Fine for Bullying Small Subcontractors
South Korea's antitrust regulator has imposed a fine on IT service provider Hewlett-Packard Korea for violating laws on subcontracting.
The Fair Trade Commission (FTC) announced on Aug. 12 that it has decided to impose a correction order and a fine of 216 million won (US$177,340) on Hewlett-Packard Korea, which was found to have forced a subcontractor to pay subcontract fees on its behalf.
According to the FTC, Hewlett-Packard Korea won an order from KT Corp. to build and operate an open platform in late 2011 and outsourced the project to 11 subcontractors. The company did not sign a contract with three of the 11 subcontractors. In December 2012, the project was completed, but Hewlett-Packard Korea did not and pay the three subcontractors for their work.
In November 2013, Hewlett-Packard Korea told company A, a subcontractor which was not involved in the KT project, to pay the contract fees to the three unpaid subcontractors in the KT project. Company A had to follow Hewlett-Packard Korea’s request to win orders from it in the future. It signed contracts with the three subcontractors as told by Hewlett-Packard Korea and paid them a total of 314.6 million won (US$258,186) in installments for 10 months.
Hewlett-Packard Korea also forced company A to pay a subcontract fee of 55 million won (US$45,140) to another company in October 2014.
The FTC said, “Company A had no choice but to follow the orders of Hewlett-Packard Korea, the South Korean unit of global IT firm Hewlett-Packard which runs IT-related business in more than 170 countries around the world, due to fears of losing a major client in the future if it refuses to comply with its request.”
An FTC official said, “This was the first case of sanctions imposed on an IT service provider that put an economic burden on smaller firms in exchange for future subcontracts. We are planning to continuously look into unfair practices in the IT service sector.”