DB Inc. Ordered Work Without Contracts... 211 Million Won Fine for Unfair Practices Against Partners

"Blind" Work After Project Launch: 85% of Partners Did Not Receive Written Contracts
Delayed Inspection Notifications... No Interest Paid on Late Payments

DB Inc., the IT services subsidiary of DB Group, has been found by the Korea Fair Trade Commission (KFTC) to have engaged in unfair business practices, such as assigning projects to hundreds of partners without even written contracts. More than 8 out of 10 partner companies suffered from these actions, revealing the widespread and chronic practice in the IT industry of "work first, contract later."

On March 16, the KFTC announced that it has decided to impose a corrective order and a fine of 211 million won on DB Inc. for violating the obligation to issue written contracts to subcontractors.

According to the KFTC, from January 2022 to June 2024, DB Inc. commissioned 652 projects, such as information system construction, to 394 subcontractors, but issued written contracts containing legally required details—such as subcontracting payments—up to 58 days after work had already started, instead of before the start of services. The investigation found that approximately 85.4% of subcontractors working with the company during this period were affected by these delayed contract issuances.

Under the Subcontracting Act, written contracts must be issued before the start of any commissioned work. This is the most basic obligation, intended to clarify contract terms, prevent disputes, and protect the interests of lower-tier suppliers. Despite this, DB Inc. failed to comply for over two years.

DB Inc.'s legal violations were not limited to contract issuance. Even after receiving deliverables, the company failed to notify the results of inspections to subcontractors within the legally mandated 10-day period, thereby delaying payment of subcontracting fees. For the deliverables of six subcontractors, notification of inspection results was delayed by up to 26 days.

In addition, DB Inc. committed further unfair practices in the payment process by failing to pay delay interest, even though it exceeded the statutory payment period of 60 days when paying subcontracting fees to 45 subcontractors.

The KFTC emphasized the significance of this action, stating that it has cracked down on unfair practices that have long been customary in the software and IT services industry. Considering that the violations persisted for an extended period and affected the vast majority of partner companies, the KFTC took strict measures.

The KFTC stated, "We will continue to strengthen monitoring of violations related to the obligation to issue written contracts, and focus our investigative capabilities on the information and communications and new industry sectors to ensure that fair subcontracting practices become the norm."

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