The recent decision by Barbour, the British lifestyle brand under J. Barbour & Sons Ltd., to transfer the rights to sell its products in South Korea from NH International (NHI) to LF Corp. had led to a legal dispute involving all three parties.
According to the Korean fashion industry, Barbour agreed on May 5 to grant the sales distribution rights in Korea to the former LG Group affiliate LF. Barbour entered the Korean market in 2011 through the small importer NHI, which set up a pop-up store for the brand at one of the major department stores.
The sources reported on June 9 that NHI, which spearheaded the brand’s expansion in Korea over the last decade, filed a court injunction on June 8 to prohibit LF from selling Barbour products in the country.
“There has been a violation of our country’s Fair Trade Act in Barbour’s unilateral contract termination,” said an NHI representative.
Korean consumers were virtually unaware of the Barbour brand 10 years ago when NHI first started importing and distributing its products.
Barbour, internationally known for its waxed cotton jackets, was created in England by the Scottish entrepreneur John Barbour in 1894.
Korean actor Song Joong-ki wearing a Barbour jacket After a decade of NHI’s aggressive marketing, investment in distribution channels and brand management efforts, Barbour grew into a major outerwear brand among Korean men, with 27 stores nationwide as of April this year.
NHI in 2020 posted an operating profit of more than 3 billion won ($2.7 million) on revenue of 20 billion won ($17.9 million) from selling Barbour products.
“We recently made large investments in marketing and for the stores across the country. Now, LF is going to be the beneficiary of our activities. The price that LF has proposed to take over our 27 stores is also unacceptably low,” said NHI.
LF’s viewpoint is that it is merely a third party outside the bilateral dispute between the British brand and the Korean importer.
“We are just a third party. We are not directly related to the dispute between the two parties. There is a concern that this event might be misconstrued as a small company’s struggle against a bigger conglomerate,” said an LF official.
LF added that the company has been in discussions with Barbour about a partnership as early as the beginning of 2020.
“Barbour wanted to expand its presence in the Korean e-commerce segment and started contacting us in early 2020,” said LF.
The sources report that Barbour and NHI have been signing import and distribution contract agreements every three years. The most recent contract was signed in May 2018 and ended in April 2021.
NHI said the contract termination was nothing but an unexpected, undesired change. NHI noted that Barbour in 2020 even made a proposal to set up a joint venture together in Korea.
Barbour also suggested NHI purchase a large volume of clothing for the autumn and winter seasons of 2021, implying an ongoing relationship according to NHI.
But contrary to NHI’s expectations, Barbour notified its intention to terminate the contract on April 28, just two days before the end date, and chose LF as its next partner in Korea by signing a contract on May 5.
“We are a small company. But we really put in everything to grow the Barbour brand in Korea. Now the Korean conglomerate, with its immense amount of capital, is taking the fruit of our labor,” said NHI.
Barbour products account for almost 100% of NHI's annual revenue.
Legal experts highlight that such cases are prevalent given the current legal system in Korea. They say that even the country’s largest conglomerates can become victims when overseas brands terminate their distribution contracts in preference for direct entry into the country.
The lawyers argue that global brands have the right to choose their distribution partners and to switch their business model to direct entry. But they also concede that Korea’s current system fails to compensate for the domestic distributor’s efforts in growing the brand, unlike some other countries where these efforts are protected under the concept of goodwill.
Moreover, the experts note that if the legal dispute remains unsettled, Korean consumers may see both LF and NHI selling Barbour products in their own stores this year. In the case of terminating a distribution rights contract, Korean law stipulates a six-month grace period for the distributor to dispose of the remaining stock and close down operations.
Write to Jeong-cheol Bae at bjc@hankyung.com Daniel Cho edited this article.
