South Korea’s largest auto components supplier, Hyundai Mobis, has been hit with KRW2.95bn (US$2.57m) in fines and corrective orders for demanding lower prices from its subcontractors.
According to the country’s Fair Trade Commission, the supplier, which is a unit of Hyundai Motor Group, abused its market dominance in demanding its smaller suppliers lower their prices between 2008 and 2011.
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The company selected suppliers that promised the lowest prices and then demanded a further price cut of 0.6% to 10%.
When a selected bidder was not the one with the lowest price, the company asked the finalist to meet the lowest cost during open bidding and then cut the price again.
Smaller partners also had to accept the company’s unilateral demand to cut supply prices throughout the contract period while Hyundai Mobis sometimes paid its suppliers up to 19% less than agreed without negotiaton.
The FTC said: “Hyundai Mobis has overcut supply prices for contractors, taking advantage of its market dominance in the domestic car market.” It added that Hyundai Mobis had repaid some KRW1.6bn (US$1.2m) to 12 suppliers.
Because the unfair business activities were allegedly carried out after Hyundai Mobis signed a shared-growth agreement last year, the FTC plans to report the case to the presidential panel on shared growth between large and small firms for possible additional penalties.
