The 16th Mandatory Prosecution Request Deliberation Committee Meeting
Request for Prosecution Regarding Unfair Internal Transactions and Subcontract Payment Decisions Among Affiliates
[Asia Economy Reporter Kim Heeyoon] The Ministry of SMEs and Startups (MSS) has requested the Fair Trade Commission (FTC) to file charges against four companies?Mirae Asset Global Investments, Mirae Asset Life Insurance, GS Construction, and Hanjin Heavy Industries?for violating the Fair Trade Act and the Subcontracting Act.
On the 16th, MSS announced that it held the "16th Mandatory Prosecution Request Deliberation Committee" and decided to request prosecution against the four companies.
The mandatory prosecution request system is a mechanism where MSS requests the FTC to prosecute cases involving violations of the Fair Trade Act or Subcontracting Act that the FTC has not prosecuted, considering the damage caused to small and medium enterprises (SMEs) or the social ripple effects. Once MSS requests prosecution, the FTC is obligated to refer the case to the prosecution.
The four companies requested for prosecution by MSS were found to have caused damage to SMEs through illegal activities such as preferential treatment of affiliated companies and unfair determination of subcontracting payments.
First, Mirae Asset Global Investments and Mirae Asset Life Insurance engaged in internal transactions amounting to 9.3 billion KRW and 8.3 billion KRW respectively from January 2015 to July 2017 with a golf course operated by their affiliate Mirae Asset Consulting. The FTC issued cease-and-desist orders and imposed fines of 640 million KRW and 557 million KRW respectively.
MSS decided to request prosecution against Mirae Asset Global Investments and Mirae Asset Life Insurance on the grounds that they caused damage to small golf courses during the process of preferentially allocating work to affiliates in which related parties hold the majority of shares.
GS Construction subcontracted construction work to SME A from October 2012 to February 2018, setting subcontracting payments 1.13415 billion KRW lower than the direct construction costs. The FTC issued a cease-and-desist order and imposed a fine of 1.381 billion KRW.
MSS decided to request prosecution because the victim company’s dependence on transactions with GS Construction was high and the reduction amount due to unfair subcontracting payment determination was significant.
Hanjin Heavy Industries subcontracted construction work to 19 SMEs from September 2016 to April 2020 without issuing subcontracting contracts and set unfair special conditions, such as including additional quantities caused by its own fault up to 5% in the main contract. It also set subcontracting payments 10 million KRW lower, causing damage. The FTC imposed a cease-and-desist order and a fine of 18 million KRW.
MSS decided to request prosecution considering that Hanjin Heavy Industries repeatedly violated the law over a long period despite having multiple past violations, causing damage to many SMEs.
No Hyungseok, Director of the Transaction Environment Improvement Division at MSS, said, “This prosecution request is significant as it not only targets companies that caused damage to SMEs through chronic unfair subcontracting payment practices but also marks the first time a request has been made against large conglomerate affiliates for preferentially allocating work in a way that disrupts fair trade order and causes damage to SMEs through irrational transactions. MSS expects this request to prevent recurrence of similar violations and raise awareness within the industry.”
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