South Korea’s Fair Trade Commission (FTC) has launched on-site investigations into Hanwha Aerospace and Korea Aerospace Industries (KAI) amid allegations of unfair subcontracting practices in the defense sector. The probes, initiated on November 3, involve inspections of Hanwha’s headquarters in Changwon, South Gyeongsang Province, and KAI’s offices in Sacheon, Chosun Biz reported.
According to industry sources, the FTC suspects that both companies may have violated the Fair Transactions in Subcontracting Act by engaging in practices such as coercing subcontractors to provide technical data, delaying payments, and unilaterally reducing unit prices. The Commission is conducting the investigations separately, with KAI also facing scrutiny for potential breaches of the Fair Trade Act.
Authorities reportedly identified recurring patterns of unfair transactions among major defense contractors, including unilateral price adjustments and demands for sensitive technical information. These behaviors are said to be particularly prevalent in the aviation sector, prompting the FTC to make it a top enforcement priority.
The investigation follows a recent statement by President Lee Jae-myung, who, during a defense industry strategy meeting on October 20, underscored the government’s determination to combat unfair practices:
“Since a huge amount of taxes is invested in the defense sector, if large companies commit unfair practices such as squeezing costs or stealing technology, we will impose strong sanctions,” he said.
An FTC official declined to comment on the specifics of the ongoing investigation, citing procedural confidentiality.