Charging Franchisees '18% Interest'... Myeong Ryun Dang Hit with 14.8 Billion Won Fine

The Fair Trade Commission imposed a fine of 10,472 million won on Myeong Ryun Dang for unfairly supporting loan companies owned by the controlling family using low-interest policy funds, and for charging high interest rates to franchisees. The corporation and Chairman Lee Jonggeun have been referred to the prosecution.

Yonhap News Agency

On the 28th, the Fair Trade Commission announced that it had imposed a correction order and a provisional fine of 10,472 million won on Myeong Ryun Dang, which operates Myeong Ryun Jin Sa Galbi and other brands, for violating Article 45, Paragraph 1, Subparagraph 9 of the Monopoly Regulation and Fair Trade Act, among other provisions.

According to the Commission's investigation, starting from the end of 2021, Myeong Ryun Dang lent a total of 298.3 billion won to 14 loan companies owned by the chairman's family at significantly lower-than-market annual interest rates of 2.3% or 4.6%. Included in the funds lent to these loan companies was 79 billion won in policy funds borrowed by Myeong Ryun Dang from the Korea Development Bank at a low annual interest rate of 3-4%.

Based on the low-interest funds secured, these loan companies provided franchise owners and prospective entrepreneurs with high-interest loans at annual rates of 12-18%. Franchise owners paid 12% annual interest for store renewals, while new business starters paid 15%. After the end of 2024, this rate increased to as high as 18%.

Funds were lent via credit lines, allowing each loan company to freely withdraw and repay funds within a limit of 10-15 billion won per company. The economic gain that these loan companies obtained by reducing financing costs amounted to about 21.7 billion won.

All 14 loan companies were established under the leadership of Chairman Lee Jonggeun. According to the Fair Trade Commission's findings, Chairman Lee not only made key decisions in the process of lending funds to loan companies, but also was deeply involved in overall management of these companies.

It was identified that Myeong Ryun Dang agreed to repay franchisees' loans to the loan companies in cases of default, thereby significantly lowering the credit risk that would normally be borne by the loan companies.

In order to meet the minimum registration requirements under the Loan Business Act, Myeong Ryun Dang was found to have rented and operated small-scale shared offices of approximately one pyeong each (about 3.3 square meters) near its headquarters.

The Fair Trade Commission determined that due to this unfair support, the 14 loan companies—entities that would otherwise have struggled to raise their own funds and enter the market—were able to secure significant competitive advantages over rival businesses.

Indeed, as of 2025, the outstanding loan assets of the 14 loan companies ranked 27th in size among 8,203 loan businesses nationwide.

Additionally, the Fair Trade Commission found that Myeong Ryun Dang provided false information in the disclosure documents it was required to give to prospective franchisees by falsely marking the section on credit provision as "not applicable." The company also concealed from franchise prospects and other stakeholders critical information such as its relationships with loan companies, the specific terms of the loans, the link between franchise and loan agreements, and the methods of loan repayment—all of which are facts that could have a decisive impact on franchise decisions.

This content was produced with the assistance of AI translation services.