Shin Young Broadcasting Co., Ltd. (Law Firm Private, Attorneys Kim Gyeong-soo et al., Counsel for the defendant-appellant)

Fair Trade Commission (Law Firm In-bok, Attorneys Seo-dae et al., Counsel for the defendant-appellant)

August 24, 2016

1. On December 21, 2015, the part of the payment order and the part of the payment order and the part of the payment order of penalty surcharge under paragraph (2) among the correction order and the payment order of penalty surcharge stated in the separate sheet No. 2015-424, which are issued by the Defendant to the Plaintiff

2. The plaintiff's remaining claims are dismissed.

3. One-third of the costs of lawsuit shall be borne by the plaintiff, and the remainder shall be borne by the defendant.

The Defendant’s corrective order and penalty surcharge payment order stated in the attached Form No. 2015-424 decided December 21, 2015 issued to the Plaintiff on December 21, 2015 shall be revoked.

1. Facts recognized;

A. Status of the plaintiff, etc.

The Plaintiff, a business proprietor who is not a small and medium business proprietor engaged in the business of manufacturing mobile phone cases, private withdrawal type, etc., entrusted Nonparty 1 (○○○○○○○○○○○○○○○○○○○○○, and hereinafter “contractor”) with the painting and painting of mobile phone parts. The Plaintiff is a principal contractor prescribed in Article 2(2)1 of the Fair Transactions in Subcontracting Act (amended by Act No. 11842, May 28, 2013; hereinafter “subcontract”), and Nonparty 1 is a subcontractor prescribed in Article 2(3) of the aforementioned Act. The general status of the Plaintiff and the subcontractor is as follows.

(units: 153,362 119,576 140,409 544 (as of 2012) subcontractor, 3,635,090 6,609 18,2012, 2010 full-time employees (units: KRW 100,000)

B. Current status of subcontract transactions between the plaintiff and the subcontractor

From April 19, 2010 to May 1, 2013, the Plaintiff and the subcontractor engaged in subcontract transactions with respect to 318 mobile phone parts, including E50 and E500 models, and C800 COVIFRNT, up to 9,02,00 won in total. Examining the subcontractor’s share of the annual sales in relation to the Plaintiff, the Plaintiff and the subcontractor reached 85.2% in the year 201 but reduced to 44.1% in the year 2012.

C. The defendant's disposition

1) On December 21, 2015, the Defendant issued an order to take corrective measures and pay penalty surcharges to the Plaintiff on the ground that “the Plaintiff committed an offense falling under Article 4(2)1 and 5 of the Subcontract Act by applying the unit price at a uniform rate of 2-8% to each quarter after reviewing the unit price for the items supplied by the subcontractor when entrusting the subcontractor with painting and painting work related to the cell phone parts of the items, including C800 and C800 C, C80 COV NANT, and 171 weeks 2). From the above disposition, the Defendant issued an order to take corrective measures and pay penalty surcharges to the Plaintiff on the ground that “The Plaintiff committed an offense falling under Article 4(2)1 and 5 of the Subcontract Act by having the Plaintiff pay the amount before the reduction was made and the amount at a uniform rate after the reduction was made, 16, 128, 310 won (including value-added tax).”

2) The Defendant imposed a penalty surcharge on the Plaintiff in accordance with Article 25-3 of the Subcontract Act, Article 55-3 of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”), Article 13(1) [Attachment 2] of the Enforcement Decree of the Subcontract Act (amended by Presidential Decree No. 24673, Jul. 22, 2013); public notice on the criteria for imposing penalty surcharges on a business entity violating the Subcontract Act (amended by Defendant’s notice No. 2010-13, Oct. 31, 2010; hereinafter “public notice on penalty surcharges”); and specific calculation details are as follows.

(a) Basic calculation criteria: 167,128,000 won;

The amount calculated by multiplying the double amount of the subcontract price by the imposition rate of the penalty and the difference due to the unfair determination of the subcontract price, which is larger than the difference due to the unfair determination of the subcontract price, by the basic calculation criteria (Public Notice of Penalty IV.

○ Computation based on the subcontract price and amount of violation

The subcontract price and amount of violation related to the plaintiff's violation are as follows (However, the amount of violation was used in the amount including value added tax as it is 3).

Subcontract (A) (B) the ratio of the amount of violation (B) to the amount of violation (B) on February 25, 2011 through May 1, 2013, 3, 096, 132 167, 1284.9% of the amount of violation (B/A) on February 25, 2011 to May 1, 201.

