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AI Issues and Implications in H2, 2025 1. Content Regulation and Copyright Developments in AI Copyright and Transparency Regulation Regulations tied to the AI lifecycle are becoming more specific. At the training stage, fair use standards for the use of copyrighted works have been established, and at the output generation and service deployment stage, transparency obligations under the AI Basic Act, such as indication and notification requirements, have been clarified. 2. Privacy Systematizing Personal Information Regulation for the AI Era: Establishment of Processing Guidelines and New Impact Assessment Items The Personal Information Protection Commission released the Guidelines on Personal Information Processing for the Development and Utilization of Generative AI to systematically set out considerations and safety measures for compliance across the generative AI lifecycle, and introduced new impact assessment items to evaluate compliance with those guidelines in practice. 3. Antitrust and Competiton Recent Trends in Novel Forms of Algorithmic Price-Fixing and Collusion Recently, competition authorities around the world, including the Korea Fair Trade Commission, have closely monitored emerging forms of algorithmic collusion. It is essential to examine the legal criteria for determining the illegality of algorithmic collusion through recent international case studies and to proactively review corporate compliance measures regarding the use of algorithms. 4. Labor, Employment and ESG Impact of New AI Legislation on Labor and Employment Matters in Korea: Key Takeaways regarding the AI Basic Act The AI Basic Act ? scheduled to take effect in January 2026 ? will impose various duties concerning the use of AI in connection with hiring (although AI users will not bear legal duties themselves). Because the use of AI in hiring will be classified as “high-impact AI” depending on impact on the affected individuals, such uses should be accompanied by proactive compliance measures to mitigate against risk factors under applicable labor and employment laws, as well as risks to business operation and reputation. 5.
Governance and Risk Management Regulatory Trends in AI in the Second Half of 2025: EU and US Both the EU and the US are signaling a shift toward lighter-touch AI regulation. The EU has adopted amendments delaying the application of key AI Act obligations and easing requirements for SMEs and SMCs. In parallel, the US Executive Order on AI seeks to constrain what it characterizes as overly restrictive state-level AI regulations and to use federal funding conditions to discourage a fragmented regulatory landscape that could impede innovation. 6.
Foundation Models and Platforms AI Policy in Korea: Developments in 2025 and Prospects for 2026 The Korean government has stated its ambition of becoming one of the world’s top three powers in AI, and has launched several key initiatives aimed at strengthening AI-related infrastructure and fostering the AI industry in Korea. In this report, we look back at the Korean government’s key AI policy achievements and developments in 2025, and provide an outlook for 2026. [Korean Version] [Related Newsletter] AI Issues and Implications in H1, 2025 [Related Newsletter] AI Issues and Implications in Q4, 2024 [Related Newsletter] AI Issues and Implications in Q3, 2024 [Related Newsletter] AI Issues and Implications in Q2, 2024 [Related Newsletter] AI Issues and Implications in Q1, 2024
2026.01.07

