[Reporter Seo-hyun Lee, Editor, Korea Internet Journalists' Alliance]

The Korean branch of Swiss watch brand 'Tissot' was sued by the Fair Trade Commission for unfair trade practices.

recently filed a 'Report on Unfair Trade Practices of Dealers' with the Fair Trade Commission, claiming that the dealers were abused, amid ongoing conflicts as the company demanded the termination of contracts with its decades-old partner dealers.

Tissot is one of the watch brands of the Swatch Group, which also includes Omega, Swatch, Breguet, Blancpain, Hamilton, Longines, and Mido.

The problem is that the dealership owners, who have been at the forefront of branding Tissot for more than a decade, have recently received a 'unilateral termination notice' from Swatch Group Korea Inc.

"Swatch Group Korea...received a notice of termination of agency contract by email"

Tissot agency owners announced in a press release on the 29th that they had filed a complaint against Swatch Group Korea Inc. with the Korea Fair Trade Commission for 'unfair trade practices at the agency'.

The Tissot dealers said, "The complainants received an email on February 15, 2024, from the respondent's employee, Mr. Ko so-and-so, containing a notice of termination of the agency contract.”

"The contractual clause in the agency contract that stipulated that the contract could be terminated at any time at the Respondent's discretion is invalid as it constitutes an unfavorable clause that unfairly infringes on the interests of the Complainants in the position of 'disadvantageous'," the complainants claimed.

In terms of specific unfair trade practices, the complainant emphasized that "the late delivery of certain products to the complainant, or the absence of a provision in the contract that allows the respondent to terminate the contract at any time during the term of the contract, with the complainant being entitled to claim damages, constitute unfair practices."

The Tissot distributors also stated that "the Complainants and the Respondent had continued to maintain a distributorship agreement prior to 2018, and in December 2018, the Respondent requested the Complainants to sign a 'Retail Agreement', which was to be renewed every one year from now on."

Regarding the notice of unilateral termination, the dealership owners explained, "However, on February 15, 2024, the Respondent, through its employee in charge of the contract with the Complainants, sent an email to the Complainants stating, ’Tissot Korea would like to announce the withdrawal of the WS (Whole Sale) business segment that it has been operating. Therefore, we would like to terminate the transaction in accordance with the procedures as soon as we have concluded mutual discussions with the business locations of those receiving this email'”

"Unilateral termination of agency agreements is illegal"

Jang-woo Hyung, a lawyer at Hanlim, a law firm representing the dealership owners, explained the legal issues with Swatch Group Korea's termination in detail in a press release.

"The respondent has been controlling the discount rate of products for the complainants for the purpose of facilitating the sales of stores in department stores operated by the respondent itself," said Attorney Hyung. "Specifically, the respondent has been required to maintain a 10% plus 5% guide until May 2023. In June 2023, we increased the restriction to 5%, and in 2024, we changed it to a 5% guide and required them to maintain it," he said.

"In addition, if the complainants did not comply, they were pressured by capturing and delivering the complainants' statements through the person in charge." "The complainants had no choice but to comply with the above demands of the respondent because they were in the position of the so-called 'disadvantageous', but in fact, the respondent himself has been offering direct and indirect discounts of 10 to 20 percent through events through online sales networks from time to time called 'promotions', and department store stores have also been offering discounts of 5 to 10 percent under the pretext of gift certificate events.

"The respondents prioritized the supply of new products to their own businesses, and did not supply new products to distributors such as the complainants for a short period of three months or a year, citing reasons such as 'lack of new products' and 'promotional activities'," he continued.

"As a result of the Respondents' actions, the Complainants were forced to supply products at a time when customer demand had already been significantly reduced, which naturally had a significant impact on the Complainants’ sales," Attorney Hyung said, adding that "customers often stopped coming to the Complainants’ stores even though they were aware that new products had been released, because they were not available in the stores."

In addition, regarding the illegality of the 'termination clause' in the 'retail contract', Attorney Hyung pointed out that "it is illegal for a supplier to penalize an agent by discontinuing business with the agent, including terminating the agency contract without a reasonable reason during the contract period, or to unilaterally terminate the agency contract without sufficient prior notice to the agent on the grounds that the supplier's business policy has changed during the contract period."

"Furthermore, contrary to the content of the respondent's termination notice, Company A, which is the same WS store, decided to continue to exist due to the different store environment, and this action on the part of the respondent is 'not in accordance with equity,'" Attorney Hyung argued.

"The respondent is causing disadvantages to the complainants by always making the headquarters' discount rate 'higher' than the discount rate of its agents, and is also restricting product transactions by separately managing a list of products that are ordered only for its agents' stores and not supplying new products or supplying them after a considerable period of time," the complainant said.

"In recent years, customers have been purchasing products in a situation where they are aware of a lot of information about products through the Internet," he said, "and few customers are looking for products that are not new. As a result, the complainants doubt that the restrictions are intended to cause the complainants to abandon the transaction 'on their own'," he said, claiming unfair trade grounds.

" is only giving false hope”

On the other hand, the agency owners explained the situation that unfolded after notified them of the termination of the contract by email on February 15, saying, "After the press conference on March 11, when Swatch Group Korea's unfair trade practices became known through the media, the respondent contacted the complainants, and the complainants and the respondent met at the respondent's company and exchanged their positions."

"Since then, the parties have made some progress, with the Respondent accepting some of the Complainants' demands and the Complainants accepting the Respondent's demands, but recently the Respondent has kept the