Note 4) Subcontract consideration (A)

The imposition rate of penalty surcharges shall be determined on the basis of the points calculated according to the criteria for imposition of penalty surcharges, and the amount calculated by multiplying twice the subcontract consideration by the imposition rate of the penalty surcharges shall be as follows:

(A) double the price of the attached Table in the main sentence (A) the amount of penalty surcharge (A xB) calculated (A xB) 6,192,264 2% 123,845

Note 5) Imposition Points

Since the amount of violation is greater than the amount calculated by the above table, 167,128,00 won, which is the amount of violation, shall be determined by the basic calculation criteria.

(B) the adjustment calculation criteria;

○ Penalty Surcharge IV. 2.c., the Plaintiff introduced and operates the “Guidelines for Selection and Operation of Cooperative Enterprises” and the “Guidelines for Establishment and Operation of Deliberation Committees on Subcontracting inside the Subcontracting,” thereby reducing 10% in total.

5 times the amount of violation(state 6), after reduction of the basic calculation standard reduction rate contained in the main sentence, 167,128 150,415 835,640 15,415

Note 6) Five times the amount of violation

(c) Determination of a penalty surcharge: 150,000,000 won (tacks less than a million won);

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, Eul evidence Nos. 1 and 2 (including numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Determination on the legitimacy of the instant disposition

(a) the existence of the reasons for the measure;

1) Whether it falls under Article 4(2)1 of the Subcontract Act

A) Summary of the Plaintiff’s assertion

The Plaintiff’s act of determining the subcontract consideration does not constitute “an act of determining the subcontract consideration by reducing the unit price at a uniform rate without justifiable grounds” under Article 4(2)1 of the Subcontract Act for the following reasons:

(1) The assertion that the unit price did not be set at a uniform rate

The Plaintiff only determined a unit price and a reduction rate in consideration of the characteristics of the mobile phone market, the change in the profit rate from the production time and quantity of each model and each item, and the change in market price, and did not set the unit price at a uniform rate for the relevant item. In fact, even if the subcontractor changed the unit price for the items supplied to the Plaintiff, the unit price was set at a uniform rate, and the reduction rate is different even if the unit price was reduced. Furthermore, even if the Plaintiff determined a unit price reduction rate separately for each item contained in the model, not for each item but for each model, it is determined a unit price reduction rate by comprehensively assessing the reduction rate for each item contained in the model, based on the daily reduction rate for each item contained in the model, based on the size of consumption in terms of time and cost. Therefore, it cannot be deemed that the Plaintiff reduced the unit price at a uniform rate without considering the characteristics or differences of each item.

(2) The assertion that justifiable grounds exist.

Even if the unit price was reduced at a uniform rate, there are justifiable grounds for the act of determining the subcontract price in this case. The Plaintiff and the subcontractor determined the unit price under mutual agreement, taking into account the factors of the unit price reduction.

(3) The assertion that the lower unit price requirement was not satisfied

In order for an act listed in any of the subparagraphs of Article 4(2) of the Subcontract Act to be deemed an act of determining unfair subcontract consideration under Article 4(1) of the same Act, it shall not be separately determined on the basis of only each of the following acts, but it shall be determined whether each of the following acts constitutes an act under paragraph (1). Therefore, even if the requirements for "low unit price" in Article 4(2)1 are not specified, in order to regard the pertinent act as an act of determining unfair subcontract consideration, it shall be proved that the subcontract price was reduced at a uniform rate without justifiable grounds, and that the result was low. However, the Plaintiff’s act does not constitute an act of determining unfair subcontract consideration prohibited under the Subcontract Act, since the Plaintiff’s act was not lower compared to other supply and demand enterprises.

B) Determination

(1) Relevant legal principles

Article 4(1)7 of the Subcontract Act provides that “When a prime contractor entrusts a subcontractor with the manufacture, etc., he/she shall not compel the subcontractor to determine or accept the subcontract price at a remarkably lower level than the price generally paid for the same or similar manufacture, etc. of an object, etc. by using unlawful means.” Article 4(2)1 of the Subcontract Act provides that “an act of determining the subcontract price by reducing the unit price at a uniform rate without justifiable grounds” shall be deemed to have been determined by determining the unreasonable subcontract price under paragraph (1). In light of the contents and structure of each provision as well as the legislative intent of prohibiting the determination of the subcontract price, “an act of reducing the unit price at a uniform rate under Article 4(2)1 of the Subcontract Act” means an act of reducing the unit price at a uniform rate of 15 percent with respect to two or more subcontractors or items, such as the type, size, quality, raw materials, manufacturing method, manufacturing process, etc., even if there are differences in individual circumstances, it shall be deemed that the subcontract price at a uniform rate of 2015 percent or 15 percent.