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Supreme Court Confirms Franchisor Must Reimburse Franchisees for Margin-Based Fees Collected Without Prior Agreement On January 15, 2026, the Supreme Court upheld the Seoul High Court’s decision ordering P Company (“Defendant”) to reimburse franchisees (“Plaintiffs”) KRW 21 billion in unjust enrichment gained through collection of margin-based fees (i.e. fees equaling the distribution margin on ingredients/items supplied to franchisees by the franchisor or a supplier designated by the franchisor). 1. Case History Plaintiffs initiated a lawsuit against Defendant, demanding the reimbursement of margin-based fees collected by Defendant from 2016 to 2022, arguing that such conduct amounted to unjust enrichment of Defendant without legal grounds. On June 3, 2022, the Seoul Central District Court ruled in favor of Plaintiffs (“First Instance Decision”): Defendant’s conduct amounted to unjust enrichment based on the absence of legal grounds for receiving margin-based fees under the Franchise Agreements, and the absence of Plaintiffs’ implicit consent for such conduct. However, the First Instance Decision only required Defendant to reimburse for the amount collected since 2019, when Defendant’s Disclosure Statement started specifying rates for margin-based fees, while dismissing the claims for the amount collected between 2016 and 2018, when the there was no evidence on Defendant’s rates for margin-based fees. On September 11, 2024, the Seoul High Court again ruled in favor of Plaintiffs (“Lower Court Decision”): Defendant’s conduct amounted to unjust enrichment because there was no explicit or implicit agreement between Plaintiffs and Defendant in this case. Under the Fair Franchise Transactions Act (the “FFTA”) and its Enforcement Decree, a franchisees’ consent must be obtained for receiving margin-based fees. The Lower Court Decision expanded the scope of reimbursement to include amount collected between 2016 and 2018; this was not recognized in the First Instance Decision, and if a franchisor collected unfair margin-based fees before its Disclosure Statement started specifying rates for margin-based fees, the reimbursement amount for that time period can be calculated based on later data. Defendant appealed the Lower Court Decision to the Supreme Court, which issued its decision on January 15, 2026, to dismiss the appeal, upholding the Lower Court Decision in its entirety (“Supreme Court Decision”). 2. Key Issues and the Supreme Court’s Decision (1) Recognition of Unjust Enrichment The Supreme Court Decision confirmed that a significant portion of the margin-based fees collected by Defendant amounted to unjust enrichment because there was no explicit or implicit agreement with Plaintiffs on margin-based fees. 1) Need for agreement on margin-based fees The Supreme Court Decision made clear that: margin-based fees are a type of franchise fees regulated under the FFTA; and payment of franchise fees is an essential and important part of franchise agreements. Therefore, in accordance with the general legal principle of contract formation, the Supreme Court ruled that there must be a specific agreement, either explicit or implicit, with franchisees for the franchisor to collect margin-based fees. 2) Absence of agreement in this case Defendant argued that there was an agreement with Plaintiffs on the payment of margin-based fees based on the provision on supplying products in the Franchise Agreements, but the Supreme Court dismissed the argument for the following reasons: Absence of product supply agreement: There was no product supply agreement for ingredients/items reached with Plaintiffs; the Franchise Agreements failed to include Defendant among the counterparties to disputes arising in the course of such supply, disqualifying Defendant as a party to the product supply agreement. Absence of a written agreement: The Franchise Agreements require “any amendment to the terms and conditions to be made by a written agreement between the parties.” Therefore, even if the supply of ingredients/items and collection of margin-based fees occurred in the manner alleged by Defendant, there was no written agreement, and thus difficult to demonstrate that a product supply agreement was reached with terms and conditions that were different from those of the Franchise Agreement. Furthermore, the Supreme Court held that even if Plaintiffs and Defendant executed a product supply agreement, there was no implicit agreement made on the payment of margin-based fees. Specifically, the Supreme Court held that, because franchisors often have a significant advantage over franchisees in terms of access to information or bargaining power, franchise agreements are generally executed in the form of standardized contracts. The FFTA thus requires franchisors to provide prospective franchisees with a franchise agreement containing key terms and conditions prior to the execution of the franchise agreement. As such, acknowledgement of an implicit agreement between the franchisor and franchisees on a matter that is unfavorable to franchisees made in the process of executing the franchise agreement should be based on a careful decision made by comprehensively taking into account: socioeconomic status of the franchisor and franchisees; background and overall content of the execution of the franchise agreement; whether sufficient information was provided to allow franchisees to express their intention to execute such implicit agreement; special circumstances in which the franchisor did not specify the details of the agreement in the franchise agreement at the risk of disadvantages such as legal uncertainty or imposition of administrative fines, degree of disadvantages suffered by franchisees as a result; and other customary trade practices (Supreme Court Decision 2017Da248803, 248810 rendered on June 15, 2018). In light of such legal principles, the Supreme Court held that an implicit agreement on the payment of margin-based fees cannot be recognized because: (i) Plaintiffs purchase of designated ingredients/items from Defendant is different from ordinary product transactions because Plaintiffs has no say in selecting the products, suppliers or prices; (ii) the margin-based fees cannot be seen as the distribution margin of a product transaction unrelated to the Franchise Agreements; and (iii) it is difficult to deem that Plaintiffs had the intention to voluntarily pay the margin-based fees solely based on the product transaction and the payment of the product price. (2) Scope of reimbursement The Supreme Court also upheld the Lower Court Decision in terms of the scope of reimbursement for unjust enrichment, to include margin-based fees collected before 2019, when the Disclosure Statement started specifying rates for margin-based fees, by calculating the reimbursement amount for that time period based on later data. In particular, the Supreme Court Decision found there was no reason to deem that the Lower Court Decision’s method of estimating the difference in franchise fees was unreasonable or contrary to the ideology of fairness and justice, considering that: (i) Defendant failed to comply with the document production order on the materials related to the margin-based fees; (ii) Defendant seems to have also received margin-based fees in 2018; and (iii) there was no change in transaction structure and form between Plaintiffs and Defendant from 2016 to 2021, and there was no difference in the number of franchise stores or the average annual sales per franchise store. 3. Significance and Implications of the Supreme Court Decision The Supreme Court Decision is highly significant in that it established a requirement to execute a written agreement between the franchisor and franchisees for the collection of margin-based fees. Therefore, franchisors need to re-examine whether their franchise agreements currently specify grounds for margin-based fees (e.g., regarding fee collection, calculation method, items), and, if not, to make sure such grounds are specified in their franchise agreements before receiving margin-based fees. The Supreme Court Decision also reaffirmed that whether franchisees implicitly agreed to a provision in the franchise agreement that is unfavorable to the franchisees should be made with careful consideration, comprehensively taking into account all circumstances. In other words, the Supreme Court Decision does not categorically deny that there could be an implicit agreement regarding margin-based fees, but instead clarifies that such determination should be made case-by-case. Therefore, in similar lawsuits going forward, recognition of unjust enrichment may vary greatly depending on recognition of implicit agreement. In particular, the Supreme Court Decision held that recognition of an implicit agreement should be made based on comprehensive consideration of (i) the socio-economic status of the franchisor and franchisees; (ii) the background and overall content of the franchise agreement; (iii) whether sufficient information was provided to the franchisees to express their intent to enter into such implicit agreement; (iv) whether there are any special circumstances that caused the franchisor to not specify the details of the implicit agreement in the franchise agreement even at the risk of disadvantages, e.g., legal uncertainty or imposition of administrative fines; (v) the degree of disadvantages suffered by the franchisees due to the terms and conditions of the agreement; and (vi) other customary trade practices. As circumstances may vary for each franchisor and franchisee, it will be necessary for franchisors to more carefully prove that there was an implicit agreement on the receipt of margin-based fees based on the above factors. In addition, considering that the Supreme Court Decision upheld the Lower Court Decision that expanded the scope of reimbursement to include unjust enrichment from 2016 to 2018 in consideration of the fact that the Defendant failed to comply with the document production order, in similar lawsuits going forward it will also be necessary to faithfully explain the scope of reimbursement for unjust enrichment. [Korean Version]
2026.01.26

