Experts Say "If the Win-Win Cooperation Act Amendment Passes, It Will Lead to a Reduction in Consignment Transactions"

[Asia Economy Reporter Ki-min Lee] Concerns have been raised that the amendment to the Win-Win Cooperation Act, which includes the burden of proof for technology misappropriation by consignment companies, could lead to a reduction in consignment transactions and cause damage to domestic small and medium-sized enterprises (SMEs).

The Korea Economic Research Institute and the Federation of Mid-sized Enterprises held a seminar titled "What is the problem with the amendment to the Win-Win Cooperation Act?" on the afternoon of the 19th at the Federation of Korean Industries Conference Center in Yeouido-dong, Seoul, where they made these claims.

At the opening remarks, Kwon Tae-shin, president of the Korea Economic Research Institute, stated, "The basic principle of a market economy is to allow companies to freely trade with innovative product manufacturers when such companies emerge," and argued, "The amendment will become an obstacle that blocks trading relationships with these innovative companies due to concerns over technology misappropriation disputes, thereby hindering the Fourth Industrial Revolution."

The amendment to the Act on the Promotion of Mutual Cooperation between Large and Small Enterprises, currently pending in the National Assembly, includes provisions that if a consignor manufactures products similar to those produced by the existing consignee or consigns them to a third party, or if the consignor continues to trade the consignee's products in the market even after the consignment relationship has ended, it can be presumed that the consignor has misappropriated technology. The burden of proof that this is not the case falls on the consignor.

At the seminar, Professor Choi Jun-seon, emeritus professor at Sungkyunkwan University Law School, gave a keynote speech on "Problems and Alternatives of the Amendment to the Win-Win Cooperation Act between Large and Small Enterprises," and Professor Jeon Sam-hyun of Soongsil University Law Department spoke on "Problems of the Burden of Proof Shift in the Amendment to the Win-Win Cooperation Act." Following this, a comprehensive discussion was held with Professors Choi and Jeon, along with Professor Yang Jun-mo of Yonsei University, Professor Cho Dong-geun, emeritus professor of economics at Myongji University, Professor Jeon Woo-hyun of Hanyang University Law School, and Professor Kang Young-gi of Korea University Financial Law Center.

Professor Choi Jun-seon, the first speaker, stated, "If the Win-Win Cooperation Act is amended, domestic large companies are likely to change their trading partners to overseas companies due to concerns over technology misappropriation disputes," adding, "This is directly contrary to the government's policy of domesticating materials, parts, and equipment (SoBuJang) and will inevitably cause setbacks in responding to Japan's export regulations."

Furthermore, he said, "The amendment is heavily regulation-oriented, including strengthening the Ministry of SMEs and Startups' punitive authority, which undermines the legislative intent of the Win-Win Cooperation Act to promote autonomous cooperative relationships between large and small enterprises," and pointed out, "Currently, the Fair Trade Commission and the Ministry of SMEs and Startups frequently conduct overlapping investigations at the contract, business activity, and payment stages between trading parties. If the amendment passes, the strengthened punitive authority of the Ministry of SMEs and Startups will allow overlapping and differing punishments between the two agencies, increasing the burden on already struggling companies."

Professor Jeon criticized, "Unilaterally shifting the burden of proof for technology misappropriation to the consigning large companies does not align with the general legal principles of the burden of proof," and raised issues that "the concept of technical data is ambiguous, violating the principle of clarity, and conflicts with other laws such as the Subcontracting Act."

Regarding the shift of the burden of proof to consignors, Professor Jeon argued, "In the public law domain, shifting the burden of proof to the private sector can lead to witch hunts against specific targets. To prevent this, evidence of criminal acts must be proven by state agencies," warning, "Violation of this could lead to constitutional controversies."

He also pointed out concerns that the amendment might conflict with other laws such as the Subcontracting Act. Professor Jeon said, "Even the Subcontracting Act, which aims to establish a fair subcontracting transaction order, does not shift the burden of proof," and added, "Shifting the burden of proof in the Win-Win Cooperation Act, which aims for mutual cooperation between large and small enterprises, violates the constitutional principle of proportionality."

Criticism of the amendment to the Win-Win Cooperation Act was also voiced during the comprehensive discussion. Professor Cho criticized the burden of proof for technology misappropriation being placed on consignors, saying, "It is like asking the person who was hit to prove that the person who hit them did not do so." He further pointed out, "The amendment applies a dichotomous logic of 'strong versus weak' in a typical manner," expressing concern that "Upon enforcement, the amendment will fundamentally deprive consignees of business opportunities due to the expansion of self-production by consignors."

Professor Jeon added, "Strengthening direct punishment by the Ministry of SMEs and Startups and the absence of investigation statutes of limitations will essentially restrict the constitutional freedom to choose one's occupation," and argued, "Restraining excessive regulation is necessary to expand jobs and enhance corporate vitality."

Professor Kang also criticized the amendment, stating, "It will effectively restrict the freedom to choose trading partners, which is part of contractual freedom," and emphasized, "It is necessary to carefully review whether the provisions restricting the rights and interests of consignors align with the legislative purpose of the Win-Win Cooperation Act."

Yoo Hwan-ik, head of the Innovation Growth Office at the Korea Economic Research Institute, said, "All presenters and discussants at the seminar pointed out that the amendment to the Win-Win Cooperation Act contains serious problems from legal and economic perspectives," and insisted, "The amendment should be reconsidered."

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