(2) Facts of recognition

The following facts are acknowledged according to the above adopted evidence, Gap evidence No. 9, and the purport of the whole pleadings.

① From February 25, 2011 to May 1, 2013, the Plaintiff: (a) entrusted the subcontractor with the manufacture of painting and painting with respect to mobile phone parts; (b) examined the unit price reduction for items supplied by the subcontractor during each quarter; and (c) reduced the unit price for 48 models and 171 items as follows.

(1) Three 4 per cent of the number of products, such as 1 5 per annum, 5 4 per cent of the number of 5 per annums: 1 6 per cent of the 4 per cent of the 5 per cent of the 5 per cent of the 14 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 4 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 4 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 4 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 4 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 5 per cent of the 1 per cent of the 5 per cent of the 1 per cent of the 5 per cent of the 14 per cent of the 5 per cent of the products.

② Examining the particulars of the reduction of the major unit price by item, the cumulative reduction rate was 15.8% to 28.7%. The cumulative reduction rate by item is 15.8% to 28.7%. The details of the reduction of the unit price by item are as set out in the table below 8).

Cumulative reduction rate (A/B) of the cumulative reduction rate (A/10) of the cumulative reduction rate (A/B) of the total cumulative reduction rate (A/10) of the total cumulative reduction rate (A/B) of the total cumulative reduction rate (A/10), 8,443, 290 E/30 BT COVB B 300 BT 300, 177,678 5.32,209, 509, 50970 BCO570 B 81895, 58970 BCO589, 3981205, 50630, 1069, 305, 3069, 305, 160, 305, 305, 1694, 160, 305, 184, 390, 2609, 1084, 1698

9) Total amount

③ Through the act of determining the subcontract price in this case, the Plaintiff received the subcontract price at which the sum of KRW 167,128,310 (including value-added tax) was reduced compared to the first unit price between the subcontractor and the subcontractor.

(3) Whether it constitutes a unit price discount at a uniform rate

In full view of the evidence adopted prior to the aforementioned facts, Gap evidence No. 7, Eul evidence No. 8, and the following circumstances acknowledged by the purport of the entire arguments, the plaintiff's act of determining the subcontract price in this case constitutes "an act of determining the subcontract price by reducing the unit price at a uniform rate" under Article 4 (2) 1 of the Subcontract Act, even if the plaintiff's act of determining the subcontract price in this case is considered as follows. The plaintiff's assertion on this part is rejected

① As seen earlier from February 25, 201 to May 1, 2013, the Plaintiff traded with the subcontractor, divided into 48 models and reduced the unit price on several occasions at a certain rate for each 171 detailed item. Even if the items entered in the same model are different from the raw materials by item, in order to reduce the unit price of each other at a uniform rate, there shall be objective and reasonable grounds to reduce the unit price by a uniform rate, such as a decline in the price of raw materials due to a significant increase in the volume of the transaction, a decline in wages, and a decrease in the same cost. There is no evidence to deem that there was such reason in determining the unit price. Even in the Plaintiff’s assertion, the Plaintiff calculated the unit price by taking into account the factors of each item belonging to the same model, based on the daily reduction in the unit price, and then calculated the unit price reduction rate by taking account of the time and cost, and thus, the Plaintiff calculated the unit price reduction by applying the individual unit price to each item without considering the difference in its convenience.

② The Plaintiff asserts that there are items that did not lower the unit price even among the parts entering the same model, or there are differences in the reduction rate by item, as alleged by the Defendant, the Plaintiff does not uniformly reduce the unit price by classifying them according to the model. However, in light of the aforementioned legal principles, if the unit price was reduced at a certain rate without reflecting such individual differences in the type, size, size, and quality of two or more items despite the difference in individual circumstances, the act of reducing the unit price at a uniform rate prohibited under the Subcontract Act constitutes “act of determining the subcontract price by reducing the unit price at a uniform rate.” Even according to the unit price agreement (Evidence No. 9) submitted by the Plaintiff, the Plaintiff appears to have uniformly determined whether the unit price was reduced by classifying them by model and the reduction rate by unit. From among the items of the same model, it is extremely difficult to view that the reduction rate was reduced by a certain rate as determined by the Plaintiff, not by the characteristics of each item

③ The Plaintiff asserts that it cannot be deemed that the unit price was reduced at a uniform rate, since it was more and more than the unit price reduction for the items supplied to the Plaintiff by the Plaintiff. However, if the Plaintiff uniformly determined the unit price according to a certain classification without considering the circumstances of each item in the instant subcontract price determination, an act contrary to Article 4(2)1 of the Subcontract Act is established, and even if the unit price for a part model or item is reduced or increased, it cannot be assessed differently.

