Samsung Electronics Denies Supplier Allegations as Korean Antitrust Regulator Reviews Complaint

The dispute is now under review by South Korea’s antitrust regulator after the Korea Fair Trade Commission (KFTC) received a complaint from the supplier, referred to as Company A. The regulator is examining the circumstances surrounding the claim and whether any violations of fair trade rules occurred, according to a statement.

Company A, a U.S. corporation established by a small Korean cable supplier, alleges that Samsung Electronics engaged in “gapjil,” a Korean term describing an abuse of power by a dominant business partner. The complaint asserts that Samsung pressured the firm to move its manufacturing operations and later reduced contract volumes after the relocation, according to a statement.

Samsung Electronics strongly rejected the claims in a statement issued on March 4. The company said it had followed all legal requirements and maintained fair business practices with its partners.

“We made every effort to comply with laws and to pursue co-prosperity with partners, and there was no violation of the law,” a Samsung Electronics official said. The official added, “There was no instance of forcing a factory transfer in the transaction with Company A.”

The company also disputed the supplier’s assertion that it demanded new investment in U.S. manufacturing facilities. Samsung said it sources cables from several vendors and therefore had no reason to pressure Company A to relocate production or expand its facilities, according to a statement.

“Because we purchase cables from a variety of companies, there was absolutely no need to force Company A to transfer its factory,” the company said. Samsung also said that while Company A claims it invested in a U.S. plant at Samsung’s request, “Samsung Electronics never asked Company A to make facility investments.”

According to Samsung, the supplier independently chose to upgrade its facilities after undergoing pre-contract quality evaluations. The company said the decision to invest in equipment and plant improvements was made by the supplier before the two sides signed their agreement, per a statement.

We’d love to be your preferred source for news.

Please add us to your preferred sources list so our news, data and interviews show up in your feed. Thanks!

Add as Preferred Source

Related: Frankfurt Court Throws Out Samsung’s Antitrust Suit Against ZTE

Samsung also denied that it unfairly canceled or reduced contract volumes. The company said the decrease in orders resulted from a lack of client demand rather than any unilateral decision to cut supply commitments.

“The decline in order volume was solely because there were no orders from the client,” Samsung said, adding that “We also completed payment for the entirety of the placed volumes.”

The relationship between the two companies began in 2019 when Samsung approved Company A as a primary cable supplier for communications equipment used in a U.S. 5G network project. A subcontract agreement followed shortly afterward, according to a statement.

In early 2021, Company A relocated its factory from Irvine, California, to Dallas, Texas. The move placed the facility near a logistics warehouse operated by a Samsung Electronics subsidiary. Company A claims the relocation came after Samsung criticized shipping times, stating that “the lead time, including shipping, is too long,” according to a statement.

Despite the relocation, Company A alleges that Samsung later reduced orders after Verizon Communications Inc. changed the type of cable used in its 5G equipment. The supplier claims that the reduced demand contributed to the bankruptcy of its U.S. unit.

Following the financial collapse, the company filed for dispute mediation with the Korea Fair Trade Mediation Agency, which operates under the Korea Fair Trade Commission, per a statement.

The KFTC is currently investigating the matter to determine the facts surrounding the complaint and whether any breach of fair trade regulations occurred. No conclusions have been announced.

Source: Biz Chosun