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Hanwha Systems faces business suspension

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The Fair Trade Commission's business trade policy bureau head Seong Kyung-je speaks during a press briefing on Hanwha Systems' violation of the Subcontracting Act at the Government Complex in Sejong, Tuesday. Yonhap
The Fair Trade Commission's business trade policy bureau head Seong Kyung-je speaks during a press briefing on Hanwha Systems' violation of the Subcontracting Act at the Government Complex in Sejong, Tuesday. Yonhap

By Nam Hyun-woo

Hanwha Systems co-CEO Chang Si-kweon
Hanwha Systems co-CEO Chang Si-kweon
Hanwha Systems is facing a business suspension and a ban from bidding for public projects as the defense and info-tech unit of Hanwha Group violated the Subcontracting Act repeatedly, the antitrust agency said Tuesday.

The Fair Trade Commission (FTC) said it has sought for ministries and other state-run agencies to impose such punishments on Hanwha Systems, as the company's violations led to Hanwha Systems accumulating more than 10 penalty points in three years.

According to the act, the FTC gives penalty points to companies found in violation and will request central or municipal governments to bar the company from bidding for public projects if they accumulate more than 5 points in three years. The act also stipulates that the FTC should request related ministries, such as the land and labor ministries, to suspend the company's business if it collects more than 10 points during the same period.

The FTC said Hanwha Systems' penalty points in the past three years stood at 10.75 points. The points stem from Hanwha S&C, an info-tech infrastructure builder acquired by Hanwha Systems in August last year.

From 2014 to 2017, Hanwha S&C violated the Subcontracting Act six times by failing to make payments to subcontractors, neglecting to issue written contracts and not paying fees for promissory notes.

The FTC has issued requests for a bidding ban, but this is the first time that the antitrust watchdog decided to request suspension of business against a company for its accumulation of penalty points.

In April, POSCO ICT was slapped with a six-month bidding ban and three more companies followed in May and June.

Hanwha Systems co-CEO Kim Kyung-han
Hanwha Systems co-CEO Kim Kyung-han
Upon the FTC's request, the Minister of Land, Infrastructure and Transport can suspend the business license of Hanwha Systems for six months and impose a 10 million won fine. The FTC plans to request a Defense Acquisition Program and Administration to ban Hanwha Systems from making bids. The decisions will be made as early as September.

Hanwha Systems said it respects the FTC's move, but it will fight the ban in court.

The FTC last year banned Daewoo Shipbuilding & Marine Engineering from public project bidding as the company collected more than 5 penalty points for violating the subcontracting act, but the shipbuilder filed a suit against the punishment with the Seoul High Court, and the court ordered the suspension of the punishment until it is able to come to a decision.



Nam Hyun-woo namhw@koreatimes.co.kr


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