[Asia Economy Reporter Moon Hyewon] Administrative measures against unfair transactions in consignment and subcontracting will be strengthened.
The Ministry of SMEs and Startups announced on the 20th that the amended "Act on the Promotion of Mutual Growth between Large Enterprises and SMEs" (hereinafter referred to as the Mutual Growth Act), which strengthens penalties for unfair transactions in consignment and subcontracting, has been promulgated.
According to the amended law, the Ministry of SMEs and Startups will introduce an ex officio investigation and corrective order system for consignment and subcontracting transactions that are not protected under the Fair Trade Commission's Subcontracting Act and the Fair Trade Act.
Until now, the Ministry of SMEs and Startups could only take measures such as "improvement requests" and "public announcement if not complied with" for illegal acts detected during ex officio investigations. With this amendment, corrective orders, public announcements, and criminal penalties for non-compliance are now possible, thereby strengthening punishment for violations of the law. The Ministry expects this to minimize blind spots in the protection of SMEs.
According to the Ministry of SMEs and Startups, 54 companies were found to have committed violations more than twice in the past three years, with fines totaling 1.55 billion KRW.
The amended law also grants the Korea Federation of SMEs the authority to mediate in the delivery price adjustment negotiation system.
The delivery price adjustment negotiation system allows subcontractors to request delivery price adjustments from consignors when supply costs such as labor and expenses fluctuate, necessitating price adjustments. This policy has been implemented by the Ministry of SMEs and Startups since July last year to realize fair delivery prices for SMEs. By utilizing this system, subcontractors can apply to their affiliated cooperatives or business cooperatives to negotiate delivery prices with consignors on their behalf if certain conditions are met.
Park Jongchan, Director of the Mutual Growth Policy Division at the Ministry of SMEs and Startups, said, "Through this amendment, strengthening penalties for violations will enable consignors to actively correct violations voluntarily and prevent repeated violations. We expect that the Korea Federation of SMEs, equipped with organization and negotiation power, will participate in delivery price adjustment negotiations, thereby revitalizing autonomous delivery price negotiations between companies."
The amended law will take effect on April 21 next year, after a six-month grace period for the preparation of subordinate statutes.
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