- Sanctions imposed for five types of violations related to technology misappropriation, including providing technical data to third parties -
The Korea Fair Trade Commission (KFTC, Chairperson Han Ki-jeong) has detected violations of the Act on the Fairness of Subcontract Transactions (hereinafter referred to as the “Subcontracting Act”) by Hyundai Kefico Co., Ltd., involving acts of technology misappropriation. The KFTC has decided to impose a corrective order and a fine of 474 million KRW.
Hyundai Kefico, an affiliate of Hyundai Motor Company, manufactures motor controllers for electric vehicles as well as automotive engine parts, with a significant portion of its sales coming from Hyundai Motor, Kia, Hyundai Glovis, and other Hyundai Motor Group affiliates.
After entering Vietnam in 2009, Hyundai Kefico proposed to subcontractor “A” that it expand into the Vietnamese market during the process of localizing parts previously transported from Korea. When the subcontractor declined due to internal circumstances, Hyundai Kefico, without consulting with the subcontractor, provided five items of technical data related to parts development—such as defective dimension reports (NG Reports)—to a competing business operator “B” and allowed them to use the data for their parts development.
Furthermore, without a legitimate reason and in circumstances where it was not unavoidably necessary to achieve the purpose of the manufacturing consignment, Hyundai Kefico unfairly demanded four mold drawings from subcontractor “C” and had them provided.
In addition, the KFTC found that Hyundai Kefico:
- Failed to provide written requests specifying the purpose for demanding technical data in 24 instances when requesting and receiving mold drawings from subcontractors.
- Did not enter into non-disclosure agreements in six such cases.
The KFTC also detected that Hyundai Kefico included clauses in 19 mold manufacturing contracts with three subcontractors that unilaterally imposed confidentiality obligations only on the subcontractors, issuing a warning for this act.
On the other hand, the KFTC concluded that some of the technical data received from subcontractors or provided to third parties did not meet the secrecy management requirements and therefore did not constitute a violation of the Subcontracting Act. However, since these materials could have fallen under a violation had the subcontractors managed them as confidential, the KFTC issued a cautionary notice to prevent potential future violations.
This measure resulted from an ex officio investigation into the automotive mold industry. It is significant in that it strictly sanctioned both the unfair demand for subcontractors’ technical data beyond the minimum necessary scope and the provision of such data to third parties, even when the acts were not aimed at lowering supply prices or diversifying suppliers.
The KFTC expects this measure to help prevent similar violations in the industry and plans to continue strengthening monitoring of technology misappropriation and procedural violations related to the request for technical data in subcontracting transactions.