The Fair Trade Commission (FTC) of South Korea has initiated an investigation into Samsung Electronics following allegations that the tech giant unfairly reduced order quantities for subcontractors. The investigation was prompted by a complaint from a subcontractor, referred to as Company A, which claimed to have suffered losses due to Samsung's actions. Company A is a cable supplier approved for participation in Samsung's 5G communication project for the American telecommunications giant Verizon. Allegedly, Samsung reduced the order volume, citing changes to the type of cable required by Verizon, which ultimately led to the bankruptcy of Company A's U.S. division.

Company A argues that their challenges were exacerbated by Samsung's demands for shorter delivery times, which they say were unreasonable given their commitments. As a response to these pressures, Company A relocated its factory from Irvine, California, to Dallas, Texas, near a local subsidiary's logistics warehouse for Samsung. Previously, Company A sought dispute resolution through the Korea Fair Trade Mediation Agency. Despite a proposal that Samsung compensate Company A for its equipment investment losses, Samsung rejected this proposal, which has now led the FTC to formally take on the complaint.

The investigation will focus on whether Samsung's actions constitute 'unfair cancellation of orders,' as outlined in South Korea's subcontracting law. This law prohibits main contractors from arbitrarily canceling or modifying contracts without justifiable reasons that could be attributed to the subcontractors. The outcome of this investigation could have significant implications for subcontracting practices within the industry and for companies engaged in similar disputes with larger corporations.