1.

Key Points

On August 4, 2026, the KFTC announced that the amendments to the administrative fine notifications for the companies that violate the Fairness in Subcontracting Transactions Act (“Subcontracting Act”), the Fairness in Franchising Transactions Act (“Franchise Act”), and the Fairness in Distribution Transactions Act (“Distribution Act”) became effective. The amendments raise the base rates and fixed-amount fines, strengthen aggravation for repeat violations, and restructure the discretionary mitigation grounds, with the aim of enhancing the effectiveness of sanctions against serious violations. Given this increased fine exposure, businesses in the subcontracting, franchise, and distribution sectors should thoroughly manage and review their legal risks in advance through diligent compliance activities.
 

2.

Background

Under the current Subcontracting Act, Franchise Act, and Distribution Act, an administrative fine is calculated by multiplying a statutory base amount by an imposition base rate that reflects the nature and gravity of the violation or by reference to a fixed-amount fine if the base amount is difficult to calculate. Because these imposition base rates and fixed amounts had been set at low levels, it was repeatedly pointed out that the actually imposed fine amounts remained modest even where the conduct was classified as a serious violation. Accordingly, to secure adequate deterrence against violations, the KFTC prepared amendments to the administrative fine notifications that raise the imposition base rates and fixed amounts and subdivide the severity classification, while also strengthening aggravation for repeat violations and restructuring the mitigation grounds.
 

3.

Key Amendments by the KFTC
 

(1)

Increase in and Subdivision of Base Standards

The KFTC raised the imposition base rates and fixed-amount fines under each law and subdivided the severity classification from the previous three tiers into four tiers. The main changes for each Act are set out below.
 

(2)

Strengthened Aggravation for Repeat Violations

To deter repeat violations, the KFTC sharply raised the aggravation ceiling so that even a single prior violation within the past five years can increase the fine by up to 50%, and, depending on the number of violations, by up to 100%.
 

(3)

Increased Aggravation for Retaliation

The KFTC increases the fine amount if a company retaliates against a party for filing a complaint with the KFTC or for applying for dispute mediation. Because the aggravation rate for the distribution sector, at 20%, was lower than the rate for the general competition law violations and for retail sectors, the KFTC raised the aggravation rate to 30%. The franchise sector previously had no separate aggravation provision for retaliation, and this amendment establishes a basis to increase the fine by up to 30%.
 

(4)

Narrowed Mitigation Grounds and Scope

Previously, a company that cooperated with the KFTC’s investigation and hearing could obtain a reduction of 10% at each stage, for a total of up to 20%. Going forward, a reduction of up to 10% is available only if the company cooperated throughout, from the investigation through the hearing. The reduction for voluntary correction, previously up to 50%, has been changed so that a reduction of up to 10% is available only if the company has substantially eliminated the effects of the violation, reflecting the view that eliminating those effects is the offender’s basic obligation. In addition, for the franchise sector, the provision that had allowed a reduction of up to 10% for violations caused by minor negligence has been deleted.
 

4.

Implications and Response Strategy

The amendments are expected to significantly increase the administrative fine exposure of the companies operating in the subcontracting, franchise, and distribution sectors. Because the imposition base rates and fixed amounts have risen and the severity assessment has been subdivided, the same conduct may now draw a higher fine than before. In particular, a single prior violation within the past five years can increase the fine by up to 50%, and four or more prior violations by up to 100%, and therefore, the burden from repeat violations is expected to grow substantially. Moreover, because the reductions available for cooperation during the investigation and hearing and for voluntary correction have been sharply curtailed (to a maximum of 10%), there will be a clear limit to reducing fines through post-violation correction and cooperation.

Accordingly, companies should strengthen preventive measures by regularly reviewing their compliance systems and reassessing their transaction practices. Companies with a prior record of violations, in particular, should prioritize enhancing their legal compliance reviews and refining their internal response procedures, given the markedly higher risk of aggravated fines for repeat violations.