Fair Trade Commission Orders Sweek to Prevent Recurrence for Unjustified 5% Reduction in Subcontract Payment

A Fine of 16 Million KRW Imposed for Delayed Issuance of Documents

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 9th that it imposed a corrective order and a fine of 16 million KRW on Sweek for delaying the issuance of contracts and unfairly determining subcontracting payments while entrusting subcontractors with the manufacturing of ship blocks.

According to the Fair Trade Commission, Sweek signed an annual unit price contract with a subcontractor on January 17, 2017, and decided the subcontracting payment by uniformly reducing the unit prices of four items by 5% compared to the previous year without justifiable reasons.

For a uniform rate reduction in unit prices to be justified, it must be determined based on objective and reasonable grounds or be advantageous to the subcontractor compared to individual unit price decisions. However, Sweek reduced the subcontracting payment by a total of 3 million KRW compared to the previous year, citing the downturn in the shipbuilding industry and the ordering party's request for price reduction.

Additionally, from December 2015 to January 2018, Sweek delayed issuing contracts for up to 168 days for 57 contracts while entrusting two subcontractors with the production of ship block outfitting parts.

Accordingly, the Fair Trade Commission decided to impose a recurrence prevention order to prevent Sweek from repeating the same or similar acts in the future and to impose a fine of 16 million KRW for the delayed issuance of written contracts.

A Fair Trade Commission official stated, "We sanctioned the act of starting work without preparing a contract beforehand and issuing the contract late afterward, as well as the uniform reduction of unit prices to compensate for losses due to the ordering party's request for price reduction," adding, "The Fair Trade Commission plans to continuously monitor unfair subcontracting transactions in the shipbuilding sector and work with the industry to improve wrongful practices."

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