Hyosung Heavy Industries has been found to have demanded that subcontractors pay construction costs for which they had no legal obligation, leading to sanctions from the Fair Trade Commission.
On the 18th, the Fair Trade Commission announced that it had confirmed allegations that Hyosung Heavy Industries violated the Subcontracting Act by imposing undue economic burdens on contractors and issued a corrective order (prohibition order in the future).
According to the Fair Trade Commission, Hyosung Heavy Industries was investigated for requiring subcontractors to pay 38.5 million won during the process of the "POSCO Pohang LNG power plant emergency power generator installation project" in November 2021 and February 2022.
The Fair Trade Commission determined that this was an act of shifting the construction costs that Hyosung Heavy Industries should bear directly onto subcontractors, and that compelling the payment of costs that were not contractually obligated constituted a violation of the Subcontracting Act.
Subcontractors were found to have been required to cover costs without prior consultation, despite having no legal obligation to bear those costs, and it appears they had no choice but to accept this during the construction process.
Hyosung Heavy Industries argued that it should bear the costs because the subcontractor did not complete the work originally assigned. Additionally, it claimed that the requirement for subcontractors to cover construction costs was in exchange for receiving excess payments that had been made.
However, the Fair Trade Commission did not accept these claims, citing the lack of objective confirmation that the construction was within the scope of the subcontractor's contract and that the argument regarding excess payment was merely an ex-post explanation. In particular, it judged that unilaterally shifting economic burdens onto subcontractors without contractual agreements or official negotiation procedures constituted an undue demand.
It was confirmed that Hyosung Heavy Industries returned the payment and late interest for the advance payment to the subcontractor prior to the Fair Trade Commission's deliberation. Considering these factors, the Fair Trade Commission decided to issue a corrective order instead of imposing a penalty surcharge.
A Fair Trade Commission official noted, "We will strictly monitor cases where primary contractors unjustly shift undue burdens onto subcontractors without justifiable reasons," adding, "It is significant that we uncovered unfair practices that occur routinely at construction sites."