FTC requests penalties for Hanwha Systems

The corporate regulator announced Tuesday that it will request business restrictions, including the partial suspension of business activities, against Hanwha’s IT affiliate for repeatedly violating subcontractor laws.

The Fair Trade Commission (FTC) said Tuesday that it will ask relevant authorities to suspend Hanwha Systems’ construction business activities and to restrict the company from participating in defense bids.

This is the first time that the FTC has attempted to suspend a company’s business activities for fair trade law violations.

Under subcontractor laws, companies that incur over 10 penalty points over the past three years for related violations can be suspended from business activities, while five points leads to a restriction to bidding activities. Hanwha Systems has incurred 10.75 points over the period.

While the company itself did not directly commit any of the violations - it acquired Hanwha S&C, which had racked up the points, in 2017. Violations included late payments to subcontractors and making unfair contracts.

The FTC will make requests to the Ministry of Land, Infrastructure and Transport for the construction business suspension and to the Defense Acquisition Program Administration regarding defense bidding restrictions.

According to the regulator, a final decision on the business suspension could take around three months.

The action is expected to have a limited impact on Hanwha Systems as its main business consists of IT services. An FTC official explained that the suspension is only applicable to the construction sector due to the relevant laws.

Hanwha Systems’ construction business is thought to make up less than 10 percent of its overall activity, according to the FTC.

The official added that the regulator is considering amendments to related laws in order for punishments to be equivalent to the severity of violations.

A spokesperson for Hanwha Systems acknowledged the company’s violations, but expressed regret at the FTC’s decision.

She added that the company was considering options to respond to the violations.

Companies are able to dispute the decision through legal action.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]