Work Dries Up on the Pretext of "Management Efficiency"···Unfair Refusal to Deal That Threatens the Survival of Small and Mid-Sized Enterprises

Attorney Son Gye-jun, Daeryun LLC (Limited)

In industrial fields, large corporations and small and mid-sized enterprises often build cooperative relationships and pursue mutual growth. However, in the actual business field, unfair practices exploiting the superior position of large corporations still occur frequently. In particular, for small-scale partner companies that depend on a specific large corporation for a significant portion of their sales, the reality is that they are inevitably exposed, helpless, to the excessive demands of the prime contractor. Among the various types of unfair trade, there is an act that most directly and fatally threatens the very existence of small and mid-sized enterprises: the "unfair refusal to deal" that unfairly reduces or suspends work.

An unfair refusal to deal refers to the act of drastically reducing orders without reasonable grounds to a partner company that has traded for a long time, thereby effectively making it impossible to maintain the business. Large corporations usually take the approach of gradually reducing work under pretexts such as management efficiency, internal policy changes, or volume distribution, rather than a unilateral contract termination. At this point, when the partner company feels the threat to its survival and protests, in most cases the large corporation justifies its conduct by claiming that deciding on trading partners and volumes is the company's managerial freedom and the principle of freedom of contract.

However, market logic or the freedom of contract cannot be an indulgence for all tyranny. The Supreme Court and the Fair Trade Act regard it as clearly unlawful for a large corporation to abuse its superior position to deprive a counterpart—who finds it hard to find an alternative trading partner—of trading opportunities and shake its business foundation. This is because unilaterally and drastically reducing trade volume by exploiting one's position, despite the absence of objective and reasonable grounds such as a supplier's serious negligence, quality defects, or continuous delivery delays, constitutes an unfair trade practice that the Fair Trade Act strictly regulates.

In fact, I have represented a company driven to the brink of closure due to a large corporation's unfair cutting of work. Company A, a small-scale company in the packaging and logistics field, had traded exclusively with large corporation B for more than 20 years. But one day, Company B began reducing work under the pretext of efficiency, and even continued unfair pressure such as suddenly surging the volume and then shifting blame by claiming the deadlines could not be met. Ultimately, Company A's volume plummeted to less than half, and it was driven into a crisis of having to worry about immediate closure.

This was a matter that, beyond a simple reduction in volume, clearly met the requirements for a violation of the Fair Trade Act—namely, a trade reduction without reasonable grounds. I submitted a complaint to the Fair Trade Commission after closely analyzing the objective facts and legal principles, and led Company B—which feared strong sanctions—to the negotiating table, drawing out an amicable settlement. As a result, Company A was able to receive compensation for its actual damages and successfully recover its rightful rights.

Likewise, if you are placed in management difficulties due to a large corporation's unfair trade measures, you must not endure indefinitely or give up. Since the core of the dispute lies in objective proof, it is more important than anything to thoroughly retain materials such as emails and messenger content exchanged with the prime contractor, meeting minutes, and purchase orders. It is also wise to leave written records confirming the content even when unfair instructions are given verbally. Unfair trade cases are a field that simultaneously requires an understanding of industry characteristics and complex interpretation of legal principles. If you are suffering unjust harm, you must actively protect the company's rightful rights and interests by receiving expert assistance from the early stage of the case.

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