"We focus on whether the prime contractor (the party that outsourced manufacturing, etc.) violated the law."
On 26th, Lee Seung-hyun, a Researcher at the Fair Trade Commission Seoul Regional Office's Manufacturing Subcontract Division, explained the "Unfair Subcontract Reporting Center" (hereinafter, the center) as follows.
The center is a temporary body that encourages prime contractors to pay subcontract fees on time, considering that small and midsize enterprises' demand for funds increases ahead of the holidays due to staff bonuses and other reasons. It was set up in five regions nationwide—Seoul metropolitan area; Daejeon–Chungcheong; Busan–Gyeongnam; Gwangju–Jeolla; and Daegu–Gyeongbuk—across 10 Fair Trade Commission regional offices.
Park Il-yeop, a Researcher at the Fair Trade Commission's Seoul Regional Office Construction Subcontract Division, said, "The handling method is the same for cases reported through the center and those reported as usual," adding, "You can think of the center's operating period as a special reporting period." This center operated for 50 days from Aug. 14 to 2nd.
Ahead of the Lunar New Year early this year, the center also operated for 50 days, enabling 212 small and midsize subcontractors to recover 30.4 billion won they had not received from prime contractors. The center accepts reports by phone, through the Fair Trade Commission website, and also by mail and fax. You can also receive only telephone counseling without filing a report. Researcher Park said, "We often conduct telephone consultations with subcontractors who have not been paid."
When the center first receives a report of unpaid fees, it checks the documents. Researcher Park explained, "If there are deficiencies in the documents, we ask the reporter (the subcontractor) to supplement them," adding, "We then contact the respondent (the prime contractor) to ask whether they are willing to mediate."
If at that time the respondent expresses willingness to mediate, the case is transferred to the Korea Fair Trade Mediation Agency, a dispute mediation body under the Fair Trade Commission. Researcher Park added, "If the parties fail to reach an agreement even at the mediation agency, we verify the facts with the prime contractor and the subcontractor to confirm whose claim is justified."
The center not only handles unpaid subcontract fees but also encourages prime contractors to make early payments. During the last Lunar New Year, early payments reached 3.7476 trillion won. This year's early payment total is being compiled.
Among the cases reported for nonpayment of subcontract fees, it is rare for a prime contractor to have deliberately decided not to pay. More often, the two parties apply different standards when calculating the fees, resulting in discrepancies.
Researcher Lee said, "I cannot go into detail, but recently there was a case where the contract terms between two businesses were not clear," adding, "The subcontractor argued that a particular item was not included in the contract and should be calculated separately, while the prime contractor said the item was already embedded in the contract."
In the process, the subcontractor claimed it had not received 1 billion won. Researcher Lee said, "There were some unclear parts in the contract's detailed terms," adding, "We explained those parts to the reporter, and the two parties also naturally reached an agreement at a level lower than 1 billion."
Lee emphasized, "We focus on ordering the prime contractor not to commit illegal subcontract practices again," adding, "We believe the same conduct should not occur in other transactions, not just with the subcontractor involved in the dispute."
Researcher Park said, "In settling material expenses, there are cases where the prime contractor claims only the expense for materials actually used, while the subcontractor claims the expense for materials specified in the contract (including unused materials)," adding, "We are currently coordinating between the parties toward a settlement."
The two advised caution regarding contracts that include unfair special terms. Researcher Park said, "If the fee was set unfairly low or a special term was agreed that was drafted unfavorably to the subcontractor, the Fair Trade Commission can view it as an improper contract and take action, even if a contract has already been signed."
Researcher Lee said, "A contract that requires the subcontractor to be unconditionally responsible when an industrial accident occurs is a representative unfair special term," advising, "If such a clause exists when concluding a contract, it should be refined before signing."