"Dae Myung General Construction Avoids Subcontract Payment Guarantee, Faces Fair Trade Commission Sanctions"

The Fair Trade Commission announced on the 5th that it has sanctioned Daemyeong General Construction and Daemyeong Suan for evading the obligation to guarantee payment of construction fees during the process of concluding subcontracting contracts.

[Image source=Yonhap News]

Both companies were ordered to prevent recurrence of violations of the Act on the Fairness of Subcontract Transactions. Daemyeong Suan was also fined 300 million KRW.

Regarding the "Namyangju Pyeongnae Daemyeong Lucen Apartment New Construction Project," Daemyeong Suan subcontracted 8 construction works to 7 subcontractors from September 2019 to April 2020, and Daemyeong General Construction entrusted 4 subcontract works to 4 subcontractors from April 2018 to April 2019, without providing payment guarantees for the subcontracting fees. The current Subcontracting Act stipulates that the original contractor must guarantee payment of construction fees to subcontractors when commissioning construction.

However, if the ordering party agrees to pay the construction fees directly to the subcontractor through a "direct payment agreement," the original contractor's obligation to guarantee payment is exempted. In this case, the subcontractors, as subcontracting companies, entered into direct payment agreements with the ordering party for the construction fees, and the original contractors, Daemyeong Suan and Daemyeong General Construction, were exempted from the payment guarantee. However, subsequently, Daemyeong Suan and Daemyeong General Construction ignored the direct payment agreements between the ordering party and the subcontractors and directly paid the construction fees to the subcontractors. The Fair Trade Commission judged that this payment method invalidated the direct payment agreements and nullified the exemption from the obligation to guarantee payment of subcontracting fees.

The Fair Trade Commission stated, "We will continue to strictly enforce laws against unfair subcontracting transactions to establish order in subcontracting transactions and strive to improve the rights and interests of subcontractors."

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