Hyundai supplier gets hefty fine

The Fair Trade Commission yesterday imposed a 544 million won ($491,000) fine on a supplier of Hyundai Motor Group for demanding price cuts from one of its subcontractors.

The government has expressed its determination to root out unfair practices between large businesses and their smaller contractors. Due to the recent revelation online that Namyang Dairy Products salesmen used threats and abusive words to strongarm a distributor, the government agency has come under fire for not paying attention to protecting contractors as it focuses on slapping conglomerates with fines and corrective measures.

Experts point out that the nation’s fair trade law has a clause that mandates punishing “Party A” (large businesses) for inflicting unfair treatment upon “Party B” (contractors).

“Weak parties tend to avoid relying on the law because they are afraid of their big clients retaliating,” said a lawyer at a major firm in Seoul.

The country’s antitrust agency said Seohan Industries, an auto parts manufacturer of the country’s largest automobile conglomerate, unfairly reduced payments to one of its subcontractors.

The FTC ordered Seohan to pay the subcontractor 292 million won in addition to the fine for demanding the cuts.

The parts maker posted 361 billion won in sales in 2010 and has been considered a large business since last year. The company supplies half shafts to Hyundai Motor and Kia Motors.

According to the agency, Seohan failed to sign a deal with Hyundai Motor to provide its products in 2009. Since then, the company demanded price cuts from its 13 subcontractors.

One subcontractor faced a 9 percent cut and stopped supplying products to Seohan in November 2009. The company’s sales plummeted to 1 billion won from 4 billion won.

Seohan recently paid a total of 240 million won to the remaining 12 subcontractors recently. However, the FTC demanded 292 million won in compensation for the company that ended its relationship with Seohan in 2009.

“The FTC is going to expand its direct inspection into unfair transactions not only between conglomerates and primary contractors, but also between secondary and tertiary suppliers,” an FTC official said.

By Song Su-hyun [ssh@joongang.co.kr]