Korea’s Fair Trade Commission unveiled measures on Thursday to eradicate the long-standing practice of conglomerates pressuring their suppliers to lower their prices of goods and services as part of efforts to overhaul the supply chain management system and boost mutual growth.

FTC chairman Noh Dae-lae said that the antitrust agency and other related organizations would overhaul the system ensuring fair valuation of SME products supplied to conglomerates, and impose tougher sanctions and regulatory measures against big businesses that forced the lowering of prices.

It will allow SMEs to report unfair practices not only to the antitrust agency but also other organizations such as the Korea Federation of Small and Medium Business, and claim bigger damages should big companies violate rules promoting a level-playing field.

These stricter measures will also be applied to subcontractors that push their second and third-tier suppliers to lower prices, the chairman said.

Top executives of conglomerates involved will also be held accountable for hindering sound relations with suppliers.

The FTC said that the government would assist SMEs to become self-sustainable so that they would not be too dependent on conglomerates by expanding their marketing and distribution channels where they could further expose their products directly to consumers or other clients.

For instance, increased timeslots will be given to SMEs marketing their goods on TV home shopping channels during prime time.

Also, the government will move first for SMEs and their second or third-tier suppliers to receive fair payment for intangible goods and services such as software installation and maintenance provided to the public procurement sector.

It will increase its payment from 8 percent of installation fees to 10 percent on average by 2014 and 15 percent by 2017 for software maintenance.

Korean software providers have complained of having their services undervalued over the years, and the FTC aims to rectify this by having the public sector increase payment so that the private sector will follow suit.

The recent fiasco concerning Namyang Dairy’s treatment of a small distributor pushed regulators to come up with tougher measures prohibiting big businesses from bullying their smaller partners.

So-called economic democratization has been one of President Park Geun-hye’s key policies aimed at rooting out Korea’s long-standing “corporate caste system” in which conglomerates have been accused of abusing their power against suppliers.

By Park Hyong-ki (hkp@heraldcorp.com)