Did the Fair Trade Commission's Subcontract Payment Sanctions Work? Early Payments Increase by 1.3 Trillion Won Ahead of Chuseok Holiday

Results of Operating the 'Unfair Subcontracting Reporting Center' in Preparation for the Chuseok Holiday
Early Payment Scale '2.0896 trillion KRW → 3.3798 trillion KRW'

[Sejong=Asia Economy Reporter Joo Sang-don] Ahead of the Chuseok holiday, the amount of subcontracting payments made early increased by 1.3 trillion KRW compared to last year. The Korea Fair Trade Commission (KFTC) analyzed that this was due to heightened awareness among primary contractors following strict sanctions on unpaid or delayed subcontract payments, as well as strengthened win-win efforts for subcontractors struggling due to COVID-19.

On the 24th, the KFTC announced the results of operating the 'Unfair Subcontracting Reporting Center' in preparation for the Chuseok holiday, which included these details.

To ensure timely payment of subcontracting fees ahead of this year’s Chuseok, the KFTC set up and operated reporting centers at 10 locations nationwide from July 26 to September 17 (54 days). As a result, 198 small and medium subcontracting companies were able to receive a total of 21.8 billion KRW in subcontract payments through the reporting centers.

In particular, considering the COVID-19 situation, the KFTC requested major companies to cooperate in making early payments of subcontracting fees scheduled for after Chuseok. Consequently, 121 companies made early payments totaling 3.3798 trillion KRW to 29,650 small and medium enterprises before Chuseok. This amount is 1.2902 trillion KRW higher than last year’s early payment amount of 2.0896 trillion KRW.

A KFTC official stated, "The nearly 1.3 trillion KRW increase in early payments is significant as it reflects the effectiveness of the KFTC’s sanctions against unpaid subcontracting fees," adding, "It can also be interpreted as a result of primary contractors strengthening their win-win efforts with subcontractors."

Previously, the KFTC imposed a payment order of approximately 450 million KRW in unpaid fees and delayed interest on Hyundai Heavy Industries for failing to pay subcontracting fees to partner companies on time last year. Additionally, the KFTC issued corrective orders (for recurrence prevention and payment) and imposed a fine of 11.5 billion KRW on Hanon Systems for unfairly reducing payments totaling 8.05 billion KRW to 45 subcontractors supplying automotive air conditioning system parts, and also filed a complaint against the corporation.

During the operation period of the reporting center, the KFTC plans to handle cases where corrections were not made through on-site investigations. Companies found to be in violation of the law will be encouraged to voluntarily correct their actions, and if they fail to do so, strict measures will be taken. Furthermore, the KFTC will continue to conduct inspections on unfair subcontracting transactions to focus its efforts on establishing proper payment practices for subcontracting fees.