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(EDITORIAL from Korea Herald on July 1)

All News 09:06 July 01, 2017

Wrong victims
Penalties for exploitative employers, franchisors should be strengthened

The case of Mr. Pizza Group, the operator of a major Korean pizza chain, should raise social awareness about the need to rein in and punish those who abuse and mistreat the weaker and more vulnerable.

The pizza franchiser is accused of multiple unfair business practices in dealing with its franchisees. Jung Woo-hyun, the founder of the pizza restaurant chain who resigned as chairman in the wake of the scandal, faces investigation by the state prosecution.

The case is only the latest in an unceasing series of scandals in which businesses or people have abused their positon and power to discriminate against or mistreat those below them. These cases often create public uproar, but it is usually short-lived.

Many cases involve personal misconduct and illegal acts by business owners and employers who mistreat and bully their smaller business partners and employees.

It would be no coincidence that if the proprietor is abusive and exploitative, so too is the company under his or her control. Ex-Chairman Jung of Mr. Pizza is a good point in case: Last year he was caught on video manhandling a janitor in a Seoul building.

The janitor had locked the building for the night unaware the chairman was still inside. He was doing his job, and Jung's overbearing response set off public fury, which led to a noticeable drop in the franchise's sales.

The Hosigi fried chicken franchise is now facing a similar fate since its founder and former chairman has been suspected of sexual misconduct against one of his employees. Choi Ho-sig, who resigned as chairman due to the scandal, faces indictment for allegedly harassing the employee sexually at a restaurant and trying to take her into a hotel.

Not surprisingly, businesses run by those who habitually abuse people in lower positions engage in abusive and exploitative practices toward their smaller partners and franchisees.

Indeed, the unfair practices allegedly committed by the Mr. Pizza chain are staggering. It provided cheese to its franchisees through suppliers run by the chairman's relatives. The poor merchants were not allowed to buy elsewhere, although the cheese was more expensive than that offered by other suppliers.

The franchiser was merciless toward franchisees who terminated contracts without consent. It opened directly managed stores near such former franchisees and offered discounted prices and free gifts. One former franchisee committed suicide as his store went out of business.

Like some other franchisers, Mr. Pizza forced franchisees to take up part of the expenses for store refurbishing, advertising and marketing. It even forced the franchisees to sell copies of Jung's autobiography.

All these incidents occurred in one pizza chain, which should convince you that such practices are rampant. A recent survey released by the Seoul Metropolitan Government found that 30 percent of 1,328 franchise stores questioned had encountered unfair practices.

As Jung and Choi did, most people and businesses caught committing the abusive acts offer public apologies, resign from their positions and promise to prevent a recurrence of similar cases.

In most cases, such promises are mere lip service. Worse yet, most maintain control over the companies as the largest shareholders. Some come back to their managerial positions after the scandals have blown over.

One fundamental solution could be strengthening punishment for both the businesses and their owners for unfair business practices or other illegal activities.

The Fair Trade Commission was well advised in that regard to push for a revision of the Franchise Act to strengthen protection of franchisees. Rep. Kim Kwan-young's proposal to have franchisers compensate franchisees for losses caused by wrongdoings of franchisers also needs speedy discussion at the National Assembly.

Last but not the least, consumers should be wiser than to boycott products sold by small stores whose franchiser, proprietor or management were engaged in misdeeds and wrongdoings. Any such campaign will eventually punish the wrong people, like the Mr. Pizza and Hosigi franchisees.

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