(4) Whether there exists a legitimate reason

The term “justifiable cause” for excluding the corresponding nature of the act of determining unfair subcontract consideration refers to objective and reasonable grounds that justify the determination of a unit price at a uniform rate even in the light of the characteristics of each item, and that the Plaintiff, the principal contractor, must assert and prove such grounds. In light of the following circumstances acknowledged by the aforementioned adopted evidence, the statement of evidence No. 7, and the purport of the entire pleadings, it is difficult to deem that the Plaintiff’s act of reducing the unit price at a uniform rate solely based on the circumstance in which the Plaintiff is tax-proof, and there is no other evidence to acknowledge it otherwise. The Plaintiff’s assertion on

① The Plaintiff asserts that, given the characteristics of the mobile phone market with short-term mobile phone market, there is a fluctuation in the price due to a fluctuation in the sales price and sales volume after a certain period of time, the Plaintiff and the subcontractor determined the reduction in cases where a price reduction factor is recognized by reviewing the unit price reduction rate per quarter. However, there is no specific evidence to deem that the consumer price and wages were increased during the period of violation, and that the model and items with the unit price reduction fall under a rapid fluctuation model in the sale price and measures to reflect the price was taken. If the sales volume decreased upon the lapse of the period, as alleged by the Plaintiff, it would result in an increase in the cost of production per unit, and thus, it is difficult to understand that the reduction in the sales volume would result in an increase in the cost of production per unit. Even if there was a reduction in the unit price due to such a reason, it cannot be deemed an objective and reasonable ground to justify the act of reducing the unit price at a uniform rate without considering the circumstances of each item.

② The Plaintiff asserts that there is a justifiable reason for the establishment of a unit price reduction by a uniform rate, as the unit price reduction was determined by an agreement with the subcontractor, but there is no evidence to deem that the Plaintiff had reached a substantial agreement with the subcontractor when determining the unit price reduction as follows.

(5) does not meet any low unit price requirement.

Article 4 of the Subcontract Act generally prohibits the determination of an unfair subcontract price under paragraph (1) of the same Article, while Paragraph (2) of the same Article provides that if an act falls under any of the subparagraphs of paragraph (2), an act of determining an unfair subcontract price shall be deemed an act of determining an unfair subcontract price and effectively cope with unfair trade practices that are determined at an unfair lower price, and the legislative purport and purpose thereof is to establish a fair order in subcontract transactions (see Supreme Court Decision 2011Du2337, Feb. 23, 2012). In light of the legislative purport and form of Article 4 of the Subcontract Act and the legislative intent thereof, the prime contractor shall determine a subcontract price by reducing a unit price at a uniform rate without justifiable grounds, and if the act falls under Article 4 (2) 1 of the Subcontract Act, it shall be deemed that an unfair subcontract price has been determined without considering whether the subcontract price was determined at a lower price than the price which is ordinarily paid. In addition, the Plaintiff’s assertion that the subcontract price was determined at a lower price than the price that is ordinarily paid by the Plaintiff.

2) Whether it falls under Article 4(2)5 of the Subcontract Act

A) Summary of the Plaintiff’s assertion

The plaintiff's act of determining subcontract consideration does not constitute "an act of unilaterally determining subcontract consideration at a low price without agreement" under Article 4 (2) 5 of the Subcontract Act for the following reasons:

(1) Claim that the unit price is determined by an autonomous agreement

The Plaintiff did not have superior standing to force the subcontractor to unilaterally terms and conditions of the transaction. The Plaintiff and the subcontractor set a unit price through an autonomous agreement on an equal footing. Even if there exists a part of a lower unit price agreement between the Plaintiff and the subcontractor on the reduction of unit price, such circumstance alone does not lead to presumption that no agreement exists, and the Defendant must prove the absence of such agreement.

(2) A claim that the subcontract price has not been determined at a low price

The lower unit price as indicated in Article 4(2)5 of the Subcontract Act requires that the Plaintiff and the subcontractor set a lower unit price when compared not only the first unit price but also the reasonable price paid to other business entities in normal transactional transactions with respect to the same or similar items identical or similar to the same or similar items at the same time. However, the Plaintiff does not constitute a case where the subcontract price is determined at a lower price than the case of other business entities similar to the subcontractor in the transaction with the subcontractor.

