South Korea’s Fair Trade Commission has mandated two companies to refund subsidies totaling 203 million won due to failures in detecting violations during system integration (SI) subcontracts.
Details of the Subsidy Refund
The commission issued the order on October 10, announcing that the firms must return the funds after neglecting to identify contract breaches in entrusted SI projects. Between January 2022 and October 21, 2024, the companies outsourced SI work to 182 subcontractors across 516 contracts without uncovering any irregularities.
Violation of Subcontract Law
Officials determined the firms breached Article 3, Subparagraph 3, of the Subcontract Transaction Act. This provision requires businesses to actively detect violations using their full workforce and ensure protection for related subcontractors over a three-year period.
The companies received explicit notifications highlighting their non-detection of violations, particularly in high-value subcontract deals lacking proper transaction protections. Analysis confirms these lapses justified the subsidy clawback to enforce compliance in subcontract governance.
