Record Fine in Technology Misappropriation Case... Second Highest Sanction for Retaliatory Acts
A leading supplier of ship air conditioners to major shipbuilding companies was fined the largest-ever penalty in a technology misappropriation case and is now under prosecution investigation along with its corporation and CEO for abusing its power over subcontractors.
On the 10th, the Fair Trade Commission announced that it imposed a fine of 2.648 billion KRW on Hi-Air Korea for violating the Subcontracting Act through technology misappropriation and retaliatory actions, and decided to prosecute the corporation and its CEO.
It also issued corrective orders including measures to prevent recurrence, cessation of the acts, destruction of technical data, and reporting requirements.
Hi-Air Korea manufactures air purification and control equipment such as ship air conditioners and dampers, supplying major shipbuilding companies. It holds a 98% share of the domestic market and 40% of the global market.
The company is accused of misappropriating technology by using the drawings of a small and medium-sized subcontractor, Company A, with whom it had a subcontracting relationship since 2015, to develop similar products on its own starting in 2020 to reduce parts production costs.
In July 2022, Company A visited Hi-Air Korea’s production plant, discovered the technology misappropriation, and requested that it be stopped, but was refused.
After Company A reported the matter to the Fair Trade Commission, Hi-Air Korea retaliated by cutting off transactions starting in December 2022, according to the investigation.
Hi-Air Korea’s abuse of power did not stop there. When it needed products previously supplied by Company A, it provided the drawings to Company A’s competitor and requested manufacturing, constituting repeated technology misappropriation.
In addition, the Fair Trade Commission uncovered other violations including 71 cases of failure to provide subcontracting transaction contracts, 24 cases of failure to provide legally required written documents upon request for technical data, and one case of failure to conclude a confidentiality agreement upon receipt of technical data.
The 2.648 billion KRW fine imposed by the Fair Trade Commission is the largest ever in a technology misappropriation case.
Furthermore, since the introduction of the prohibition on retaliatory measures under the Subcontracting Act in 1985, this is only the second case of detection and sanction, coming 11 years after the first enforcement.
The Fair Trade Commission also stated that this is the first time it has detected and sanctioned the failure to conclude a confidentiality agreement upon receipt of technical data.
A Fair Trade Commission official said, "We will continue to strictly monitor and severely sanction any abuse of superior position by primary contractors to misappropriate technical data painstakingly developed by small and medium enterprises or retaliatory acts that block reporting and whistleblowing."
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