Subcontractor law charges referred to prosecutors

Complaints against LG Electronics and three other companies for violating subcontractor laws are being referred to prosecutors despite the Fair Trade Commission (FTC) initially deciding not to do so.

The Ministry of SMEs and Startups said Wednesday that it requested the FTC to file the complaint against four companies - LG Electronics, SH Global, Aerix and City Construction - after it found that they had caused severe damage to small- and medium-sized companies.

All four companies have been fined by the FTC for unfair practices, but their cases were not filed with the prosecutors. While the FTC has the exclusive authority to make such a recommendation, under subcontractor laws, the SME Ministry is able lodge a request with the regulator, and the FTC is required to act on that request.

LG Electronics was fined 3.3 billion won ($2.8 million) last year for underpaying contractors from 2014 to 2017. The FTC found that the electronics company had negotiated price reductions with its suppliers but had also applied the price changes to products already delivered, leading to losses of more than 500 million won.

“Considering that LG Electronics’ violations happened over a long period of time on multiple businesses and the wrongful reduction of contractor payments attracts punitive damages and should be rooted out, the ministry requested filing a complaint against LG Electronics,” said the SME Ministry in a statement.

The FTC has imposed a fine of 379 million won against SH Global and 1.13 billion won against City Construction for subcontractor law violations, while Aerix was ordered to make withheld payments of 193 million won to its contractors.

The SME Ministry established a joint committee with the FTC, the Supreme Prosecutor’s Office and others to monitor unfair business practices against small businesses.

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