Samsung Electronics fined for irregular subcontracting

The Fair Trade Commission said Tuesday that it had fined Samsung Electronics 1.6 billion won ($1.4 million) for irregular practices in its transactions with subcontractors.

This is the second time that Samsung Electronics has been fined for unfair subcontracting, as the company was fined 11.5 billion won by the antitrust regulator four years ago.

According to the FTC, the memory chipmaker engaged in 28,574 cases of irregular subcontracting, equivalent to 76.3 billion won between 2008 and 2010.

A total of 151 suppliers suffered from the irregularities, it said in a statement.

“The suppliers had to suffer losses and shoulder the burdens of inventory as Samsung Electronics (sometimes) withdrew its orders when its manufacturing plan was scaled down,” an FTC official said.

“While 24,523 of the 28,574 irregular cases were order withdrawals, the other 4,051 cases were receiving products including components later than initial contracts.”

Meanwhile, Samsung Electronics argued that the antitrust regulator failed to sufficiently reflect the peculiar business environment of the information technology sector.

“As the market trend is rapidly changing in the IT industry, manufacturers have to revise their initial manufacturing plans frequently,” the company said in a statement.

In February 2008, the FTC, which slapped noteworthy fines of 11.5 billion won for similar subcontracting by Samsung, said the company pressured its partners to provide electronic parts at lower prices in attempts to cut costs.

By Kim Yon-se (kys@heraldcorp.com)