Fair Trade Commission to brief 102 large business groups on subcontracting disclosure rules

Price-indexing regime expanded to cover major energy sources; guidance on evasion to be provided

The Korea Fair Trade Commission will brief executives and employees of major business groups on cases of false and delayed disclosures flagged in its subcontracting payment inspections, as well as on amendments to the subcontracting payment indexing regime and related compliance procedures.

The Fair Trade Commission said Friday it will hold the briefing Monday at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, targeting employees at 3,538 affiliates belonging to 102 business groups designated as disclosure-subject conglomerates this year.

The Korea Fair Trade Commission at Government Complex Sejong in Eojin-dong, Sejong [Newsis]

The briefing will cover the Subcontracting Act in general, the subcontracting payment terms disclosure regime and the subcontracting payment indexing system.

Under the current Subcontracting Act, prime contractors belonging to disclosure-subject business groups must disclose on DART — the electronic disclosure system — their subcontracting payment amounts broken down by payment method and payment period, as well as information on dispute mediation bodies related to subcontracting payments, on a semiannual basis.

The subcontracting payment terms disclosure regime, which took effect in January 2023, makes payment practices publicly available to encourage prime contractors to voluntarily improve how they pay and to help subcontractors use the disclosed information to negotiate payment terms more smoothly.

With the second-half disclosure for this year due to be filed between January and February next year, the commission will explain the scope of disclosure obligations, procedures and key precautions. It will also conduct training focused on preventing a recurrence of false and delayed disclosures, as well as simple omissions and clerical errors repeatedly flagged in past inspections.

The commission will also distribute guidelines covering the requirements for subcontracting transactions subject to disclosure, filing methods and procedures, and points to note when preparing submissions, along with a frequently asked questions document.

The FAQ addresses specific scenarios companies commonly raise during the disclosure process. A company belonging to a disclosure-subject business group is not required to file if it has no subcontracting transactions and therefore does not qualify as a prime contractor; transactions with mid-sized enterprises also do not need to be included.

On the other hand, self-employed individuals and freelancers registered as businesses qualify as small and medium-sized enterprises and must file disclosures if their transactions meet the subcontracting requirements. Including non-subcontracting transactions in a disclosure constitutes a false filing in principle, and companies that do so intentionally may be subject to fines.

The briefing will also address amendments to the subcontracting payment indexing regime. Following revisions to the Subcontracting Act in February, the scope of the indexing system was expanded to cover major energy sources, with the change taking effect Aug. 11. The commission plans to explain the amended provisions and compliance procedures, and will also provide guidance on prohibited conduct, including attempts by prime contractors to circumvent or evade the regime.

y2k@heraldcorp.com