KFTC Gathers 102 Conglomerates for Briefing on Subcontract Payment Disclosure and Indexation Systems

Practical Guidance Ahead of the First Half-Year Disclosure Deadline
Explanation of the Expanded Subcontract Payment Indexation System Covering the Energy Sector

The Korea Fair Trade Commission (KFTC) will hold a briefing session on the "Disclosure System for Subcontract Payment Terms and the Subcontract Payment Indexation System" for executives and employees of companies affiliated with 102 designated conglomerates at the DMC Tower for Small and Medium Enterprises on May 21 in the afternoon.

This session has been organized ahead of the first half-year disclosure deadline to help the 3,538 companies affiliated with conglomerate groups better understand the requirements. The subcontract payment disclosure system mandates that large principal contractors publicly disclose, via the electronic disclosure system (DART), details such as the payment methods, payment periods, and amounts paid for subcontracting, on a semi-annual basis. Introduced in January 2023, this system aims to increase transparency in the market and encourage voluntary improvements in payment practices by making actual conditions public.

During the briefing, the KFTC will focus on preventing the recurrence of issues that have been persistently identified during the disclosure review process, such as false or delayed disclosures, simple omissions, and clerical errors. The KFTC will also distribute on-site the "Guidelines for the Disclosure of Subcontract Payment Terms"—which specify the requirements and procedures for disclosure—and a frequently asked questions (FAQ) booklet.

In particular, this session will include guidance on the recently amended "Subcontract Payment Indexation System," which was fully implemented in October 2023. As a result of a law passed in February that expands the scope of the indexation system from only covering raw materials to now also include "major energy" prices, the revised system will take effect on August 11. The KFTC will explain the expanded system and implementation procedures, and will also strongly warn against any circumvention or illegal practices by principal contractors seeking to avoid indexation requirements.

The KFTC stated, "We will thoroughly monitor the overall operation of the disclosure system for subcontract payment terms and the indexation system to ensure that these measures are faithfully implemented in practice," adding, "We will continue to support companies’ compliance management by holding additional briefing sessions and providing a wide range of materials in the future."

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