B) Determination

(1) Whether the unit price has been determined by an autonomous agreement

Article 4(2)5 of the Subcontract Act provides that an act of a prime contractor unilaterally determines a subcontract price at a low price without an agreement with a subcontractor shall be deemed to have been determined by an unreasonable subcontract price. In such cases, whether a prime contractor unilaterally satisfies the requirements of “in the process of determining a subcontract price,” shall be determined by taking into account the type, quantity, size, quality, materials, and information of the object to a subcontractor, whether the subcontractor had sufficiently consulted with the subcontractor, such as providing the subcontractor with sufficient and faithful data and information, and whether the subcontractor was in a state where autonomy of expression in the process of the agreement was not restricted. Furthermore, even if an agreement on the determination of subcontract price was enacted to establish a fair order in subcontract transactions so that the subcontractor can complement and develop it on an equal basis with the prime contractor, it cannot be deemed that there was a substantial agreement if the authenticity of the agreement was not recognized. According to the agreement (Evidence 9) cited by the Plaintiff, considering that the subcontractor was signed and submitted to the Plaintiff after signing the agreement, the Plaintiff’s presentation of evidence and evidence as follows, the Plaintiff’s presentation of the entire evidence and evidence.

① The Plaintiff asserted that it was not the superior position to unilaterally demand the subcontractor to unilaterally demand the subcontractor to suspend the transaction with the subcontractor due to the Plaintiff’s dependence on the subcontractor. However, the dependence on the Plaintiff’s transaction with the subcontractor on the part of the subcontractor appears to have been absolutely dependent on the Plaintiff’s transaction relation with the subcontractor to the extent that it reaches 85.2% around the year 201 when the sales amount was the largest. On the other hand, the Plaintiff traded with multiple subcontractors, including the subcontractor. On the other hand, the Plaintiff may decide to suspend the transaction with the subcontractor by changing the volume of the water between the subcontractor and the subcontractor, or by cumulative assessment based on these evaluation results, it is determined that the subcontractor had no choice but to accept the Plaintiff’s demand in order to continue the transaction with the subcontractor. In particular, as of the year 2011, the Plaintiff’s sales amount exceeded approximately 24 times the subcontractor’s total sales amount, as alleged by the Plaintiff, it is difficult to view that the subcontractor had an equal relationship with the Plaintiff.

② During the process of the investigation by the Defendant on October 6, 2014, Nonparty 2, the head of the Plaintiff’s business department, stated to the Plaintiff that, “If the Plaintiff’s operating staff completes the preparation of the unit price reduction agreement, the agreement was prepared by contact with the △△△△△△△△△△△, and the person in charge of the surveying the △△△△△△△△, affixes seals thereto.” In light of all the circumstances, the Plaintiff appears to have commonly applied the procedures and methods of paying the unit price to all subcontractors, including the instant subcontractor, etc. In this case, there is no evidence to deem that the Plaintiff and the subcontractor consulted with each other prior to the preparation of the unit price agreement. The content of the above unit price agreement appears to have been unilaterally prepared by the Plaintiff rather than by determining the subcontractor through substantial consultation, and it appears that the Plaintiff refused the Plaintiff’s demand based on the fact that the subcontractor was in a superior position as seen earlier.

③ During the investigation into the instant case No. 2014-218, Nonparty 2 stated that, while making a decision of subcontract consideration with △△△△△, the Plaintiff presented only the anticipated volume of goods and the fairly defective quantity to △△△△△△△, and did not provide any data and information about factors affecting the unit price determination, Nonparty 2 stated that no data was received from the Plaintiff in relation to the reduction of the unit price. In this case, there is no evidence to deem that the Plaintiff provided the subcontractor with sufficient information in advance while determining the unit price, and that there was no substantial agreement based on

(2) whether the subcontract price has not been determined at a low price; or

Comprehensively taking account of the following circumstances acknowledged by the evidence adopted earlier and the purport of the entire pleadings, it is reasonable to deem that the Plaintiff’s unilaterally determined a lower unit price than the first unit price without reasonable grounds in this case, and this constitutes an act of determining unfair subcontract price under Article 4(2)5 of the Subcontract Act.

① Article 4(1) of the Subcontract Act provides that an act of determining a subcontract price at a remarkably lower level than the generally paid subcontract price shall be deemed an act of determining a subcontract price. However, as seen earlier, the phrase “materially” was deleted on May 28, 2013, and subsequently amended by Act No. 11842, it is deemed that an act of determining a subcontract price requires a lower level than the generally paid subcontract price. Meanwhile, Article 4(2) of the Subcontract Act provides that an act falling under any subparagraph of Article 4(2) shall be deemed an act of determining a subcontract price, and the burden of proof was mitigated than the case of immediately proving the requirements of paragraph (1). Accordingly, if a prime contractor unilaterally determines a subcontract price against the subcontractor’s will without reasonable grounds, it is reasonable to interpret that an act of determining a subcontract price exists without examining whether the subcontract price was generally lower than the initially paid.

