Car parts maker gets stiff fine for unfair contracts

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Car parts maker gets stiff fine for unfair contracts

The Fair Trade Commission imposed a fine of 2.3 billion won ($2 million) on auto parts maker Hyundai Mobis yesterday for forcing its subcontractors to lower their prices for three years starting in 2008.

Before receiving the fine, the company paid back 12 subcontractors a total of 1.59 billion won early this month after the FTC conducted a probe in May informing the company of its perceived wrongdoing.

As the company paid the sum at the start of July before the anti-trust watchdog stepped in and imposed a punishment, it got a 10 percent deduction on the subsequent fine.

The fair trade watchdog is also set to request a reevaluation of the company’s shared growth index, which was released in May last year by the Commission on Shared Growth for Large and Small Companies. Hyundai Mobis’ actions in this area were deemed “good,” the second-best grade available.

“As the local car industry is oligopolistic, and subcontractors usually sign a contract with just one car maker, they had to bear the unfair price cut to keep the contract,” said Jung Chang-wook, a director at the FTC’s manufacturing subcontract improvement division.

From January 2010 to May last year, Hyundai Mobis pressured the four subcontractors to cut their unit prices by up to 19 percent, arguing that they had lowered their production costs, and that it deserved a share of the savings. The FTC said its argument was groundless and the subcontractors had simply caved under pressure.

Hyundai Mobis also made the small subcontractors bid for their contracts, and eventually had them seal each deal at a price below the lowest bid, the FTC said.

The commission originally investigated three companies, including Hyundai Motor and Kia Motors after receiving a tip-off that they had all engaged in unfair practices. However, the latter two were exonerated in the wake of a probe.

By Lee Sun-min []

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