Fair transactions

Fair transactions may be conducted by the fair play spirit of contracting parties. When such spirit fails to meet the expectations of both parties, any affected party would raise complaints.

The Korean Fair Trade Commission is ready to answer such complaints and correct any unfair transactions, in particular, between the employer and the subcontractor in general in accordance with the Fair Transactions in Subcontracting Act.

Key words
fair transactions, fair trade, subcontract, SMEs, subcontract dispute mediation

Legislative Intent
Although the Korean economy has been recovering quickly as of late, the economic sentiment of small and medium enterprises (SMEs) is yet to improve. In order to rectify this situation, this Act was amended on March 29, 2011 by Act No. 10475 to better the business environment for SMEs and to improve upon and supplement some shortcomings revealed in the administration of the previous system.

These ends are met by creating conditions favorable for the mutual growth of large enterprises and small-medium ones through cooperative coexistence and by not only eradicating unfair subcontracting transactions but also enabling the establishment and development of fairer subcontracting transaction order between SMEs.

Main Points
The gist of this Act is as follows:
 * The scope of SMEs and subcontractors this Act applies to was expanded. (Article 2(2))
 * A principal contractor shall not unreasonably reduce the subcontract consideration fixed at the time of the entrustment, unless any reasonable grounds attributable to the subcontractor exists. If the principal contractor has a reasonable grounds for reducing the price, the principal contractor shall, in advance, send in writing to the subcontractor the reasons for reduction in price, etc. (Article 11)
 * If the principal contractor requests the subcontractors's technological data, the principal contractor shall, in advance, send in writing to the subcontractor the purpose of the request, etc. (Article 12-3(2))
 * Where the adjustment of subcontract consideration is inevitable due to sudden fluctuations in the price of raw materials, SME cooperatives are permitted to request subcontraction consideration adjustment. (Article 16-2(2))
 * The Fair Trade Commission shall make written investigations on subcontracting transaction conditions and make the results public. (Article 22(2))
 * Subcontract Dispute Mediation Councils, whose establishment is required of business organizations, shall be established additionally at the Fair Trade Mediation Agency. (Article 24, Article 24(4))
 * Exclusive complaint system complemented by making it mandatory for the Fair Trade Commission to file charges where the violation of law is clear and grave, etc. (Article 32)
 * Where there has been a loss due to the principal contractor's misappropriation of technological data, the principal contractor shall compensate for up to three times the damages, and the burden of proof of intent or negligence regarding the extortion or misappropriation shall be on the principal contractor. (Article 35)