(1) Reasons for Proposal

This amendment aims to reflect the content of the Plans for the Improvement of Trading Practices and Expansion of Win-Win Cooperation Between Large Enterprises and Small and Medium Enterprises (SMEs) (December 16, 2019) prepared and announced by the Fair Trade Commission jointly with relevant Ministries to enhance the negotiating power of SMEs and spread voluntary win-win cooperation.

(2) Major Provisions

A. Expand the subcontract consideration adjustment negotiation system (Article 16-2) 

1) Currently, a subcontractor may request the prime contractor to adjust the subcontract consideration through any SME cooperative, but the system has a problem of low utilization due to the gap in bargaining power between SME cooperatives and prime contractors. In addition, since the subcontract consideration adjustment application is currently only possible in case of a cost increase, etc., there is a problem that it is difficult to apply for the adjustment of subcontract consideration in contracts that gradually reduce unit prices on the premise of cost reduction.2) This amendment aims to grant the right to negotiate the adjustment of subcontract consideration to the Korea Federation of Small and Medium Business, which has stronger bargaining power than general SME cooperatives and also to include a case where supply cost, etc., is not reduced due to unexpected circumstances such as a change in quantity, after concluding a gradual unit price reduction contract on the premise of supply cost reduction, as a reason for subcontract consideration adjustment application.

B. Introduce the authority of court order to submit data and maintain confidentiality (Article 35-2 through Article 35-5)

1) In a lawsuit for damages due to a violation of the current Subcontracting Act, a victim enterprise relies on an order to submit documents under the Civil Procedure Act to secure evidence necessary to prove damages and the amount of damages, but a business entity may reject the order to submit documents for the reason of trade secrets, etc., and there is no significant disadvantage to the business entity even if it does not submit documents; therefore, there are difficulties in securing the data of a prime contractor necessary for the victim enterprise to prove damages and the amount of damages.

2) Thus, prescribe that in the case where it is absolutely necessary to prove damages and the amount of damages, a business entity shall not reject the court order to submit data for the reason of trade secrets, and that court orders shall require the submission of data, and that such court order shall include provisions to maintain confidentiality and include related procedures that specify means to minimize the leakage of trade secrets.

C. Expand the scope of installment payment of fines for SMEs (Article 25-3) 

1) Upon being imposed a penalty for violating the subcontracting law, installment payment is possible only when the amount of a penalty exceeds 1 billion won, but for SMEs, remarkable difficulties may arise in the financial situation due to the lump sum payment of the penalty even if the penalty is less than 1 billion won.

2) Thus, establish a provision on the installment payment of penalty surcharges, amending the provision that the Article of the Monopoly Regulation and Fair Trade Act related to the installment payment of penalty surcharges shall apply mutatis mutandis, and stipulate the amount of penalty surcharges, which is applicable to installment payments only for SMEs, from "exceeding 1 billion won" to "exceeding 500 million won,” by mandating specific requirements to the Enforcement Decree of the Act.