FTC to check unfair subcontracting in software sector

South Korea's antitrust watchdog will probe unfair subcontracting practices in the local software industry next month as part of efforts to level the playing field, the nominee for its chief said Wednesday.

Kim Sang-jo, who has been named the chairman of the Fair Trade Commission, made the remark in a written report to Rep. Park Yong-jin of the ruling Democratic Party of Korea for a parliamentary confirmation hearing. The date for Kim's hearing has yet to be fixed.

"The FTC will carry out a first-phase check on unfair subcontracting practices in the software sector in June," Kim said.

"When I take office, an intensive inspection into such practices will be conducted in a phased manner this year as it was last year."

Asked about whether the amount of a fine on NCsoft Corp., a South Korean online gamemaker, for its improper subcontracting practices in February was proper, Kim said he understands the FTC imposed the penalty in line with relevant rules on subcontracting and penalties.

At that time, NCsoft was fined a mere 11 million won ($9,800) for not signing formal contracts with subcontractors.

Kim, an economics professor from Seoul's Hansung University, also said the FTC will apply a strict zero-tolerance policy toward large companies' misuse of technologies developed by smaller companies and take strong action against those practices.

The corporate watchdog has been ramping up its crackdown on illegal subcontracting practices in the software industry since 2014, which were subjected to the nation's subcontracting law.

On top of NCsoft, the FTC fined Hansol Inticube and three other software developers affiliated with conglomerates a combined 78 million won for their alleged unfair practices. 

Kim also said the antitrust regulator will push to require large discount stores, open markets and social commerce websites to disclose commissions they charge suppliers for selling products.

Currently, department stores and TV home shopping channels are subject to the rule designed to prevent them from overcharging commissions and thus making undue profits at the price of suppliers.

"It is all-important to disclose related information transparently in order to have prices or commissions be determined properly in line with market principles," he said. "The FTC will scrutinize whether there is room for expanding the current disclosure system."

A fortnight ago, President Moon Jae-in tapped Kim, who has been a renowned civic activist for his minority shareholder movement and dubbed "a sniper" of chaebol, or family-controlled conglomerates, in a show of his strong will to reform them.

Samsung and several top conglomerates have been implicated in a massive corruption and abuse-of-power scandal that led to the impeachment and ouster of former President Park Geun-hye and the May 9 presidential election, in which Moon scored a sweeping victory. (Yonhap)