Probe Launched Into Parts Delivery System

A government investigation began yesterday into the practice by large corporations of demanding discounts on the unit costs of delivered goods from small and mid-size parts suppliers.

The Knowledge Economy Ministry said, “The investigation will help small and mid-size parts suppliers, which are suffering from large corporations abusing their power,” adding, “The probe will initially focus on the electronics industry, in which the number of companies is large and relations with parts suppliers are unsound.”

According to a survey of 1,000 small and mid-size companies conducted by a Seoul National University team last year, 44.7 percent complained of trouble due to the demand to lower unit costs of delivered goods by large companies.

The ministry decided to investigate the electronics industry first under the judgment that parts suppliers in that industry will suffer the most since it has a large number of companies and produces many goods.

A ministry official said, “In the auto industry, only one company (the Hyundai-Kia Automotive Group) is involved in such practices, but the electronics industry has a lot of prime contractors and small parts suppliers.”

The ministry will first survey the number of parts suppliers and their difficulties and investigate whether large corporations are forcing parts suppliers to lower the unit costs of delivered goods.

Unless such unfair practices are rectified, the development of the domestic parts and material industries is impossible, the ministry said.

“For the country to achieve the goal to become one of the world’s top four powerhouses in parts and materials by 2018, such unfair practices must be resolved,” a ministry official said.

The ministry will present measures to improve parts delivery systems after completing an investigation in the first half of the year.

alwaysj@donga.com