I gather before consulting a lawyer about a supplier dispute?

A. Useful materials typically include the full agency contract and any amendments, order and delivery records, sales target communications, correspondence around the disputed conduct, and any termination or suspension notices. Organizing these chronologically before the consultation helps focus the initial legal assessment.

Q. Is there a deadline for filing a complaint or claim under the Agency Act?

A. Civil damages claims are subject to general statute of limitations principles under the Civil Act, and FTC enforcement is also subject to statutory time limits on investigation, so delaying action can narrow the available options (민법상 소멸시효 원칙 및 대리점법상 조사 관련 규정 참조). Because the applicable period depends on the specific claim and conduct, it is worth reviewing the timeline early rather than assuming there is no rush.

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