A private right of action, which allows parties (both individuals and entities) to seek an injunction against unfair subcontracting practices, has been introduced with the passage of the amended Fair Transactions in Subcontracting Act (the “Subcontracting Act”) by the National Assembly on August 27, 2025. Under the amended law, small and medium-sized enterprises (subcontractors) that have suffered damages, or are at risk of suffering damages from violations of the Subcontracting Act, can now directly petition the court to prohibit or prevent such violations, bypassing the administrative procedures of the Korea Fair Trade Commission (the “KFTC”).
The amended Subcontracting Act will take effect three months after its promulgation, following standard procedures, including Cabinet approval. The key amendments are as follows:
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Broadened Scope for Seeking Injunctions
Under the amended law, subcontractors can directly petition the court for an injunction to prohibit or prevent 12 types of unfair subcontracting practices.[1] This reform expands the existing private injunction system under Article 108 of the Monopoly Regulation and Fair Trade Act and applies it to the Subcontracting Act. Subcontractors are expected to actively leverage this new right to protect their interests.
The court will rule on injunctions after considering the nature of the violation, the likelihood of harm, and whether a breach of the Subcontracting Act has occurred.
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Right to Demand Disposal of Goods and Removal of Equipment Related to Technology Misappropriation
The amended law stipulates that in cases related to the misappropriation of technical data, a subcontractor may petition the court for the disposal of goods produced through the infringing act or the removal of equipment used for such purposes. This remedy is available if the prime contractor has wrongfully demanded technical data (Article 12-3, Paragraph 1 of the Subcontracting Act), misappropriated it (Paragraph 4 of the same article), or if there is a risk of such acts.
This provision recognizes that even if an injunction against misappropriation is granted, the subcontractor may continue to suffer damages from goods already produced or equipment still in use. It therefore provides a more proactive remedy for relief and recovery, going beyond a simple prohibitory or preventive injunction.
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Implications and Outlook
With the introduction of this private right of action, subcontractors can now act to stop violations of the Subcontracting Act at an early or preliminary stage through the courts. This right also serves as a basis for more rapid and effective remedies, such as provisional injunctions, allowing subcontractors to seek swift relief and prevent damages without waiting for the outcome of KFTC administrative sanctions or subsequent damage claims. This development is expected to provide significantly stronger protection for subcontractors and will likely have a meaningful impact on subsequent KFTC investigations and civil litigation.
Moreover, discussions are underway for additional amendments to the Subcontracting Act to introduce a “Korean-style discovery” system. This is intended to address cases where the prime contractor possesses most of the evidence needed to prove technology theft but fails to produce it in court. The introduction of both the private injunction system and a discovery process is expected to increase the frequency of civil disputes between contracting parties, thereby raising litigation risks for prime contractors.
Because this new system allows for legal action merely on a “risk of violation” or “risk of damage” and enables much stronger remedies such as the disposal of goods, it has become crucial for companies to proactively review their subcontracting practices and implement robust risk management measures.
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[1] 12 Types of Unfair Subcontracting Practices: ① Unfair Special Terms Setting (Article 3-4), ② Unfair Determination of Subcontracting Price (Article 4), ③ Forced Purchasing (Article 5), ④ Unfair Cancellation of Consignment (Article 8), ⑤ Unfair Return of Goods (Article 10), ⑥ Reduction of Payment Amount (Article 11), ⑦ Unfair Payment Demand (Article 12), ⑧ Unfair Demand for Economic Benefits (Article 12-2), ⑨ Demand for and Misappropriation of Technical Data (Article 12-3), ⑩ Unfair In-Kind Payment (Article 17),⑪ Unfair Management Interference (Article 18), and ⑫ Prohibition of Retaliatory Measures (Article 19).
[Korean Version]
