The Korea Fair Trade Commission launched an on-site probe into allegations of unfair transactions related to Hanwha Ocean's supply of warship equipment and parts.
According to the industry on the 7th, the Korea Fair Trade Commission (FTC)'s Manufacturing Industry Surveillance Division within the Market Surveillance Bureau recently sent a Researcher to Hanwha Ocean's Seoul office in Jung District, Seoul, to secure related materials.
The investigation stems from questions raised over the supply terms for certain contracted equipment going into Jang Bogo-III Batch-I ship No. 3. Hanwha Ocean, which built Batch-I ships No. 1 and No. 2 of Jang Bogo-III, has the supply base for three types of equipment: bow weapon system, fuel cell system and vertical launch system.
Although the follow-on ship No. 3 was built by HD Hyundai Heavy Industries, a rival of Hanwha Ocean, the three types of equipment must be supplied by Hanwha Ocean. The Korea Fair Trade Commission (FTC) is said to be examining whether Hanwha Ocean used its position as equipment supplier to demand excessive prices or unfavorable transaction terms in the process.
The Korea Fair Trade Commission (FTC) is also said to be checking the terms under which Hanwha Ocean received warship equipment and parts from affiliates such as Hanwha Aerospace and Hanwha Systems. It reportedly plans to review whether the quoted prices, delivery dates and the timing of providing price and technical information needed for bid proposals applied to Hanwha Ocean differed from the conditions offered to rival warship builders.
Hanwha Ocean became a systems integrator for surface ships and submarines after Hanwha Group acquired Daewoo Shipbuilding & Marine Engineering. Hanwha Aerospace and Hanwha Systems supply key equipment and parts needed for each warship, such as vertical launch systems and radars. As warship building and parts supply are tied within one group, critics have argued that rival shipbuilders have little choice but to rely on Hanwha affiliates for certain equipment and parts procurement.
The Korea Fair Trade Commission (FTC) also recently concluded that Hanwha affiliates still have strong dominance in the warship market. After analyzing competition in the relevant markets for 2023–2025, the FTC found Hanwha Ocean to be the leading No. 1 operator in both the surface ship and submarine markets. In eight out of 10 warship parts markets, Hanwha Aerospace or Hanwha Systems also remains either a monopolist or the top operator.
The Korea Fair Trade Commission (FTC) determined that, under this structure, it is difficult for rival warship builders to obtain the parts in question through suppliers other than Hanwha affiliates. If quoted prices or the provision of information are handled in a discriminatory manner, it could create a foreclosure effect in which competitors fail to secure necessary parts on time.
When it approved Hanwha's acquisition of Daewoo Shipbuilding & Marine Engineering in 2023, the Korea Fair Trade Commission (FTC) imposed conditions prohibiting Hanwha from discriminatory provision of warship parts quotations, unjust refusals of technical information requests and the provision of competitors' trade secrets to affiliates. Concluding recently that concerns about restricted competition had not been resolved, it extended the implementation period for those conditions by three years, to May 2029.
If violations are confirmed, the company could face corrective orders or a penalty surcharge. An FTC official said, "We cannot confirm matters under investigation." A Hanwha Ocean representative said, "We are cooperating faithfully with the FTC's investigation and plan to actively explain the details."