Copied Supplier's Drawings Handed to Competitor... Kyungdong Navien Fined 500 Million Won for 'Technology Misappropriation'

Falsifying "In-House Drawings" Using Supplier Blueprints to Slash Costs
Subcontracting Act Violations: Technology Misappropriation and Failure to Provide Written Documentation

Kyungdong Navien Co., Ltd., a leading household boiler manufacturer, was sanctioned after it was found to have illegally copied key technical drawings from a supplier in order to reduce component supply prices, and then passed these drawings to a competing company in an attempt to establish a secondary supplier.

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

The Fair Trade Commission announced on the 30th that it had decided to issue a corrective order and impose a fine of 500 million won on Kyungdong Navien for converting a subcontractor's technical data into its own drawings and leaking them to a competitor.

Kyungdong Navien pursued diversification of suppliers for the “temperature sensor,” a core component for measuring internal boiler temperature, as part of efforts to lower its manufacturing costs. The problem arose when, during this process, the company used three types of temperature sensor drawings submitted by the existing supplier in 2017 without any consultation or consent. In March 2024, Kyungdong Navien created its own “in-house drawings” based on the supplier’s blueprints, replicating not only the appearance but also the detailed dimensions and specifications. A month later, in April, it provided these copied drawings directly to the competitor of the original supplier.

This is a typical case of a main contractor's “abuse of technological advantage” to cut supply prices and strengthen bargaining power by giving drawings to a competitor so they could produce the component. Beyond technology misappropriation, a number of legal violations related to subcontracting procedures were also identified. From March 2018 to August 2019, Kyungdong Navien asked four suppliers to submit 12 management plans containing manufacturing process steps and quality standards by email and other means, but did not provide the required written documentation with legally mandated information. Furthermore, between February 2018 and August 2019, Kyungdong Navien received ten management plans from five suppliers, but failed to retain these written requests for the legally required seven years; the company either discarded or lost them.

The Fair Trade Commission imposed a corrective order and a fine of 500 million won for a total of three violations: improper use of technical data (Article 12-3, Paragraph 4 of the Subcontracting Act), failure to provide written documentation (Article 12-3, Paragraph 2), and failure to preserve documents (Article 3, Paragraph 12). The Commission explained that this measure is meaningful in that it detected and sanctioned a case where a large or mid-sized principal contractor was caught appropriating a supplier’s technology and transferring it to a competitor to cut costs, based on an ex officio investigation into the home appliance sector. 

The Fair Trade Commission stated, “Acts of improperly utilizing or leaking small business suppliers’ technical data for cost reduction or changing trading partners are serious violations that damage fair market order,” and added, “We will continue to closely monitor for cases of technology misappropriation and procedural violations in technical data requests from small and medium-sized enterprises.”

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