Kyung Dong Navien fined W500m for misusing supplier's technical drawings

Boiler maker used supplier's drawings without consent to cut costs

Created near-identical schematics and shared them with a rival supplier

Firm also cited for failing to issue and retain required documentation

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

Kyung Dong Navien has been sanctioned after regulators found it used a supplier's technical drawings without consent to create near-identical schematics of its own, then handed those schematics to a competing supplier to drive down component costs.

The Korea Fair Trade Commission said Sunday it would issue a corrective order and impose a fine of 500 million won ($362,000) on Kyung Dong Navien for the unauthorized use of technical materials.

According to the investigation, Kyung Dong Navien pursued a dual-supplier strategy for temperature sensors — bringing in a second vendor to reduce manufacturing costs for residential heating equipment. In the process, it used three temperature-sensor drawings submitted by an existing supplier in 2017 as the basis for its own schematics, which it completed in March 2024.

The drawings Kyung Dong Navien produced closely resembled those of the original supplier not only in appearance but also in detailed dimensions and specifications. The company then provided those drawings to a rival of the original supplier in April of the same year.

The Fair Trade Commission determined that Kyung Dong Navien's actions — creating near-identical drawings based on the supplier's materials and sharing them with a competitor, all without the supplier's knowledge or consent — constituted unlawful use of technical materials under the Subcontracting Act.

A side-by-side comparison of the original supplier's drawings and those produced by Kyung Dong Navien. The Fair Trade Commission found the two sets of drawings to be similar in appearance and identical in detailed dimensions and specifications. [Korea Fair Trade Commission]

Regulators also cited Kyung Dong Navien for procedural violations in how it requested technical materials. Between March 2018 and August 2019, the company obtained 12 process-control plans from four suppliers via email and other means without issuing the legally required written request forms.

Under the Subcontracting Act, companies requesting technical materials must provide suppliers with a written document specifying the purpose of the request, the ownership of rights, compensation terms, and other mandatory details.

In addition, between February 2018 and August 2019, Kyung Dong Navien failed to retain the written request forms it had issued when collecting 10 process-control plans from five suppliers. Such documents must be kept for seven years from the date a subcontracting transaction ends.

A process-control plan is a document prepared by a supplier that outlines production sequences and workflows, equipment used, quality-control items, standards and responsibilities, and corrective procedures in the event of defects — all aimed at ensuring standardized product quality.

The Fair Trade Commission ruled that the unauthorized use of technical materials and the failure to issue and retain the required written request forms each constituted separate violations of the Subcontracting Act.

The case was uncovered during a Fair Trade Commission probe into the home appliance sector. The commission said the sanctions were particularly significant because Kyung Dong Navien went beyond simply creating similar materials from a supplier's technical data without authorization — it also passed those materials to a competing supplier as part of its cost-cutting dual-vendor strategy.

The commission said it would continue to closely monitor technology misappropriation — where larger companies exploit the technical materials of small and medium-sized enterprises to cut costs or switch suppliers — as well as procedural violations in the handling of technical material requests.

y2k@heraldcorp.com