Administrative Orders and Fines Imposed Together
[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has decided to file a criminal complaint against Taeyang Metal Industry. This is due to Taeyang Metal Industry unfairly reducing subcontract payments, unilaterally lowering delivery prices, and failing to pay bill discount fees and substitute bill payment fees while outsourcing automobile parts manufacturing to subcontractors.
The FTC has decided to issue corrective orders (recurrence prevention orders), impose a fine of 530 million KRW, and file a corporate complaint against Taeyang Metal Industry for these actions.
According to the FTC, Taeyang Metal Industry reduced subcontract payments by 9,829,684 KRW under the names of sales discounts and win-win discounts after receiving automobile parts from subcontractors on January 31 and February 15, 2016.
The FTC found that Taeyang Metal Industry did not specify the reduction conditions in the contract at the time of outsourcing, and unilaterally proceeded with the reductions without consulting the subcontractors beforehand, making it difficult to recognize any legitimate reason for the reductions. Such actions fundamentally violate the Subcontracting Act, which prohibits subcontract payment reductions.
Additionally, from February 1, 2016, to June 30, 2018, Taeyang Metal Industry unilaterally lowered the unit prices of items delivered by subcontractors by uniform rates of 4.5% and 2% compared to previous prices.
Taeyang Metal Industry shortened the maturity period of bills paid to subcontractors (from 60 days to 45 days) and lowered prices on the grounds that this would incur additional costs for itself and financial benefits for subcontractors. However, the FTC judged that the price reduction rates were calculated by reflecting the discount amounts under sales and win-win discounts without reasonable basis, and since raw materials, unit prices, and manufacturing processes differ for each item subject to reduction, it is difficult to recognize a legitimate reason for applying a uniform reduction rate.
Taeyang Metal Industry also failed to pay bill discount fees and substitute bill payment fees. From January 28, 2016, to June 30, 2018, while paying subcontract payments via bills and substitute bill payment methods, it did not pay a total of 5,165,600 KRW in bill discount fees and substitute bill payment fees. Such actions violate the Subcontracting Act as they involve failing to pay bill discount fees and substitute bill payment fees from 60 days after receipt of the goods until maturity when subcontract payments are made via bills or substitute bill payment methods.
An FTC official stated, "This action is significant in strictly sanctioning the reduction of payments and unfair price cuts that cause direct damage to subcontractors in continuous transactions by the principal company using its superior bargaining position." He added, "By penalizing the principal company’s unilateral payment reductions without prior agreement on reduction conditions, it is expected that similar transactional practices will improve in the future."
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