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Lawmakers in South Korea, led by Rep. Choi Seung-jae of the People Power Party, are stepping in to investigate potential violations of Fair Trade and Franchise Business Transaction laws by Adidas Korea. The intervention follows a backlash from numerous franchisees over Adidas Korea's unilateral termination of franchise contracts, a move seen as a part of its restructuring focus on online and company-owned stores.
The Adidas Franchisee Association has appealed to the members of the National Policy Committee, including Rep. Choi's office, highlighting the unfairness of the contract termination process. This pressing issue is expected to be thoroughly discussed and examined during the fall session of the National Assembly audit.
In January, Adidas Korea underwent a business restructuring, focusing on online platforms and company-owned stores. Among the approximately 100 franchisees, only 19 were chosen to continue, while the rest faced store closures or consolidation. The remaining franchisees received a formal notice indicating that product supply would only be guaranteed until 2024.
Franchisees in Korea have formally requested the newly-appointed Adidas CEO, Bjorn Gulden, to reconsider the restructuring plan initiated by his predecessor, Kasper Rorsted. Kim Jung-joong, the leader of a group of Adidas franchisees in Korea, expressed hope that the new chief executive, who previously worked at Puma, would rescind the contract terminations affecting around 80 Korean franchisees out of the approximate 100 by 2025.
In response to the unilateral contract termination, 76 franchisees nationwide have collectively formed an association to address this issue. The association filed for dispute mediation with the Gyeonggi Province Fair Trade Support Center earlier this year.
Beyond the franchise contract termination matter, Rep. Choi's office is also investigating whether Adidas Korea fulfilled its disclosure obligations when it converted to a limited liability company in 2017. As per the revised External Audit Act, enacted in 2019, companies with paid-in capital exceeding 50 billion won (US$39 million) must disclose their audit reports. However, limited liability companies are exempt from such disclosure obligations.
Photo: Om Kamath/Unsplash
