508 firms flagged for fair-trade violations; W9.2b in unpaid supplier fees recovered

A government probe into suspected violations of the Act on the Promotion of Mutually Beneficial Cooperation between Large Enterprises and Small and Medium Enterprises recovered 9.2 billion won ($6.27 million) in unpaid supplier fees for small and medium-sized enterprises.

The Ministry of SMEs and Startups announced Thursday the results of its "2024 Regular Survey on Subcontracting and Ordering Transactions," which covered 3,000 ordering firms and 12,000 subcontractors.

Under the act, the ministry conducts an annual survey to prevent and address unfair trade practices arising in subcontracting and ordering transactions between large companies and SMEs.

Subcontracting arrangements are the most common form of business transaction for SMEs, particularly in manufacturing. Ordering firms, which hold a dominant position in such relationships, have consistently failed to pay supplier fees on time or delayed issuing contracts — a pattern long identified as a source of financial strain for smaller businesses.

The survey identified 508 companies suspected of violating the act. Regional offices of the Ministry of SMEs and Startups recommended voluntary corrective action to the ordering firms, and 479 complied — paying a combined 9.2 billion won in overdue supplier fees and taking other self-initiated remedial steps.

The ministry took administrative action against 17 companies that failed to pay outstanding supplier fees and late-payment interest even after administrative guidance. Going forward, the ministry said it will publicly disclose the names and violations of any firm that continues to ignore improvement orders, and will refer such cases to the Korea Fair Trade Commission for review and action under the Subcontracting Act.

An additional 12 companies that violated mandatory documentation requirements — including the issuance of written agreements and goods-receipt certificates — were ordered to make improvements. Eleven firms that failed to issue written agreements on time were also fined.

"Small and medium-sized enterprises often find it difficult to report unfair trade practices out of fear of losing business relationships," said Lee Eun-cheong, director general of the ministry's Mutually Beneficial Cooperation Policy Bureau. "We will continue working through regular surveys to push for corrections from violating companies and to establish a fair subcontracting and ordering culture."