[Sejong = E-Daily Reporter Kang Shin-woo ] It has been confirmed that the Fair Trade Commission is investigating allegations of unfair trade practices surrounding the domestic distribution rights for the popular running shoe brand “HOKA.” The key issue is whether unfair trade practices occurred when Deckers Asia Pacific Limited (Deckers), the company that owns the HOKA brand, notified its existing domestic distributor, Joyworks, of contract termination and selected E-Land World (E-Land) as its new sales partner.

As the conflict between Joyworks, Deckers, and E-Land intensifies over HOKA’s domestic distribution rights, there is speculation that the dispute could enter a new phase depending on the results of the Fair Trade Commission’s investigation.

◇Case Transferred to Competition Division on the 7th; Investigation Begins in Earnest

According to government officials and the National Assembly on the 20th, the Fair Trade Commission (FTC) completed its preliminary review of a complaint filed by Joyworks with the Rapid Response Team of the Consumer Affairs Division at its Seoul Office in late August and transferred the case to the Competition Division of the Seoul Office on the 7th of this month. Joyworks raised concerns, arguing that the termination of the contract, the suspension of product supply, and the process for selecting a new distributor were unfair.

In a written response to a policy audit submitted to Rep. Cho Jeong-hoon of the People Power Party, a member of the National Assembly’s Political Affairs Committee, the KFTC stated, “Based on the results of the preliminary review, we determined that an investigation and review for potential legal violations were necessary, so we transferred the case,” adding, “The case was recently filed as a formal complaint, and an investigation has begun.”

This dispute arose when Deckers terminated its domestic master distributor contract with Joyworks. Joyworks had served as Hoka’s domestic distributor since 2018, expanding its distribution network and consumer base. According to company data, Hoka-related sales increased approximately eightfold, from 13.3 billion won in 2021 to 106.5 billion won last year. However, after an assault incident involving then-CEO Cho Seong-hwan sparked controversy, Joyworks received notice of contract termination from Deckers.

Previously, on August 10, former CEO Cho held a press conference and claimed that the assault incident—which led to the contract termination—was a “premeditated scheme” aimed at seizing Hoka’s distribution rights.

JoyWorks maintains that former CEO Cho’s personal misconduct is separate from the company’s contractual rights. In particular, the company claims it received unilateral notice of contract termination just seven days after the renewed contract took effect this year and was refused delivery of already confirmed orders. The two sides are disputing the legality of the contract termination and their respective rights in arbitration proceedings administered by the International Center for Dispute Resolution (ICDR) under the American Arbitration Association (AAA).

Amid this situation, tensions escalated when Deckers and E-Land announced on August 20 that they had reached an agreement on a new partnership contract regarding Hoka’s domestic operations. Joyworks objected to the selection of a new sales partner while the dispute over the existing contract remained unresolved, arguing that the value of the distribution network and market development it had built up over time should be recognized. E-Land, on the other hand, maintains that it entered into a valid contract with Deckers.

◇ Investigations Possible Even During International Disputes... Fact-Finding Also Underway
The Fair Trade Commission (FTC) explained that it can conduct a separate investigation into unfair practices in the course of a transaction even while international arbitration is underway. The rationale is that while arbitration is a procedure for resolving private disputes between parties, investigations under the Fair Trade Act are intended to promote fair and free market competition, thus allowing for a separate investigation. The FTC stated, “There are no provisions under the Fair Trade Act that restrict investigations solely because international arbitration is in progress.”

The FTC plans to verify allegations of legal violations by requesting the submission of documents from the subject of the investigation and then notify the complainant of the results and grounds for any measures taken. While the standard processing period for unfair trade practice cases is six months, the specific timeline has not been set as it may vary depending on the complexity of the case and the level of cooperation from the subject of the investigation.

The commission also left open the possibility of reviewing trading practices between overseas brands and domestic distributors in light of this case. When Rep. Cho inquired about the need for a fact-finding review and institutional reforms regarding the unilateral termination of contracts and the transfer of distribution rights with a domestic distributor with whom he had a long-standing business relationship, the Fair Trade Commission replied, “We will consider conducting a fact-finding review or implementing institutional reforms if necessary.”