Kyungdong Navien Fined $52,000 for Improper Subcontracting Practices

Kyungdong Navien, the leading boiler manufacturer in South Korea, has been penalized by the Fair Trade Commission for failing to issue legally required written contracts during its subcontracting process.

On June 14, the Fair Trade Commission announced it would impose a fine of 52 million won ($52,000) on Kyungdong Navien for violations of subcontracting laws.

According to the commission, from June 2021 to June 2024, Kyungdong Navien failed to properly issue a total of 436 price agreements to 98 subcontractors involved in the manufacturing of home heating equipment components, such as ignition transformers, heating supply pipes, temperature sensors, and temperature fuses.

Price agreements are essential documents that specify delivery prices and are a core part of subcontracting contracts. Current subcontracting laws require that both the primary contractor and subcontractor sign or seal these documents before they are provided to the subcontractor.

However, the investigation revealed that Kyungdong Navien sent some agreements without the company seal or signed by employees without proper authority. In some cases, forms were used that did not even include a signature line for the primary contractor.

The Fair Trade Commission determined that these actions did not meet the legal requirements for issuing written contracts.

In subcontracting transactions, written contracts serve as crucial evidence for confirming delivery prices and transaction terms. If these documents are not properly executed, it can complicate the ability to prove contract terms in the event of future disputes, which is why the law mandates the issuance of signed or sealed documents.

The guidelines for fair subcontracting transactions also state that any document lacking the signatures of both parties is considered unissued.

Considering that Kyungdong Navien repeatedly failed to include signatures or seals over an extended period, the commission decided to impose a fine along with a corrective order.

A commission official stated, "We hope this action serves as a wake-up call against the habitual issuance of incomplete contracts in subcontracting processes. We also plan to improve the criteria for imposing fines to ensure they correspond to the severity of violations of subcontracting laws."