FTC penalizes LS Group affiliate over subcontracting violations

Fair Trade Commission headquarters at the Sejong Government Complex / Yonhap

Korea’s antitrust regulator has ordered Sunwoo Co., a construction and maintenance affiliate of industrial conglomerate LS Group, to correct its subcontracting practices following a probe into deficient contract documentation.

The Fair Trade Commission (FTC) said Thursday that Sunwoo violated the Subcontracting Act by failing to issue proper written contracts to partners between February 2021 and June 2022. The lapses occurred during the outsourcing of electrical and instrumentation work for smelting and petrochemical plants.

According to the regulator, Sunwoo failed to specify critical project details — including the scope of work and project locations — in 48 separate instances, including one primary contract and 47 additional work orders across eight project sites. The documents also lacked the required signatures or legal seals from both parties.

Under Korean law, primary contractors must provide finalized, signed documentation before work begins. The regulation is designed to prevent “top-down” contract notifications, in which a dominant firm unilaterally dictates terms, often leading to legal disputes and undermining subcontractor rights.

“This action is significant in identifying the practice of issuing vague documentation, which routinely undermines the rights of subcontractors in the construction sector,” the FTC said in a statement. “By imposing these sanctions, we aim to raise awareness and ensure that primary contractors maintain a clear and fair contractual basis for their partnerships.”

The FTC added that it will continue to monitor subcontracting practices for unfair trade violations and impose strict penalties on major industrial players if further breaches are identified.

This article was published with the assistance of generative AI and edited by The Korea Times.