"50% Penalty Increase Regardless of Violation Type"... Amendment to Win-Win Cooperation Act Standards

Expansion of Penalty Points for Habitual Law Violators
Reduction of Penalty Points for Companies Operating the Delivery Price Adjustment Consultation System

Source: Ministry of SMEs and Startups

[Asia Economy Reporter Kim Daeseop] The Ministry of SMEs and Startups announced on the 7th that it will revise and implement the penalty point criteria imposed for violations of the Win-Win Cooperation Act.

The amendment to the Win-Win Cooperation Act, effective from today, was prepared to revitalize the operation of the payment adjustment consultation system for consignment transactions and to prevent recurrence by habitual violators of the law. Penalty points under the Win-Win Cooperation Act are imposed when improvement requests or corrective actions are received due to violations such as failure to issue agreements or non-payment of delivery fees. If the cumulative points exceed 5 within the past three years, the Ministry of SMEs and Startups will request central government agencies and public institutions to restrict the offender's eligibility to participate in public bids.

The payment adjustment consultation system allows the subcontracted company to apply for delivery fee adjustments to the consignor company when supply costs such as labor and expenses fluctuate, requiring adjustment of the delivery fee. This system has been in effect since July last year.

The recent amendment stipulates that if the consignor company introduces and operates this system or submits a plan to introduce and operate it within a period of one year, penalty points will be reduced (by 0.25 to 2.0 points) by combining basic and additional points.

If a company currently operating the system plans additional measures, the reduction points will be calculated based on the combined results of the existing operation and the future planned content.

If a company plans to introduce and operate the system to receive penalty reductions but fails to implement the plan, the reduced penalty points will be canceled, and an additional penalty of 5.1 points will be imposed for non-implementation. When 5.1 penalty points are imposed, the violating company will immediately become subject to restrictions on participation in public bids.

The imposition of penalty points for non-implementation is expected to prevent indiscriminate submission of plans to receive penalty reductions and to encourage responsible behavior by consignor companies in fulfilling their plans.

In particular, the scope of penalty point increases for habitual violators of the law will be expanded.

Currently, if a company receives corrective actions two or more times for the same type of violation within the past three years, penalty points are increased by 50%.

The amendment removes the condition that the violations must be of the same type, so even if the reason for the penalty points this time is not the same type of violation as in the past, habitual violators will have increased penalty points. This is expected to enhance the effect of preventing repeated violations.

Park Jongchan, Director of the Win-Win Cooperation Policy Division at the Ministry of SMEs and Startups, said, "Through this amendment, the incentive effect for consignor companies to utilize the payment adjustment consultation system will increase, thereby activating autonomous adjustment of delivery fees between consignors and subcontractors. We also expect that the expansion of penalty point increases for habitual violators will reduce repeated violations and spread a culture of voluntary legal compliance."

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