Prime contractors' tyranny

Time to root out high-handed acts through harsh punishment

The Fair Trade Commission (FTC) said Tuesday that it had asked related government agencies to suspend the business of Hanwha Systems for repeatedly violating the Fair Transactions in Subcontracting Act and ban the company from bidding for public projects.

The antitrust agency gives penalty points to law-breaking companies by violation type, and requests relevant government agencies to prohibit the violators from bidding for public projects if they accumulate more than five points in three years. Those who get more than 10 points face operational suspension.

Hanwha Systems, the defense and info tech unit of Hanwha Group, accrued 10.75 penalty points by committing six violations over the past three years. For instance, it failed to deliver written contracts to subcontractors, made exclusive and unjustifiable agreements and reneged on payments.

Large companies and small firms are usually in a dominant/subordinate relationship in the course of subcontracting work. Various social problems, including the exploitation of labor, result in the unequal power dynamics between the two sides. The government initiated legislation of the fair subcontracting act to help prime contractors and subcontractors stand on an equal footing and turn such one-sided relationships into mutually supplementary ones.

Contrary to its legislative intent, however, even the affiliates of large conglomerates are committing violations. According to the FTC data, the subsidiaries of Hyundai Motor Group violated the Fair Trade Act 21 times from 2017 to 2018, and 16 of the 21 cases were violations of the Fair Transactions in Subcontracting Act.

As seen in the FTC's annual investigations into despotic business practices by large business groups, some chaebol affiliates slashed the prices they would pay for supplies, stole suppliers' hard-won technology and threatened to sever business ties if the latter refused to comply. Given the nation's most famous companies have committed such shameless acts, lesser-known ones' practices are beyond question.

The persistent violations are due mainly to the subcontractors' silence. They have few other options to accept even the most unreasonable demands from prime contractors. The victims cannot expose the irregularities unless they are prepared for bankruptcy. The Ministry of Land, Infrastructure and Transport and the Public Procurement Office ought to sternly punish Hanwha Systems as a warning to others. They should use this occasion to root out prime contractors' tyranny.