Ministry of SMEs and Startups Requests Prosecution of KEP for Blocking Deals with Competitors

Inflicting Damage on SMEs for Seven Years

On July 8, the Ministry of SMEs and Startups announced that it held the 34th Mandatory Accusation Request Deliberation Committee meeting and requested the Korea Fair Trade Commission (KFTC) to file a criminal complaint against Korea Engineering Plastics (KEP) with the prosecution. The mandatory accusation request system allows the Ministry of SMEs and Startups to request a criminal complaint for cases the KFTC has not referred, considering the damage to SMEs or the broader social impact. Upon such a request, the KFTC is required to refer the case to the prosecution.

According to the Ministry, Korea Engineering Plastics violated the Fair Trade Act and caused damage to SMEs by prohibiting its contract manufacturers from signing contracts with competitors while outsourcing polyoxymethylene (POM) processing. The violating company is the leading producer and sales company in the domestic POM-related market. In September 2019, while signing a contract extension agreement with the affected SME that had been transacting with the company, it included a clause prohibiting the SME from providing contract manufacturing services to competing companies for seven years. As a result, the KFTC issued a corrective order and imposed a fine of 144 million won in August last year.

Due to this violation, the affected SME was unable to enter into POM contract manufacturing agreements with other companies for seven years, resulting in an estimated loss of expected sales totaling 3.7 billion won. The Ministry explained that it decided to request a criminal complaint, judging that strict sanctions are needed against the violating company, which abused its superior position over an SME highly dependent on the business relationship since 2008, blocking business opportunities and causing significant financial damage.

Lee Byungkwon, chair of the Mandatory Accusation Request Deliberation Committee (Second Vice Minister of the Ministry of SMEs and Startups), stated, "The mandatory accusation request system is designed to protect SMEs from unfair practices by companies in a superior transactional position," adding, "This request for a criminal complaint is significant as it seeks strict punishment for a violation of the law that caused serious damage to SMEs through the abuse of a dominant position." He continued, "We hope that by firmly responding to unfair practices against SMEs and small business owners in accordance with the law and principles, the business environment will improve."

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