② Article 4(2)5 of the Subcontract Act provides that an act of the prime contractor to unilaterally determine a subcontract price by means of an unreasonably low unit price shall be deemed to be an act of determining a subcontract price. Upon amendment by Act No. 7488, Mar. 31, 2005, the prime contractor was amended by Act No. 7488. The purpose of the amendment is to strictly regulate a prime contractor’s act of determining a subcontract price by unilaterally low unit price without an agreement with the subcontractor. The purpose of the amendment is not only limited to the subject considered to be an act of determining a subcontract price inasmuch as the existing provision requires “unfair low unit price” and it is not easy for the prime contractor to prove illegality, in reality, even though the prime contractor’s act of determining a subcontract price by unilateral unit price is frequently at issue, by eliminating the requirements of “unfairness” and to regulate a prime contractor’s act of determining a subcontract price more effectively and by relaxing the burden of proof. Accordingly, Article 4(2)5 of the Subcontract Act aims to strictly regulate the prime contractor’s act of unilaterally low unit price.

③ The Defendant’s “Guidelines for Examination of Unfair Subcontract Price Determination and Reduction” (amended by Defendant’s Rule No. 114, Jun. 30, 201) provides that “In principle, the determination can be made by taking into account the difference between the price and ordinarily paid for the same or similar object as the subject matter, etc., the quantity of the subject matter, the difference to the subcontractor, the degree of burden upon the subcontractor on the subcontractor, market conditions, etc.” (IV. 1. c. 5) whereas the determination of whether the “low unit price” under Article 4(2) 5 of the Subcontract Act is based on whether the subcontractor lowers the unit price based on objective and reasonable calculation, in principle, on the basis that the subcontractor’s ordinary payment of the unit price for the same or similar object as the estimate price, the quantity of the subject matter, the market conditions of the subject matter, etc., can be determined by taking into account the prime contractor’s continuous transaction with the subcontractor in violation of subparagraph 5, and thus, requires the subcontractor to determine a new and reasonable unit price to be lower than the first subcontract price.

④ Even if the Plaintiff falls under any of the subparagraphs of Article 4(2) of the Subcontract Act, the Plaintiff may be deemed to be an act equivalent to the degree under Article 4(1) of the Subcontract Act, and thus, in the case of Article 4(5), the requirements for “reality” under Article 4(1) of the Subcontract Act are additionally required. However, as seen earlier, in the case of an act falling under any of the subparagraphs of Article 4(2) of the Subcontract Act, it is considered to be an unfair determination of the subcontract price under Article 4(1) of the Subcontract Act, and it does not have to meet the requirements under Article 4(2)5 of the Subcontract Act. Therefore, it is difficult to deem that it is a remarkably low unit price in determining whether the Plaintiff falls under Article

⑤ During each quarter, the Plaintiff established a unit price lower than the first one concluded with a subcontractor with respect to a part of 171 items by examining the unit price reduction rate of 2-8% for each quarter during the period in violation. During that process, the Plaintiff unilaterally determined the unit price without any actual consultation with a subcontractor. As seen earlier, the Plaintiff asserted that he/she determined the unit price reduction rate by comprehensively taking into account the characteristics of the mobile phone market, the timing and quantity of production by model and item, the amount of material cost, the amount of consumption, output, and productivity improvement, etc. In the process of paying the unit price, the Plaintiff did not submit any detailed data as to the existence of the actual unit price reduction factor in the process of paying the unit price, reflecting this in any way, and determining the reduction rate and the reduction rate. Accordingly, the Plaintiff cannot be deemed to have determined the unit price reduction based on objective and reasonable grounds.

6) Even if “low unit price” referred to in the above provision means a lower unit price than that paid at a similar time for the same or similar product, based on the evidence adopted earlier and the overall purport of pleadings, the Plaintiff appears to have paid a lower unit price than that paid to the subcontractor at a lower level than that paid for the same or similar product. As seen earlier, the Plaintiff was in superior position with the subcontractor, and the Plaintiff is also likely to have determined the first unit price in favor of the Plaintiff rather than the subcontractor. In light of the materials presented by the Defendant in the process of the investigation, the Plaintiff asserted that the lower rate of the first unit price was not determined than that of the previous subcontractor’s supply and demand based on the materials newly determined unit price for the same or similar product than that of the previous subcontractor, and thus, the Plaintiff did not appear to have determined a lower rate than that of the previous subcontractor’s first unit price for the product at a lower level than that of the previous subcontractor’s supply and demand based on the materials presented by the Plaintiff during the period of violation.

