Pizza Hut Korea fined for extorting franchise owners

Pizza Hut Korea has been fined by South Korea’s antitrust regulator for its unfair business practices against franchise owners here.

According to the Fair Trade Commission on Tuesday, Pizza Hut was fined 526 million won ($437,000) for unilaterally creating and collecting new fees -- called “administration fees” -- from franchise owners. To date, the FTC estimated that Pizza Hut has extorted 6.8 billion won from franchise owners through these fees. 

The fee was not included in franchise owners’ contracts from 2003 to 2012, a violation of fair trade laws. In addition, the pizza chain raised the rate of the administration fees from 0.55 to 0.8 percent of sales without explanation in 2012, despite falling revenue at its stores. 

“We hope that this action will prevent other large chains from carrying out unfair practices, such as unilateral increases in franchise owners’ fees without prior discussion,” the FTC said in a statement. 

By Won Ho-jung (hjwon@heraldcorp.com)