NextQube Corporation, which evaded the mandatory consent of 50% or more of franchisees through cunning methods and shifted advertising costs, faced disciplinary action from the Fair Trade Commission. This marks the first enforcement case since the introduction of the 'advertising pre-consent system' in January 2022, and serves as an important measure sounding an alarm on the unilateral cost-shifting practices of franchise headquarters.

NextQube Corporation, which operates educational services such as 'Eduplex,' imposed portions of advertising costs on franchisees from November 2022 to April 2023 without meeting the legal requirement of 50% or more consent from franchisees for sharing advertising expenses under the Franchise Business Act. Their 'loophole' was particularly revealed in a survey conducted in October 2022. NextQube Corporation presented two options for implementing a 'performance-proportional advertising cost-sharing method.' This method involved a structure where advertising costs were shared in proportion to performance, for example, 110,000 won per newly registered student and 220,000 won per newly registered student through headquarters advertising. However, the survey results showed that the two options received approval rates of 47.0% and 11.4% respectively, falling far short of the legal requirement of 50%. Despite this, the headquarters arbitrarily combined the affirmative votes for the two options and calculated the approval rate as exceeding 50%, employing a loophole.

That was not all. NextQube Corporation was also pointed out for failing to provide franchisees with sufficient essential information regarding advertising content, cost scale, and the total amount franchisees would bear. Franchisees had to share advertising costs without clear information about how much they would pay, for which advertisements, and how.

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Although the Fair Trade Commission determined it to be a clear violation of the Franchise Business Act, it issued only a corrective order without imposing a penalty surcharge. The Commission stated that it comprehensively considered that the violation was not intentionally malicious, the headquarters did not appear to have obtained unfair benefits, and the advertising cost-sharing ratio of franchises was gradually declining. The fact that only a corrective order was issued without a penalty surcharge despite legal violations has left room for controversy regarding the level of sanctions for similar cases in the future.

This Fair Trade Commission action has significant meaning for the franchise market. It will be recorded as the first enforcement action against a franchise headquarters following the implementation of the 'advertising pre-consent system' in January 2022. This system was designed to prevent unilateral cost-shifting by headquarters by mandating that franchise headquarters obtain consent from 50% or more of franchisees when passing advertising costs to them. This corrective order, as the first 'disciplinary measure' of the newly implemented law, is expected to become a strict benchmark for future law enforcement.

The Fair Trade Commission's action against NextQube Corporation is interpreted as a clear warning message regarding franchise headquarters' attempts to unilaterally shift advertising and promotional costs to franchisees. A Fair Trade Commission official emphasized, "We will enforce the law strictly to ensure that franchisees are sufficiently aware of and can participate in the cost-sharing information during advertising and promotional activities." This suggests that the Fair Trade Commission's rigorous monitoring and law enforcement for creating a transparent and fair franchise business environment will continue, requiring special caution from franchise headquarters.