Automotive Parts Firm SL Fined by FTC for Delayed Contract Issuance and Withholding Payments to Subcontractors

SL, a mid-sized automotive parts company, was sanctioned by the Fair Trade Commission (FTC) for failing to promptly issue written contracts to subcontractors and for withholding payments, including delayed interest, totaling more than 700 million won.

SL factory exterior view. SL.

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On May 5, the FTC announced that it had imposed a corrective order and a fine of 38 million won on SL for its unfair subcontracting practices, while issuing a warning regarding the non-payment of delayed interest and other violations. SL is a mid-sized company with assets totaling 2.6 trillion won, manufacturing automotive lamps and electrification parts.

According to the FTC's investigation, between May 2020 and 2023, SL delayed issuing written contracts for the production of automotive part molds to 40 subcontractors across a total of 328 cases.

Under current law, a primary contractor is required to provide a written contract specifying subcontracting payments before the subcontractor commences work. However, it was found that SL issued contracts only after work had already started, with delays ranging from a minimum of 8 days to as many as 605 days.

Unlawful practices were also identified in the payment process. In 342 contracts with 41 companies, SL paid the final balances only after more than 60 days had passed from the date of receipt of the deliverables, and failed to provide delayed interest and promissory note discount fees.

The unpaid amount reached a total of 728.89 million won, consisting of 509.65 million won in delayed interest and 219.24 million won in promissory note discount fees. SL paid the outstanding amounts only after the FTC investigation had begun, resulting in a warning rather than a more severe penalty.

Following this investigation, SL has decided to improve its internal procedures to ensure that contracts are issued immediately upon selection of subcontractors and that payments are made earlier.

The FTC emphasized, "The significance of this action lies in sanctioning the mold industry’s wrongful practices, where primary contractors abuse their superior position to violate contract issuance obligations or delay payments. We will continue to monitor unfair trade practices in the mold sector, a key national root industry."

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