Antitrust regulator poised to take stern action over unfair practices against suppliers


The nation’s top antitrust regulator said on Monday that it will weed out irregularities at large companies.

The Fair Trade Commission said the warning will be given to business leaders when FTC chairman Kim Dong-soo meets them on Tuesday.

“The meeting between FTC chairman Kim and the chief executives is designed to prevent big firms from bullying subcontractors,” the FTC said in a statement.

Participants will likely include Samsung Electronics’ LED chief Kim Jae-kwon, Hyundai Motor president Chung Jin-haeng and Hyundai Engineering & Construction vice president Kim Han-soo.

FTC chairman Kim is set to notify the CEOs of his policy to enhance oversight of three major irregular practices ― unreasonably cutting prices for manufacturing parts, stealing technologies and making orders without written documents.

He is also scheduled to reiterate the importance of “shared growth” between conglomerates and small enterprises.

In May, the authorities fined Samsung Electronics 1.6 billion won ($1.4 million) for unauthorized practices in its transactions with component suppliers.

This was the second time that Samsung Electronics has been fined for unfair subcontracting, as the company was fined 11.5 billion won by the antitrust regulator four years ago.

According to the FTC, the memory chipmaker engaged in 28,574 cases of irregular subcontracting, equivalent to 76.3 billion won, between 2008 and 2010. A total of 151 suppliers were estimated to have been affected.

“The suppliers had to suffer losses and shoulder the burden of inventory as Samsung Electronics (sometimes) withdrew its orders when its manufacturing plan was scaled down,” an FTC official said.

While 24,523 of the 28,574 irregular cases were order withdrawals, the other 4,051 cases were receiving products including components later than promised by initial contracts, he said.

Meanwhile, Samsung Electronics argued that the antitrust regulator failed to sufficiently reflect the particular business environment of the information technology sector.

“As the market trend is rapidly changing in the IT industry, manufacturers have to revise their initial manufacturing plans frequently,” the company said in a statement.

In February 2008, the FTC, which applied fines of 11.5 billion won for similar subcontracting by Samsung, said the company pressured its partners to provide electronic parts at lower prices in attempts to cut costs.

By Kim Yon-se (kys@heraldcorp.com)