The Fair Trade Commission (FTC) has imposed a payment order on Hyundai Heavy Industries, which forced its supplier to provide replacements free of charge even after the warranty period for defects, for about 456 million won ($383,000) in unpaid bills and delayed interest.
The FTC said on Aug. 26 that it has ordered Hyundai Heavy Industries, which violated the subcontracting law by failing to pay subcontract money and delayed interest to its suppliers, to pay 256 million won in unpaid bills and about 200 million won in delayed interest.
The FTC imposed a fine of 20.8 billion won on Hyundai Heavy Industries in December last year for violating the subcontracting law and 970 million won last month for technology misappropriation, but this is the first time it has issued a payment order.
According to the commission, Hyundai Heavy Industries received engine cylinder heads for its thermal power plant in Jaramijo, Ecuador, in 2011. The cylinder head is a part that acts as a cover for the engine combustion chamber.
In late 2014, more than three years later, defects were identified, including cracks in a number of cylinder heads.
Hyundai Heavy Industries demanded the free delivery of replacement products, asserting that even though the warranty period for the products supplied by the supplier has ended, the supplier is responsible for the defects.
However, the partner company refused to provide free supply because of the end of the warranty period and its inability to accept responsibility for defects.
Hyundai Heavy Industries then received 108 additional cylinder heads between January and February 2015, saying it would pay for the goods after revealing the cause of the defect.
However, as Hyundai Heavy Industries did not pay the additional cylinder head price to the supplier and did not pay the delayed interest of 15.5% per year, the FTC issued the payment order.
"The payment order is an effective way to quickly relieve the damage of subcontractors," said Jang Hye-rim, head of the FTC's manufacturing subcontract improvement division. "Although the payment order and fines can be imposed together, fines can be imposed only when the amount of violation of the law exceeds 300 million won, but in this case, the unpaid amount is 250 million won, so the fine was not imposed."
Meanwhile, Hyundai Heavy Industries said, "A civil suit is currently underway at the Ulsan District Court regarding the responsibility for the payment, and we feel sorry that the FTC's disposition was made before the court's judgment. We plan to review future countermeasures such as filing for an objection."
