596 Companies Caught for Unfair Practices in Consignment Transactions

Ministry of SMEs and Startups Announces 2019 Regular Survey Results on Consignment and Entrustment Transactions

[Asia Economy Reporter Kim Cheol-hyun] As a result of the regular survey on consignment and subcontracting transactions, 596 companies engaged in unfair practices were detected, and a damage amount of 4.96 billion KRW was paid to the entrusted companies.

On the 20th, the Ministry of SMEs and Startups (Minister Park Young-sun, hereinafter referred to as the Ministry) announced the results of the "2019 Regular Survey on Consignment and Subcontracting Transactions," conducted from November last year targeting a total of 12,000 companies, including 2,000 consignment companies and 10,000 entrusted companies.

The Ministry revealed that it detected 596 companies violating the Win-Win Cooperation Act and imposed improvement requests and penalty points on 15 companies that did not voluntarily improve within the period. Among them, 3 companies that did not respond to the improvement requests and failed to pay delivery payments were publicly announced on the 15th and the Fair Trade Commission was requested to take measures related to violations of the Subcontracting Act.

The 596 companies suspected of violating the Win-Win Cooperation Act detected this time include 587 companies for non-payment of delivery payments and 9 companies for failure to issue agreements. Among the companies suspected of violating the delivery payment sector, 581 companies voluntarily improved by paying the damage amount during the investigation process, and among the remaining 6 companies, 3 companies complied with the improvement requests, resulting in a total damage payment of 4.96 billion KRW to the entrusted companies. Additionally, the Ministry requested improvements to the 9 companies violating the law, such as failure to issue agreements, to prevent recurrence in the future.

The Ministry also conducted an additional survey on consignment and subcontracting transactions in the Information and Communication Technology (ICT) sector in May this year. Investigating the transaction details of 150 consignment companies and 1,000 entrusted companies in the sector, it detected suspected violations of the Win-Win Cooperation Act by 37 companies, including non-payment of delivery payments, delayed payment of delivery payments, and non-payment of delay interest and substitute fees for promissory notes. Based on this, the Ministry notified the 37 consignment companies of the suspected legal violations to induce voluntary improvement, and as a result, all violating companies responded to voluntary improvement and paid the full damage amount of about 300 million KRW to the entrusted companies.

The Ministry conducts at least one regular survey annually to eradicate unfair trade occurring between consignment and subcontracting companies and to promote the establishment of sound trading practices in the industry. This year's regular survey has been underway since the 23rd of last month, targeting a total of 15,000 companies. Companies suspected of violating laws related to delivery payment will be given an opportunity for voluntary improvement, and on-site investigations will be conducted on consignment companies suspected of unfair practices and those that have not voluntarily improved based on surveys of entrusted companies. Companies confirmed to have violated the law will be subject to measures such as improvement requests, public announcements, penalty points, and education orders.

Companies that fail to issue agreements will be fined, and companies that repeatedly engage in unfair trade or fail to comply with improvement requests, accumulating more than 5 penalty points, will face strong sanctions such as restrictions on participation in the public procurement market.

Park Jong-chan, Director of the Win-Win Cooperation Policy Division at the Ministry, stated, "The 2020 regular survey expanded the number of target companies and the survey period to provide more entrusted companies with opportunities for damage relief," adding, "We plan to examine unfair trade practices occurring in consignment and subcontracting transactions, including industries affected by COVID-19 such as aviation and courier services."

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