Ministry of SMEs Requests Prosecution of 'Interplex'... Subcontracting Law Violation Damage Amounting to 27 Billion Won

Unilateral Cancellation of Orders to SMEs After Order Suspension
Use of False Accusation Request System... Report Filed with Fair Trade Commission
Ministry of SMEs and Startups "Expect Prevention of Similar Legal Violations"

[Asia Economy Reporter Kim Bo-kyung] The Ministry of SMEs and Startups has decided to request the Fair Trade Commission to file charges against Interflex, an affiliate of Young Poong, which caused damages of approximately 27 billion KRW to small and medium-sized enterprises (SMEs) by unilaterally canceling manufacturing consignment contracts.

The Ministry of SMEs and Startups announced on the 7th that it held the "15th Mandatory Prosecution Request Deliberation Committee" on the 5th and decided to request the Fair Trade Commission to file charges against Interflex for violating the Subcontracting Act.

The mandatory prosecution request system, implemented since January 2014, requires the Fair Trade Commission to compulsorily prosecute cases to the prosecution if the Minister of SMEs and Startups requests prosecution for cases that the Fair Trade Commission has not prosecuted for other reasons.

Interflex, which is being requested for prosecution this time, caused significant damage to SMEs through unfair consignment cancellations, a chronic unfair practice in the subcontracting sector.

In January 2017, Interflex consigned the electroless plating process in the manufacturing of printed circuit boards for smartphones to SME A. However, when the client stopped placing orders in January 2018, Interflex unilaterally terminated the transaction. As a result, in August of last year, the Fair Trade Commission issued a corrective order and imposed a fine of 350 million KRW.

Despite the fact that SME A was highly dependent on transactions with Interflex and that unilateral termination would cause significant management difficulties, Interflex canceled the consignment unilaterally without prior notice or loss consultation, causing substantial managerial damage.

The Ministry of SMEs and Startups decided to request prosecution considering that the damage amounted to approximately 27 billion KRW, the scale was considerable, and that unilateral transaction termination (unfair consignment cancellation) is an unfair trade practice that must be strictly eradicated.

Park Jong-chan, Director of the Win-Win Cooperation Policy Bureau at the Ministry of SMEs and Startups, explained, "This prosecution request is significant as it calls for strict punishment of unfair consignment cancellations, which frequently occur in the subcontracting sector."

He added, "We expect this prosecution request to raise awareness in the subcontracting industry and prevent recurrence of similar legal violations."