Hyundai Wia referred to prosecution for abusing subcontractors

By Jhoo Dong-chan

Hyundai Wia CEO & President Yoon Jun-mo

The Fair Trade Commission (FTC) has fined Hyundai Wia, an auto parts maker affiliated with Hyundai Motor, for abusing its subcontractors.

The company was also referred to the prosecution by the nation’s antitrust regulator for allegedly paying its subcontractors less than promised on subcontract bidding prices to maximize its profitability.

The FTC has decided to fine Hyundai Motor Group’s auto parts-making affiliate 361 million won ($317,083) as well as report the company to the prosecution.

Hyundai Wia is the nation’s second-largest automotive parts maker following Hyundai Mobis. It also has other business operations, including heavy machinery, defense products and aircraft parts.

Hyundai Wia allegedly carried out an additional supply negotiation with its chosen subcontractors between September 2013 and June last year. Although the subcontractors won the initial supply bidding, the Hyundai Motor Group affiliate allegedly demanded further negotiations to lower the supply price.

Under the related law, a client company is not allowed to get supplied at subcontracted prices lower than the bidding price from its subcontractor.

Also, Hyundai Wia allegedly unilaterally imposed a burden to its 28 subcontractors when Hyundai Motor held the company accountable for supplying defective auto parts. Although subcontractors were not responsible for the defective parts, Hyundai Wia forced them to shoulder the burden, the FTC said.

Hyundai Wia reportedly attempted to correct its practice during the FTC investigation, but the FTC said it upheld its decision because 45 small businesses suffered from the unfair trade practice for nearly three years.

The FTC processed 1,657 unfair trade practices last year, reporting five cases to the prosecution.

Last year, the FTC also fined Doosan Heavy Industries 300 million won and reported them to the prosecution for similar charges.

“The FTC is expected to impose heavier penalties against conglomerates who exploit small businesses,” an FTC official said.

Newly appointed FTC head Kim Sang-jo said last week he will do his best to protect social and corporate underdogs to enhance fair market competition.

"The competition law is aimed at protecting competition in the market, but society is calling on the FTC to play a different role," Kim said. "I will never hesitate in enforcing fair competition rules and never step back.”

Kim, a former civic activist who advocated for minor shareholders' rights, was appointed the head of the corporate watchdog by President Moon Jae-in despite strong protest from opposition parties. He is regarded as a pivotal figure to spearhead Moon's pledges to reform major conglomerates.