Cerajem, a manufacturer of massage chairs and other medical devices, has been sanctioned by the Korea Fair Trade Commission after an investigation found the company violated the Subcontracting Act by passing mold drawings obtained from subcontractors to its Chinese affiliate.

The Fair Trade Commission said Thursday it would issue a corrective order and impose a fine of 432 million won ($303,000) on Cerajem for violations including the setting of unfair contract terms and the misuse of technical data.

The Korea Fair Trade Commission at Government Complex Sejong in Sejong [Newsis]
The Korea Fair Trade Commission at Government Complex Sejong in Sejong [Newsis]

The probe found that Cerajem had included contract clauses transferring ownership of mold drawings and other technical data — created by small and midsize subcontractors hired to produce molds for its massage chairs and other medical devices — to the company without any separate compensation.

The Fair Trade Commission said such terms unilaterally vest in the primary contractor the rights to technical data acquired during subcontracting transactions, excessively restricting subcontractors' rights, and constitute a textbook example of an unfair contract clause.

Cerajem also demanded that subcontractors submit 33 sets of mold drawings to supply to its Chinese affiliate Tianjin Cerajem Medical Machinery Co., then transferred seven of those drawings to the Chinese entity without consulting the partner companies, the investigation found.

The commission also confirmed that Cerajem had requested exterior drawings and specification sheets for motor components without providing the written technical data request form required under the Subcontracting Act — a document that must state the purpose of the request and the scope of intended use. That violation was included in the corrective order as well.

The written technical data request form is a procedural requirement under the Subcontracting Act designed to prevent misuse after data is provided and to reduce disputes by clarifying rights, obligations and confidentiality measures.

"During a probe targeting the home appliance industry, we detected and sanctioned unfair contract terms and the misuse of technical data," the commission said. "This case is significant in confirming that it is unlawful to sign a contract transferring ownership of a partner company's technical data to the primary contractor without fair compensation, and then use that contract as grounds to demand the data or provide it to a third party."

Cerajem said the case arose from a difference in legal interpretation between the company and the commission over the legal nature of mold drawings and the scope of the Subcontracting Act's application.

"No partner company or consumer has suffered harm as a result of this matter, and it has no bearing on product quality, safety or customer service," the company said. It added that it had fully presented its position during the review process but that its arguments were not accepted, and that it planned to examine the commission's decision closely before determining how to respond.


y2k@heraldcorp.com