Omitting Signatures in Subcontracting Deals... Boiler Market Leader Kyungdong Navien Fined for "Legal Loophole"

Corrective Order and 52 Million Won Fine Imposed
Corporate Seal Omitted on 436 Unit Price Agreements

Kyungdong Navien, the leading domestic company in the home boiler and heating equipment market, has been caught by the Fair Trade Commission for engaging in "abuse of power" practices, such as habitually omitting its corporate seal or signature on the unit price agreement—a key contract document—when outsourcing the manufacturing of parts to subcontractors. The Fair Trade Commission deemed this incomplete documentation as "failure to provide written contracts," which is strictly prohibited under the Subcontracting Act, and imposed a heavy fine.

Kyungdong Navien Condensing Boiler 'Navien Condensing ON AI'. The Asia Business Daily DB.

On the 14th, the Fair Trade Commission announced its decision to impose a corrective order, including a recurrence prevention order and a fine of 52 million won, against Kyungdong Navien for its unfair subcontracting practices. As of 2024, the company holds a dominant market position with annual sales of 1.2469 trillion won, yet for several years, it continued to engage in irregular transactions with small and medium-sized subcontractors, failing to adhere to even the basic principles of subcontracting agreements.

According to the Fair Trade Commission's investigation, from June 17, 2021, to June 14, 2024, Kyungdong Navien outsourced the manufacturing of boiler parts, such as ignition transformers and heating supply pipes, to 98 subcontractors. However, during this process, the company either completely omitted its corporate seal or only had a non-authorized employee sign their personal name on a total of 436 unit price agreements that specified the supply price. In some cases, the company's signature field was left entirely blank when proceeding with the contracts. The current Fair Subcontract Transactions Guidelines clearly define any document lacking the signatures or seals of both parties as a case of "failure to provide written contracts."

The Fair Trade Commission explained that this measure is significant for raising awareness among prime contractors by cracking down on the widespread industry practice of issuing incomplete documentation in subcontracting transactions. Meanwhile, to address the limitation of the current maximum fine—considered too low in comparison to repeated violations by large companies—the Commission plans to substantially strengthen deterrence by revising the fine notification, raising the minimum standard amount for fines on "serious violations" of the Subcontracting Act from the current 200 million won to 1.5 billion won.

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