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MOEL Revises “Yellow Envelope Act” Enforcement Decree to Dualize Bargaining Standards Following the amendment of the Trade Union and Labor Relations Adjustment Act—commonly known as the “Yellow Envelope Act,” which, for example, expanded the definition of an “employer”—the Ministry of Employment and Labor (the “MOEL”) announced a legislative notice period regarding a draft amendment to the Enforcement Decree (the “Original Draft”) until January 5, 2026, outlining specific collective bargaining procedures. During the above notice period, various opinions were raised by both business and labor groups. In response, the MOEL has prepared a revised draft amendment (the “Revised Draft”) reflecting such feedback and announced an extended legislative notice period from January 21, 2026, to February 6, 2026. 1. Key Changes As discussed below, the most notable feature of the Revised Draft is the clear distinction between the general criteria (Article 14-11, Paragraph 3) and special criteria that must be prioritized in the context of principal-subcontractor bargaining (Article 14-11, Paragraph 4). (1) Separation of Bargaining Units within a Principal Company Regarding the separation of bargaining units among unions within a principal company, the common criteria will continue to apply. While the Revised Draft further clarifies the existing standards (i.e., differences in working conditions, employment forms, and bargaining practices) and introduces a new catch-all provision for “other grounds equivalent to the above three criteria,” the practical application of these rules is expected to remain substantially similar. (2) Separation of Bargaining Units for Principal-Subcontractor Bargaining Notably, through the newly added Paragraph 4, the Revised Draft mandates that when a subcontractor union demands collective bargaining with a principal company, “interests between trade unions” must be considered prior to the common criteria. Original Approach: Under the Original Draft, the “interests between workers” were merely one factor to be weighed alongside working conditions, employment forms, and bargaining practices, with no specific priority assigned to any single factor. Revised Approach: The Revised Draft adds a dedicated provision for principal-subcontractor bargaining contexts. In these cases, “interests between trade unions and the potential for inter-union conflict” must be considered before applying the common criteria. Such a shift suggests that a conflict of interest—such as differing affiliations with upper-level trade union—may by itself serve as valid grounds for separating a bargaining unit. Notably, the Revised Draft explicitly limits the application of special criteria specifically to principal-subcontractor bargaining scenarios to prevent any confusion or spillover effects within the principal company’s own internal labor relations. 2. Implications The Revised Draft maintains the fundamental principle of a single bargaining channel, but effectively broadens the pathway for subcontractor unions to bargain independently from the principal company union by prioritizing the separation decision on “interests between trade unions.” This enables bargaining unit separation not only between principal and subcontractor unions, but potentially among different subcontractor unions themselves. For companies, this development presents a tangible operational risk, as the likelihood that subcontractor unions will secure independent bargaining units based on inter-union interests has significantly increased. Companies must therefore prepare for a more fragmented bargaining landscape. Additionally, the introduction of the catch-all provision (“other grounds equivalent to...”) in the separation criteria adds a layer of uncertainty, as companies need to closely monitor how the Labor Relations Commission will interpret and apply this provision in future adjudications. [Korean Version]
2026.01.21

