New FTC rules aid department store vendors

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New FTC rules aid department store vendors

A women’s fashion brand that entered a department store less than a year was unexpectedly told to pack up and leave. The department store told the shop owner that it was changing its interior.

The brand’s owner, who didn’t identify herself, said she panicked as the notification from the department store was unexpected. She said she wished that the notices to relocate or renew contracts at department stores were more predictable.

Her proposal was accepted. Starting this year, department stores can no longer force out a store or cancel a contract without prior notification and a specific reason.

The Fair Trade Commission on Monday said it changed its laws to help prevent stores from being driven out of department stores as was the case of the women’s fashion brand.

Under the revised law, department stores have to post changes to their interior that will affect the shops on their websites. This includes the amount of floor space for each shop. The department stores will be obligated to provide such information as early notification of any changes to the contracts.

If the department stores plan to make changes, they have to answer any inquiries including whether a certain brand is subject to changes including relocation within the department store.

The department store also has to give notice if it’s not renewing a contract.

A detailed notification must be given 30 days before the contract expires. Previously the department stores only had to inform the stores of decisions on contract renewal without a reason within 30 days.

Stores that are operating within the department stores spend a huge amount to decorate their space. However, as the contracts are just one year, it has been crucial for stores to know the department stores’ standards when renewing contracts.

“We hope the new changes will help a more transparent and objective process in the changes that department stores make and on the way it renews contracts,” said an FTC official. “We plan to push the revised bill to be applied within this year.”


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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