Enacted in 2015, the Fair Agency Transactions Act of South Korea mandates annual written fact-finding investigations of agency transactions. Per this mandate, the Korea Fair Trade Commission (KFTC) has conducted agency deal surveys since 2017 to identify unfair trade practices in agency transactions, with results disclosed through press releases. However, KFTC’s investigations do not deal with specific instances of unfair trade conditions. This study aims to determine factors contributing to unfair trade in agency transactions based on these survey results, focusing on the cosmetics sector as investigated in the 2021 fact-finding survey. Dissatisfaction with transactions serves as an indicator of the existence of unfair trade practices.

This study first investigates the factors influencing supplier dissatisfaction. Findings indicate that suppliers are more likely to be satisfied if they are market leaders with a significant market share and less dependent on the agency channel for transactions. This suggests that supplier satisfaction in agency deals decreases with lower market share or higher reliance on agents. These results are connected to the concept of bargaining power, implying that suppliers with greater negotiating power face fewer challenges when negotiating with agents. The study also examines the factors that influence agent dissatisfaction. Conditions frequently leading to unfair trade in agency transactions include the lack of a defined sales territory, diversification of supplier distribution channels (e.i., online), and shorter contract cycles.
However, this study finds the impact of contracts granting exclusive rights to suppliers and agents is inconclusive. While exclusive agents experience a greater variety of unfair trade, there is no higher likelihood of dissatisfaction with their transactions. This suggests that exclusive agency agreements foster a greater dependence on suppliers, which can lead to a higher likelihood of encountering unfair trade, but may also result in increased satisfaction due to more consistent transactions.

All these results have several implications. To enhance the effectiveness of KFTC’s surveys, it is essential to analyze unfair trade practices specific to each industry, which can improve KFTC’s monitoring functions. Additionally, including open-ended questions rather than solely relying on closed-ended ones is crucial, as agency transactions entail a myriad of scenarios that are difficult to capture accurately with quantitative queries alone. To reduce the burden on respondents and improve efficiency, KFTC should consider incorporating narrative questions into the survey design and streamlining the questionnaires through a thorough evaluation.

Preface
Executive Summary

Chapter 1. Introduction

Chapter 2. Current Status of the Fact-Finding Survey on Agency Transactions
　Section 1. Unfair Practices in Agency Transactions
　Section 2. Overview of the Fact-Finding Survey
　Section 3. Annual Survey Results
　Section 4. Summary of the Fact-Finding Survey Findings

Chapter 3. Key Indicators of the Agency Transactions Survey
　Section 1. Overview of the Cosmetics Sector Fact-Finding Survey
　Section 2. Key Statistics on Factors Contributing to Unfair Trade
　Section 3. Implications

Chapter 4. Empirical Analysis of Unfair Trade Factors
　Section 1. Variable Construction and Model
　Section 2. Factor Analysis of Supplier's Transaction Satisfaction
　Section 3. Factor Analysis of Agent's Transaction Satisfaction

Chapter 5. Conclusion and Policy Recommendations

References
Appendix
Abstract