[News Space=Reporter seungwon lee] The Fair Trade Commission has initiated a 'consent resolution' procedure to provide an opportunity for voluntary correction without determining whether Hyosung Group, which is under investigation for unfairly requesting technical data from subcontractors, has violated the law.

Hyosung proposed a 3 billion won win-win plan, and the Fair Trade Commission accepted it, opening the way for a quick conclusion to the case. This decision is raising controversy over whether the consent system is being reduced to an 'indulgence.'

Hyosung, unreasonably demanding technical data from subcontractors for 9 years

According to the Fair Trade Commission's investigation, Hyosung unfairly requested and used technical data prohibited by the Subcontracting Act while outsourcing the manufacturing of heavy electric equipment parts to subcontractors for approximately nine years from 2014 to 2023.

It was revealed that the subcontracting law's technical data provision requirements were generally violated during this process, including failure to provide written documents and failure to conclude a confidentiality agreement.

Case closed without determination of illegality through ‘consent resolution’

The Fair Trade Commission sent Hyosung an 'inspection report' (equivalent to a prosecution indictment) in November of last year, and Hyosung applied for a consent decision in March of this year. A consent decision is a system that quickly closes a case without determining whether it is illegal if a company presents a corrective measure such as damage relief and improvement of transaction order. It is similar to a 'consensus' in civil and criminal cases.

Regarding the background of the initiation of this consent decree procedure, the Fair Trade Commission effectively ruled in favor of Hyosung Group, saying, “There was no confirmation of actual financial damage to the subcontractor, and Hyosung had no intention of disrupting the subcontracting transaction order.”

In this case, the Fair Trade Commission stated that “no actual financial damage was confirmed,” but many point out that unreasonable demands for technical data not only cause direct financial losses, but also cause non-financial damages such as decreased mid- to long-term competitiveness, exposure of trade secrets, and deepening of dependence in business relationships.

Hyosung, 3 billion won win-win plan, 'indulgence' controversy

In the consent resolution application, Hyosung presented an implementation plan worth a total of 3 billion won, including support for partner companies through the establishment and operation of a technical data request and confidentiality agreement management system, establishment and regular training of work guidelines, support for quality improvement and work environment improvement facilities, research and development (R&D), industry-academia cooperation, and acquisition of domestic and international certifications.

The Fair Trade Commission decided to initiate a consent decree, stating that “Hyosung had no intention of disrupting the subcontracting transaction order, and no actual financial damage to the subcontractor was confirmed.” The commission’s position is that improving the transaction structure and enhancing the technological competitiveness of subcontractors is more in the public interest than simply imposing sanctions.

However, the effectiveness of the subsidy is also questionable.

The specific implementation plan and effectiveness measurement criteria for whether the 3 billion won will be distributed evenly to all subcontractors and used to recover actual losses of the affected companies have not yet been disclosed. Although research and development and facility support may help to strengthen future competitiveness, they are different in nature from the restoration or compensation of damages caused by technology misuse that have already occurred.

Controversy over 'favoritism' of large corporations in consent system

The consent resolution system was introduced to the Subcontracting Act in July 2022, and this is the first application case related to the 'prohibition of technical data provision' clause. However, criticism has been raised that "the case will be closed if 3 billion won is paid without a judgment of illegality." In fact, the Fair Trade Commission did not make a final judgment on Hyosung's illegality, and Hyosung avoided direct sanctions such as fines.

Since the consent resolution system itself is structured to conclude a case without determining illegality, it is difficult for the victimized company to receive specific compensation for damages, and there is even criticism that large corporations are effectively receiving a free pass through their contribution to the ‘mutual growth fund.’

The Fair Trade Commission stated that “a consent resolution is not an indulgence for the company,” and that it plans to finalize the final plan after gathering opinions from stakeholders and consulting with relevant organizations. However, the controversy over “leniency” is unlikely to die down easily, as large companies will not officially record violations of the law if they submit voluntary corrective measures. 

An industry insider said, “There is concern that the Fair Trade Commission’s decision this time will be abused as a ‘quick conclusion’ channel for legal violations by large corporations in similar cases in the future,” and emphasized, “It is necessary to examine how the stakeholder opinions are collected before the final approval of the consent decree and the post-implementation monitoring system actually works.”

In particular, the value of compensation for non-financial and structural damage or prevention of recurrence has been relegated to a lower priority, and there are signs that the controversy over the regulatory authorities' 'favoritism of conglomerates' toward Hyosung Group will be reignited.

Attention is being paid to whether this decision will serve as a 'bad precedent' for similar violations of the law by large corporations in the future.