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Amendments Expanding Scope of Industrial Technology Protection and Specifying Submission Order Procedures—Promulgated and Scheduled for Enforcement Partial amendments to the "Act on the Prevention of Leakage and Protection of Industrial Technology," passed by the National Assembly on November 13, 2025, were promulgated on December 2, 2025, and will take effect on June 3, 2026 (the " Amendments"). The Amendments are expected to significantly strengthen the protection of industrial technology and related trade secrets in litigation and compliance practice. As previously explained, the Amendments (i) expand industrial technology protection to include core strategic technologies in the materials, parts, and equipment sectors (such as semiconductors, secondary batteries, and displays); (ii) substantially specify and elaborate the court’s system for orders to submit materials in industrial technology infringement litigation, thereby strengthening its effectiveness; and (iii) expand the scope of confidentiality orders so that they may also protect trade secrets. These changes are expected to enable more effective prevention of, and legal remedies against, industrial technology infringement. 1. Strengthened Submission Order Regime In industrial technology infringement litigation, most evidence of infringement is typically under the control of the alleged infringer, making it challenging for rights holders to meet the evidentiary burden. Under the prior submission order regime, the absence of detailed procedures and sanctions for non-compliance meant that such orders were rarely sought or effectively utilized in practice. The Amendments introduce an in camera review procedure in industrial technology infringement litigation; clarify that a party cannot refuse submission solely on the grounds that the materials constitute industrial technology or trade secrets; and authorize the court, in the event of non-compliance with a submission order, to deem the opposing party’s factual assertions to be true. Once effective, these measures are expected to allow rights holders to obtain technical documents, design drawings, process data, sales records, and similar materials held by alleged infringers, and to rely more actively on in camera review or truth presumption provisions where submission is refused. 2. Expanded Confidentiality Measures Previously, confidentiality orders applied only to industrial technology, creating a risk that trade secrets could be disclosed during litigation. Under the Amendments, the scope of confidentiality orders now extends to trade secrets; and with this change, even sensitive trade secrets required to prove infringement in the course of litigation can now be protected through confidentiality orders. Following implementation of the Amendments, even where infringement is suspected but evidence is difficult to obtain, rights holders are expected to be able to pursue effective relief by actively utilizing submission orders and confidentiality orders. 3. Implications for Businesses These enhanced measures for rights holders will inevitably increase both the procedural burden and the potential legal exposure of companies that may face allegations of industrial technology infringement. Companies should therefore review and, where necessary, reinforce their ongoing compliance systems. More broadly, Korea and many other jurisdictions are intensifying protection of critical technologies through legislation and enforcement policy. Our firm will continue to closely monitor related legislative developments and policy trends and will provide timely updates on significant issues and their practical implications. [Korean Version]
2026.01.16

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Korea Environmental Legal Update (Winter 2025) This issue includes: Finalization of the Phase 4 National Emission Permit Allocation Plan and Trends in Amendments to the Emission Permits Trading Act Finalization and Implications of the 2035 Nationally Determined Contributions (NDC) Target Legal Grounds Established for Private Participation in Ecological Restoration Projects [Korean Version]
2025.12.11

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“Tier 1” in All 17 Practice Areas

In the 2026 edition of The Legal 500 Asia Pacific, Kim & Chang was the only Korean law firm to be recognized as “Tier 1” in all 17 areas surveyed for Korea. Moreover, 54 of our attorneys, patent attorneys, and tax attorneys/CPAs were recognized in the individual categories.
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“Band 1” in 17 Areas, 94 “Leading Individuals”

Kim & Chang obtained a “Band 1” ranking in 17 practice areas in the 2026 edition of Chambers Asia-Pacific, once again receiving the most “Band 1” rankings among Korean law firms. The guide also recognized 94 of our professionals, the highest number among Korean law firms, as “Leading Individuals.”
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23 Kim & Chang Professionals Recognized

23 professionals from Kim & Chang were recognized in the Lexology Index: Client Choice 2026.
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