Daewoo Shipbuilding & Marine Engineering (DSME) was fined with a $13.8 million fine for mistreating its subcontractors, including forcing them to accept contract prices below labor cost, according to the Fair Trade Commission (FTC).
As FTC informed, the shipbuilder violated the Fair Transactions in Subcontracting Act, that aims to prevent companies from abusing their power over smaller suppliers.
In addition to the fine, the FTC will also sue DSME for breaching fair trade laws.
The investigation began after a series of complaints were submitted by DSME’s subcontractors. According to local media, from 2016 to 2019, DSME unilaterally set contract prices for 1,471 deals below production cost. The 91 subcontractors involved are outsourcing companies that send their workforce to the shipbuilder’s construction sites for ships or offshore plants.
For each contract, a DSME team in charge of the project submitted plans specifying man-hours. DSME’s budget department allegedly cut these submitted man-hours to a point lower than the actual labor cost needed, said the FTC.
Moreover, the commission also discovered that DSME had not issued contracts before starting work on 16,681 occasions between 2015 and 2019. For all of these projects, DSME agreed to a contract containing payment and detailed instructions only after construction had started.
