"Subcontract Payment Undercutting" Dongho Construction... Fine of 256 Million Won Imposed

[Sejong=Asia Economy Reporter Joo Sang-don] Dongho Construction, which repeatedly lowered subcontract payments without justifiable reasons, has been caught by the Fair Trade Commission.

The Fair Trade Commission announced on the 23rd that it decided to impose a corrective order (recurrence prevention order) and a fine of 256 million KRW on Dongho Construction for unfair subcontract payment determination practices.

According to the Fair Trade Commission, Dongho Construction selected Company A, which submitted the lowest bid on November 19, 2015, as the successful bidder, and then repeatedly negotiated prices with Company A five times without justifiable reasons. Eventually, on January 21, 2016, they signed a subcontract contract at 3.2 billion KRW, which was 690 million KRW lower than the previous lowest bid amount of 3.809 billion KRW.

This act falls under the type of unfair subcontract payment determination prohibited by the Subcontracting Act, specifically "determining subcontract payments at an amount lower than the lowest bid amount without justifiable reasons when concluding a subcontract contract through competitive bidding" (Article 4, Paragraph 2, Item 7 of the Subcontracting Act), constituting an unfair subcontract transaction.

A Fair Trade Commission official stated, "This measure strictly sanctions the act of unfairly determining subcontract payments during the subcontract contract process through competitive bidding," and added, "We plan to continue strengthening monitoring and law enforcement against unfair subcontract transactions conducted by the principal contractors in superior positions to establish a fair subcontract transaction order."