SK Ocean Plant Loses Appeal Against $31,000 Fine for Subcontract Violations

SK Ocean Plant (100090) has lost its court battle to overturn a fine imposed by the Korea Fair Trade Commission for failing to issue written subcontracts in advance.

According to legal sources on Monday, the Seoul High Court's Third Administrative Division, presided over by Judge Yoon Gang-yeol, dismissed the company's lawsuit on December 12 seeking to cancel the corrective order and fine.

The KFTC imposed a corrective order and a final penalty of 44 million won ($31,000) on SK Ocean Plant in December 2024 for violations of the Subcontracting Act. According to the commission, the company failed to issue written contracts for 421 transactions while outsourcing work including ship parts manufacturing to 44 subcontractors between September 2019 and December 2021. Additionally, for five subcontractors, the company issued only purchase orders without separate written contracts for individual projects, citing them as one-time jobs.

SK Ocean Plant filed an appeal with the High Court in April last year. The company argued that the work constituted "minor additional projects" and that "post-settlement was permitted under guidelines at the time." It also contended that the work fell within existing contract scope and did not require separate agreements, and that purchase orders alone sufficiently specified contract details. The company also pointed to errors in the KFTC's penalty calculation process.

However, the court rejected SK Ocean Plant's arguments. The panel stated that "issuing only purchase orders without the subcontractor's signature itself constitutes failure to issue written documents under the Subcontracting Act." The court emphasized that "subcontractors forced to begin work based solely on purchase orders they have not signed lose the opportunity to reflect their intentions through the contract signing process."

The court also ruled that "the obligation to issue written documents exists to clarify contract terms in advance and prevent disadvantages arising from unclear outsourcing details." It added that "merely having small work amounts or limited processes does not automatically qualify as minor and frequent additional work—specific proof is required."

Regarding the penalty amount, the court explained that "considering there were 48 related subcontractors, over 400 violations, and subcontracting payments totaling 7 billion won, the penalty decision cannot be deemed unlawful."

An SK Ocean Plant spokesperson said, "These violations occurred during the Samkang M&T era, before the company joined the SK Group." The spokesperson added, "Since joining SK Group in September 2022, we have established a compliance management system and operated a fair trade voluntary compliance program, resulting in zero violations of the Subcontracting Act."