Ftc Report New York Unfair Subcontracting Dispute Resolved

The prime contractor repeatedly postponed payment while providing verbal assurances that final reconciliation would occur at the end of the project.

Key issues included:

• Partial payments without explanation

• Attempts to impose unilateral “final settlement” conditions

• No written change orders for major added work

• Payment proposals significantly below direct cost thresholds

These behaviors aligned with unfair business practices and justified the initiation of an FTC report.

Because the subcontractor preferred to avoid litigation that could jeopardize future business relationships, the FTC report served as a regulatory pressure mechanism.

Once the report was filed, the prime contractor faced heightened scrutiny and was forced to reengage in negotiations.

Applicable New York legal authorities included:

• New York General Business Law (GBL) §349  prohibition on deceptive or unfair acts

• New York contract modification rules requiring written changes for material terms

• Commercial reasonableness standards for cost related pricing

• Prime contractor’s duty to maintain accurate cost tracking documentation

These principles formed a strong legal and regulatory basis for the FTC filing and subsequent negotiations.

The evidence showed:

• Consistent delays in payment without legitimate justification

• Payment proposals far below direct and indirect cost levels

• Absence of written authorization for substantial additional work

• A contractor controlled review committee that excluded the subcontractor

• A payment structure that created a risk of financial distress to the subcontractor

Together, these elements demonstrated a systemic pattern of unfair business conduct, which strengthened the FTC report.

The FTC’s interest in the matter placed substantial regulatory pressure on the prime contractor. 

Concerned about potential penalties and reputational damage, the contractor initiated settlement discussions. 

Counsel then shifted focus toward maximizing recovery while preserving the subcontractor’s long term commercial stability.

Unfair subcontracting cases become more difficult to resolve as time progresses. Early intervention ensures:

• Rapid preservation of essential evidence

• Stronger negotiation leverage

• Prevention of compounding financial losses

• Effective use of regulatory mechanisms, including the FTC report
 

Experienced commercial counsel is essential to align compliance strategy, pressure tools, and settlement execution.