B. Whether the instant payment order and penalty surcharge payment order are unlawful

1) Summary of the Plaintiff’s assertion

The Defendant ordered the Plaintiff to pay to the subcontractor the sum of KRW 167,128,310, which is the difference between the amount before and after the reduction as a corrective measure. However, the order to pay the difference between the first unit price and the subcontractor is premised on the premise that there was no ground for a unit price reduction during the transaction period over two years between the Plaintiff and the subcontractor, which is unfair, and the penalty surcharge calculated on the basis of the foregoing difference should be revoked or reduced.

2) Whether the instant payment order is legitimate

Article 25(1) of the Subcontract Act provides that the ordering person and the principal contractor who have violated the provisions of Articles 3(1) through (4) and (9), 4 through 12, 12-2, 12-3, 13, 13-2, 14 through 16, 16-2 (2), and 17 through 20 of the Subcontract Act may recommend or order the payment of subcontract consideration, the suspension of violation, and other measures necessary for correcting the relevant violation, by providing that the person ordering and the principal contractor may take corrective measures, such as the payment of subcontract consideration, etc., the suspension of violation, and other measures necessary for correcting the relevant violation, including various violations subject to corrective measures and various corrective measures with regard thereto.

The contents of corrective measures under the Subcontract Act shall be clear and specific, and shall be in proportion to the contents and degree of the relevant offense (see, e.g., Supreme Court Decision 2007Du25138, Jun. 11, 2009). However, Article 4(2)1 of the Subcontract Act means the behavior that the prime contractor reduces the unit price at a uniform rate without reflecting the difference in individual circumstances between two or more subcontractors or items without justifiable grounds, and Article 4(2)5 of the Subcontract Act means that the prime contractor unilaterally determines the subcontract price at a low rate without consultation with the subcontractor. Thus, it cannot be readily concluded that the price before determining the unit price at a uniform rate or a low rate of the unit price unilaterally in transactions violating the above provision is a justifiable subcontract price. Moreover, in light of the nature of the above provision, it is difficult to uniformly present the subcontract price between the prime contractor and the subcontractor.

Considering the comprehensiveness of the provision on the basis of corrective measures and the nature of the violation under Article 4(2)1 and 5 of the Subcontract Act, the corrective measures against the violation under Article 4(2)1 or 5 of the Subcontract Act, ordering payment of the difference between the price that forms the basis for uniform reduction of the unit price and the actual subcontract price, may not be permitted (see Supreme Court Decision 2012Du1555, Feb. 1, 2016).

Accordingly, even in the case of this case, since there is no ground to view that the transaction amount calculated according to the previous contract price with respect to the relevant violation is a reasonable subcontract price that can be the premise for payment order, the defendant's corrective measures against the plaintiff's act that violated Article 4 (2) 1 and 5 of the Subcontract Act is an amount calculated according to the previous contract price and the payment order corresponding to the difference between the amount calculated according to the previous contract price and the subcontract price according to such violation is unlawful

3) Whether the instant penalty surcharge payment order is legitimate

In full view of Article 25-3 of the Subcontract Act and Article 55-3 of the Fair Trade Act, the defendant has discretion to determine whether to impose penalty surcharges on the determination of unfair subcontract consideration and to determine the specific amount of penalty surcharges within a certain extent provided for in the Subcontract Act, the Fair Trade Act, and the Enforcement Decree of the Fair Trade Act. Thus, the order to pay penalty surcharges on the principal contractor who has made the decision of unfair subcontract consideration is a discretionary act. However, if there are grounds such as misunderstanding of facts constituting the basis for the imposition of penalty surcharges or violating the principle of proportionality and equality in exercising such discretion, it is illegal as a deviation or abuse of discretionary power. Considering the facts as seen earlier, the order to pay the penalty surcharges in this case is an unlawful act of deviating from and abusing discretionary power. The plaintiff's assertion in this part is with merit.

① In IV.1. A. B., the penalty surcharge is basically calculated on the basis of the basic calculation criteria by multiplying the double amount of the subcontract price of the violating enterpriser by the imposition rate of the penalty surcharge, and on January 3, 2005, the penalty surcharge is calculated on the basis of IV. 1.C. and II. A. However, if the difference due to the unfair determination of the subcontract price under Article 4 of the Subcontract Act exceeds the above amount calculated by multiplying the two times the subcontract price by a certain imposition rate, the above difference can be deemed as the basic calculation criteria. The Defendant: (a) on January 1, 200 among the penalty surcharge notice, as described in IV. 1.B., the Plaintiff’s act of violation, the ratio of the amount of the penalty surcharge, the number of violations, and the past fact of violation; (b) the Defendant’s act of calculating the price of the subcontract price as 123,845,000 won on the basis of the basic calculation criteria; and (c) the Defendant’s act of determining the difference as 16.

