LG Electronics has been fined by South Korea’s corporate watchdog for unfair business practice. The corporate watchdog confirmed on Wednesday that it has imposed a fine of 3.3 billion won (nearly $3.1 million) on LG Electronics. This should come as a shock since South Korea is the major market for LG Electronics and it is also home market for the company.
According to Fair Trade Commission (FTC), LG Electronics negotiated with 24 subcontractors to cut prices of 1,318 parts used for its smartphone between July 2014 and March 2017. But it retroactively applied the revised contract terms to its previous parts supply deal with the subcontracting companies. The FTC says it caused a total 2.88 billion won reduction in goods payment and the subcontractors suffered an average of 120 million won in losses.
Yonhap News reports that the corporate watchdog with main office in Sejong City has also ordered LG Electronics to take corrective measures. Under South Korea’s fair trade laws, unfair business practices including transfer of increased labor costs to subcontractors and franchises are prohibited.
LG Electronics is one of the biggest consumer electronics brand in South Korea. It sells products across wide range of categories including smartphones, dishwashers, refrigerators and televisions. The fine imposed by FTC in South Korea should come as a blow especially when LG is under pressure from rival Samsung Electronics in major areas including smartphones and large-screen televisions.
Back in September last year, LG was fined 541 million euros by the European Union for fixing prices. LG has not confirmed whether it accepts the fine imposed by FTC or plans to contend the ruling but it could affect the company’s profits in the next few quarters, as it will write down this fine in its books.