Hewlett-Packard Korea was ordered to correct from the Fair Trade Commission (FTC) and fined some 200 million won for unfair subcontracting practices it committed to a subcontractor of the IT service project it won in 2011.
On Aug. 11, the FTC said it decided to impose a correction order and a fine of 216 million won on Hewlett-Packard Korea, which demanded that a subcontractor unrelated to the relevant transaction pay subcontract fee that it must pay.
The FTC's corrective order and the imposition of fines targeted unfair subcontracting practices in the IT service sector, including distribution of products, IT infrastructure and services related to Hewlett-Packard's business for corporate computing systems.
Defining the move as "the first case of sanctioning acts demanding economic benefits in the IT service sector," the FTC expected that the unfair subcontracting form will be improved, in which the original operator forces a subcontractor to provide money or other economic benefits by using its superior trading position.
According to the FTC's explanation, the act subject to the sanctions took place in late 2011 when Hewlett-Packard obtained an order to build a KT open platform and commissioned 11 suppliers to carry out the project.
At that time, the company signed subcontracts with eight suppliers in writing. It entrusted its work to three other companies -- A, B, C -- without issuing letters. However, subcontractor payments were not made immediately after the three companies completed their consignment work in December 2012.
In November 2013, Hewlett-Packard demanded that a subcontractor E pay the subcontract fee to A for the KT open platform construction project. This request was made to E as an excuse for signing future business-related contracts.
The company E was specifically ordered by Hewlett-Packard to sign a contract and agree with the payment method, and signed a contract with the company A to pay 314.6 million won in installments for 10 months.
In October 2014, Hewlett-Packard also demanded that E pay 55 million won to another supplier, D.
The FTC ruled that the case required a subcontractor to pay the subcontract fee that Hewlett-Packard itself has to pay in exchange for fear of losing a major client in the future if it fails to comply with the request of Hewlett-Packard.
“Such actions are recognized as requiring the provision of economic benefits for Hewlett-Packard itself without due cause,” it said.
The commission issued a correction order and a fine. The contents of the correction order are the "return order" to Hewlett-Packard to return 369.6 million won that E paid on behalf of Hewlett-Packard to E and the "recurrence prevention order" for such work in the future. The fine is 216 million won.