Korea set to fine Apple for unfair practices

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Korea set to fine Apple for unfair practices

People browse Apple's latest products in the Apple retail store at a popular shopping street in Sinsa-dong, Nov. 2, when the iPhone XS was officially released here. / Yonhap

By Jun Ji-hye

The Fair Trade Commission (FTC) is set to hold a full session next week to deliberate on whether Apple Korea has abused its powerful market position and shifted the burden of advertising costs and other expenses to Korean mobile carriers.

The full session of the FTC, scheduled for Dec. 12, corresponds to a court trial. If the corporate regulator rules the allegations as true, Apple Korea could face a fine of tens of billions of won, according to industry sources, Friday.

The U.S. firm has been investigated by the FTC since 2016 for allegedly having shifted advertising expenses to SK Telecom, KT and LG Uplus and forcing the mobile carriers to assume responsibility for the repair costs of iPhones.

For example, in November last year, TV commercials for the iPhone 8 and the iPhone X were paid for by the mobile carriers, not Apple.

Also, the company allegedly gave strict instructions to the mobile carriers when they held iPhones promotion events, but shared none of the burden.

The FTC sent its examination report, which corresponds to a prosecutors brief, to Apple Korea in April.

Industry sources said the mobile carriers had no choice but to accept Apple's demand due to the strong position of iPhones in the smartphone market.

More recently, Apple faced protest from smartphone retailers for what they called "unfair" policies, which have pressed them to buy in-store iPhones used only for display and other promotional purposes.

The Korea Mobile Distributors Association (KMDA) issued a statement Nov. 21, saying "Apple's policies contrast with those of other smartphone manufacturers, which provide all smartphones needed for promotional demonstrations at stores and collect them afterward."

The KMDA claimed Apple does not allow them to sell iPhones if they do not purchase demonstration devices.

Apple Korea is reportedly sticking to its position that all activities were fair dealings based on contracts.

If the FTC concludes that Apple Korea committed unfair trading practices, it will face the hefty fine.

The forecast comes as the FTC imposes fines equal to 2 percent of a company's sales. Apple Korea has not disclosed its sales here but market observers estimate them to be in the trillions of won.

It remains to be seen, however, whether the FTC will make a final decision at it first full session.

When the corporate regulator deals with a case involving a domestic company, it usually makes a final decision at the first session, but holds several more sessions when dealing with a case involving a foreign company.

"The FTC is likely to make a final decision on Apple Korea around the first half of next year," a source said.


People browse Apple's latest products in the Apple retail store at a popular shopping street in Sinsa-dong, Nov. 2, when the iPhone XS was officially released here. / Yonhap

By Jun Ji-hye

The Fair Trade Commission (FTC) is set to hold a full session next week to deliberate on whether Apple Korea has abused its powerful market position and shifted the burden of advertising costs and other expenses to Korean mobile carriers.

The full session of the FTC, scheduled for Dec. 12, corresponds to a court trial. If the corporate regulator rules the allegations as true, Apple Korea could face a fine of tens of billions of won, according to industry sources, Friday.

The U.S. firm has been investigated by the FTC since 2016 for allegedly having shifted advertising expenses to SK Telecom, KT and LG Uplus and forcing the mobile carriers to assume responsibility for the repair costs of iPhones.

For example, in November last year, TV commercials for the iPhone 8 and the iPhone X were paid for by the mobile carriers, not Apple.

Also, the company allegedly gave strict instructions to the mobile carriers when they held iPhones promotion events, but shared none of the burden.

The FTC sent its examination report, which corresponds to a prosecutors brief, to Apple Korea in April.

Industry sources said the mobile carriers had no choice but to accept Apple's demand due to the strong position of iPhones in the smartphone market.

More recently, Apple faced protest from smartphone retailers for what they called "unfair" policies, which have pressed them to buy in-store iPhones used only for display and other promotional purposes.

The Korea Mobile Distributors Association (KMDA) issued a statement Nov. 21, saying "Apple's policies contrast with those of other smartphone manufacturers, which provide all smartphones needed for promotional demonstrations at stores and collect them afterward."

The KMDA claimed Apple does not allow them to sell iPhones if they do not purchase demonstration devices.

Apple Korea is reportedly sticking to its position that all activities were fair dealings based on contracts.

If the FTC concludes that Apple Korea committed unfair trading practices, it will face the hefty fine.

The forecast comes as the FTC imposes fines equal to 2 percent of a company's sales. Apple Korea has not disclosed its sales here but market observers estimate them to be in the trillions of won.

It remains to be seen, however, whether the FTC will make a final decision at it first full session.

When the corporate regulator deals with a case involving a domestic company, it usually makes a final decision at the first session, but holds several more sessions when dealing with a case involving a foreign company.

"The FTC is likely to make a final decision on Apple Korea around the first half of next year," a source said.



Jun Ji-hye jjh@koreatimes.co.kr
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