Fair Trade Commission Imposes Heavy Fine on Hanlim Co., Ltd. for Unfair Reduction of Subcontract Payments

Fair Trade Commission

[Asia Economy Sejong=Reporter Dongwoo Lee] The Fair Trade Commission announced on the 15th that it imposed a fine of 1 million KRW on Hanlim Co., Ltd. for violating the Subcontracting Act.

According to the Fair Trade Commission, Hanlim Co., Ltd. agreed with subcontractor Company A in April 2018 to reduce the unit price for aluminum formwork production by approximately 0.4% to 4.0% per item compared to the previous unit price.

However, the company retroactively applied the reduced unit price to the quantities already delivered by subcontractor Company A during the period from March 1 to April 5, 2018, resulting in a reduction of about 1.11 million KRW in subcontracting payments compared to applying the previous unit price. This violates Article 11 of the Subcontracting Act.

Hanlim Co., Ltd. also subcontracted aluminum formwork production to Company A on October 31, 2016, but only issued the contract document specifying the subcontract price and payment method to Company A on January 1, 2017, two months after the work had started.

In around August 2017, although additional tasks such as label sticker printing, which were not included in the original contract, were subcontracted to Company A, no additional written contract specifying the unit price and other contract details for these additional tasks was issued.

The Fair Trade Commission stated, "This action clarifies that even if the principal contractor and the subcontractor agree on a price reduction, retroactive application is an unfair reduction and constitutes an unfair subcontracting transaction." It added, "We will continue to strictly enforce the law against unfair subcontracting practices such as unjust reductions and delayed issuance of contract documents to ensure that subcontractors are not unfairly disadvantaged."

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