[Exclusive] HDC Hyundai Development Company Received 5 Fair Trade Commission Corrective Actions Related to Subcontracting Act in the Past 5 Years

HDC Hyundai Development Company, Non-Payment of Deposits and Delayed Interest
Received Five Corrective Actions from the Fair Trade Commission Since 2018
Unpaid Amounts Are Small but Similar Situations Recur
Fair Trade Commission Decisions in 2021 and 2018 Are Similar

[Asia Economy Reporter Hwang Seoyul] HDC Hyundai Development Company (hereinafter HDC Hyundai) has been subject to corrective actions by the Fair Trade Commission five times over the past five years due to unpaid payments and unpaid delayed interest. Calls are rising for urgent policy measures to correct the uneven playing field between contractors and subcontractors.

According to data requested by Park Sung-jun, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, HDC Hyundai has received five corrective orders, including fines and warnings, related to the Subcontracting Act since 2018.

Specifically, the Fair Trade Commission issued two warnings to HDC Hyundai in April and December 2018 for unpaid delayed interest. In January 2019, a fine of 635 million KRW was imposed for delayed payment, and in January 2020, a warning was issued for unpaid payments. In December last year, a fine of 30 million KRW was imposed for failure to issue written documents. The Fair Trade Commission explained that the two fines were due to "the large number of subcontractors and the long duration of legal violations, which caused significant ripple effects."

2021 Fair Trade Commission Decision/Documents = Fair Trade Commission. Office of Park Seong-jun, Democratic Party of Korea

According to the Fair Trade Commission's resolution last year, HDC Hyundai did not pay substitute payment fees for promissory notes while commissioning construction to 46 subcontractors from August 2016 to April 2019. Article 13 of the Subcontracting Transactions Fairness Act (hereinafter the Subcontracting Act) stipulates that if the principal contractor pays by substitute payment means exceeding 60 days from the receipt date of the goods or services, they must pay the substitute payment fee from the day exceeding 60 days until the repayment date. The unpaid substitute payment fees amounted to 2,121,000 KRW.

Additionally, from September 2016 to January 2019, HDC Hyundai did not pay delayed interest on subcontract payments to 35 subcontractors. The same article states that if the principal contractor pays subcontract payments more than 60 days after the receipt date of the goods or services, interest must be paid at a rate set and announced by the Fair Trade Commission, up to 40% annually. According to the delayed payment interest rate notice for advance payments, the applicable delayed interest rate in this case is 15.5% per annum. The unpaid delayed interest amounted to 25,431,000 KRW.

2021 Fair Trade Commission Decision/Documents = Fair Trade Commission. Office of Park Seong-jun, Democratic Party of Korea

The delay in subcontract payment days sometimes exceeded 100 days. The unpaid delayed interest period ranged from 1 to 260 days, and the delay related to substitute payment fees ranged from 1 to 83 days. However, HDC Hyundai paid all unpaid amounts to the relevant subcontractors after the investigation began.

Although the unpaid amounts were relatively small and the enforcement measures were mild, the recurring nature of similar situations is problematic. According to the 2018 resolution, substitute payment fees were not paid to 138 subcontractors, and delayed interest on subcontract payments was not paid to 158 subcontractors. The commission also ordered prompt payment of delayed amounts to some subcontractors.

For the Political Affairs Committee's national audit held that day, the committee summoned HDC Hyundai Chairman Chung Mong-gyu as a witness regarding "multi-level subcontracting and delayed subcontract payment issues and the construction company's unfair treatment of subcontractors." However, it was confirmed that Chairman Chung submitted a letter of absence due to an overseas trip for activities related to the Asian Football Confederation (AFC) Asian Cup on the 4th.

Assemblyman Park Sung-jun stated, "It cannot be said that the continuous reports, investigations, and corrective orders against the principal contractor HDC Hyundai under the Subcontracting Act are unrelated to the recent collapse disaster," adding, "The Fair Trade Commission should go beyond administrative measures and strive to develop policies suited to the actual situation to ensure fair transactions between contractors and subcontractors." He further added, "One possible approach is to establish measures for aggravated penalties in cases of repeated violations of the same issue."

This content was produced with the assistance of AI translation services.