② Meanwhile, in light of the contents and purport of Article 25-3(2) of the Subcontract Act, Article 55-3(5) of the Fair Trade Act, Article 61 of the Enforcement Decree of the Fair Trade Act, and public notice II.5.(c)(1) of the Enforcement Decree of the Fair Trade Act on the imposition of penalty surcharges, it is desirable to apply the amount excluding value-added tax out of the contract amount or the amount in violation. Nevertheless, in calculating the penalty surcharge of this case, the Defendant erred by applying the amount in violation of Article 167, 128,310, including value-added tax, as it is, in calculating the penalty surcharge of this case. Unlike this case, the Defendant calculated the penalty surcharge on the basis of the amount in violation of Article 2014-218 against the Plaintiff by applying the amount excluded from value-added tax (Article 3-1). Accordingly, it is recognized that the Defendant erred by misapprehending the fact that the Defendant is the basis for imposing the penalty surcharge or by violating the principle of equity.

③ In cases where an order to pay a penalty surcharge that has discretion as to whether to impose a disposition or whether to impose a penalty surcharge or whether to impose a disposition is a deviation from the discretionary authority, the court can only determine whether the order is a deviation from its discretionary authority, but it can not determine whether the order is appropriate within the scope of its discretionary authority, and the court can only cancel the order (see, e.g., Supreme Court Decisions 98Du2270, Apr. 10, 1998; 2005Du3172, Oct. 26, 2007; 2007Du18062, Jun. 23, 2009); and the order to pay the penalty surcharge in this case is completely cancelled.

3. Conclusion

Since the part concerning the payment order in attached Form 2 and the part concerning the payment order in attached Form 3 of the disposition of this case is illegal, it is revoked. The remaining claim of the plaintiff is dismissed as there is no reason

[Attachment]

Judges Lee Dong-won (Presiding Judge)

(1) The transaction between the Plaintiff and the subcontractor was conducted from April 2010, but around February 25, 2014, the offense was established upon reporting by the subcontractor, and Article 23 of the Subcontract Act sets the period of the Defendant’s transaction subject to investigation into three years. Thus, the Defendant determined the period from February 25, 2011 to May 1, 2013, which was less than three years from the date of reporting, as the subject transaction period.

Note 2) In the case of the same model, and the same product, there was no overlapping appropriation. The model and the number of items actually paid a unit price in the manner of calculating the number of items in which one model and item overlaps over several quarters so that the unit price is not overlapped, except where the unit price is not carried out under the terms of the unit price reduction agreement among the type of items.

3) According to the criteria for imposing penalty surcharges under attached Table 2 of the Enforcement Decree of the Subcontract Act, the subcontract consideration that serves as the basis for calculating penalty surcharges shall be the contract price of the relevant subcontract, but the contract price shall be calculated as the changed contract price if the contract price is changed, and the unpaid amount related to the violation of the Act (amount of violation) shall be the amount unpaid by the date of receipt of the report in the case of reporting

4) According to the written resolution, the subcontract consideration is indicated as the amount excluded from value-added tax.

In light of the contents, 32 points of the type of violation (=80 x 0.4), 8 points of the imposition of the amount of violation (=40 x 0.2), 8 points of the imposition of the number of violations (=40 x 0.2), and 0 points of the imposition of past records of violation of law.

(6) According to IV. 2. E., the penalty surcharge notice, if a violation is not voluntarily corrected and the amount of the penalty surcharge calculated exceeds five times the amount of the violation, the penalty surcharge shall be deemed five times the amount of the violation.

Note 7) The foregoing provision was partially amended by Act No. 11842 on May 28, 2013, and the phrase “bruptly” was deleted.

8) There are a number of other items not included in the table below.

9) The sum of the amount of the quarterly reduced unit price during the period of violation shall be the sum of the amount of the first unit price.

Note 10) The foregoing provision was amended by Act No. 11842 on May 28, 2013, and the phrase “free of agreement” was deleted.

Note 11) The penalty surcharge notice shall be taken into account as an element of determining the rate of penalty surcharge in the course of calculating the basic calculation under Section 4.1. A. (b) but this is acceptable in that the amount is used as a standard for determining the severity of the violation.

Note 12) The written resolution states that value added tax is included in value added tax, and it can be known that even if the sum of the reduced amount among subparagraph 1-2 and subparagraph 1-2, it is included in value added tax.