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HHI hit with fine for squeezing suppliers

Dec 19,2019
Hyundai Heavy Industries (HHI) has been fined 20 billion won ($17.1 million) for strong-arming subcontractors into cutting their prices.

The Fair Trade Commission (FTC) said that the company squeezed suppliers that supported the manufacturing of ships, offshore plants and engines between 2014 and 2018.

It also said that Korea Shipbuilding and Offshore Engineering, which was formed in June to act as a holding entity for HHI, obstructed the antitrust authority’s investigation. The FTC levied fines totaling 125 million won for the obstruction and referred the case to the prosecutor.

It said the shipbuilder engaged 207 subcontractors for 48,529 jobs in the four years up to 2018. In that time, the company not only pressured the suppliers but also had them work without contract.

In some cases, the subcontractors were given an agreement a year after they started work.

“The subcontractors were given work without details being clarified and how much they would be paid being clear,” said Park Jae-gul, director of the subcontract division at the FTC. “They were later forced to take the payment set by the shipbuilder.”

In the first half of 2016, Hyundai Heavy Industries forced subcontractors to cut prices by 10 percent, citing the difficult situation in the industry.

The company suggested that sub-contractors not complying could lose future work.

There was no reason for the subcontractors to cut their prices in a uniform manner as they were each engaged in very different types of work, the FTC said.

The FTC also found evidence of deception.

In October 2018, employees of Korea Shipbuilding and Offshore Engineering, at the time known as Hyundai Heavy Industries, swapped out 101 computers and 273 hard drives in the department that was under investigation.

In some cases, documents requested were withheld and destroyed.

The fine on the holding company for this obstruction was 100 million won, while two employees were fined a total of 25 million won.

“We hope our action will improve practices in the shipbuilding industry,” Park said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]