South Korea’s antitrust watchdog is probing the US franchise Subway over an allegation that it forced a local franchisee to shut down his shop without a proper reason, said officials and local news reports Sunday.

The Fair Trade Commission’s Seoul office recently concluded in its preliminary investigation that the American franchise might have violated the local franchise business law and filed the case to an in-house judging committee.



The probe began as one store owner of Subway chain in Pyeongchon, Gyeonggi Province reported the American firm to the antitrust watchdog.

The case dates back to October 2017 when Subway told the shop owner, only identified with his surname Ji, to close the store on the grounds that his penalty points had exceeded the limit, according to the news reports quoting FTC officials. The franchisee resisted and was told to file the case to the Arbitration and Resolution Center in the US if he wants to appeal. The Korean franchisee filed the case with the arbitration body, but the center concluded that the closure was reasonable in August this year.

The FTC sees the Subway’s pressure to close the shop as unfair as it did not give a proper reason to the shop owner and the closure did not go through a due process. It also viewed that the American firm may have conducted “excessive” hygiene checks to give the shop more penalty points.

The authorities also sees it unfair for Subway to order a self-employed man to directly respond to the case in the US and in English, which is not in his native language, and without much understanding of the American arbitration process.

The FTC said, “Although the arbitration center has completed the process, any unilateral decision to shut down the shop without a good reason could violate the local franchise business act.”

FTC Chairperson Joh Sung-wook, who took office last month, has repeatedly warned that she will regard foreign companies as same as domestic firms and respond strictly to unfair business practices. 

By Shin Ji-hye (shinjh@heraldcorp.com)