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SKT, KT, LG Uplus turn blind eye towards illegal marketing from stores

By Kim Hyun-bin

The country's three major telecommunication companies SKT, KT and LG Uplus have been turning a blind eye towards illegal marketing conducted by their local stores in order to maximize profitability, even though the move significantly tarnishes their reputation.

SK Telecom CEO Park Jung-ho
SK Telecom CEO Park Jung-ho
The companies sell their products locally largely through two different types of stores; one being an "official store" authorized by the company and only selling products of the affiliated firm, the other "unofficial store" operates under a separate agreement to sell the products in exchange for incentives in attracting new customers.

"The telecommunication companies sign legally binding contracts with the official stores and could be fined for their unethical marketing, however, the companies have no legal responsibility for unauthorized stores, even though they are engaged in illegal marketing for the company," an official from one of the three major telecommunication companies told The Korea Times.

The "unofficial" stores are allowed to sell products from all three companies, and their marketing strategy depends on which one provides the most incentives at any given time, an official familiar with the issue said.

KT Chairman Koo Hyun-mo
KT Chairman Koo Hyun-mo
A woman in her mid-30s surnamed Chung received a random call at work from a telecom marketer on Jan. 7, who tried to force a change to her TV and internet plan, falsely claiming her current plan would no longer be valid at her apartment complex in Seoul.

"There has been a structural change in the cable industry, I know you are using KT but you will need to change to LG Uplus as KT will no longer offer the current plan in your region. It is not a matter of choice but a must due to structural changes," an unofficial store marketer said. "Despite the structural changes, your contract will be automatically extended by three years when you change companies, but your monthly bill will be reduced by 10,000 won ($8.6). We need to set a date so we can install the new cable box," he said.

"The marketer was very persuasive and I almost consented to the changes. I believe a lot of customers were falsely deceived into signing the contract that binds them for three years," Chung said.

The telecommunication companies are well aware of the situation, however, they turn a blind eye as they continue to create profits, even though they are achieved by illegal means that tarnish the companies' reputations.

LG Uplus Vice Chairman Ha Hyun-hwoi
LG Uplus Vice Chairman Ha Hyun-hwoi
"They are not our official stores so we do not have direct relations with them, they submit their performance results to official stores and receive incentives, we are aware they tend to engage in aggressive and illegal marketing and that sometimes it could tarnish our reputation. However, the government regulates illegal marketing of unofficial stores with fines," another major telecom company official said.

Although unofficial stores are not regulated by the telecom companies, the government can slap them with fines for illegal marketing.

In recent times the government has strengthened fines for offenders. Last year, the government responded with a 1 million won fine for a first illegal marketing offense, 3 million for a second, 6 million for a third and 10 million for a fourth or over offense. However, the fines have now been strengthened to 3 million won for the first offense.

"We have strengthened fines regarding illegal marketing from unofficial stores and increased the fines for repeat offenders. We impose a 5 million won fine for second offenders and 10 million won for a third, but we do not suspend their operations. It's up to the telecom companies to restrict them," an official at the Korea Communications Commission (KCC) said.

Despite the strengthened penalties many have criticized the KCC for not cracking down on violators with the full force of the regulations.


By Kim Hyun-bin

The country's three major telecommunication companies SKT, KT and LG Uplus have been turning a blind eye towards illegal marketing conducted by their local stores in order to maximize profitability, even though the move significantly tarnishes their reputation.

SK Telecom CEO Park Jung-ho
SK Telecom CEO Park Jung-ho
The companies sell their products locally largely through two different types of stores; one being an "official store" authorized by the company and only selling products of the affiliated firm, the other "unofficial store" operates under a separate agreement to sell the products in exchange for incentives in attracting new customers.

"The telecommunication companies sign legally binding contracts with the official stores and could be fined for their unethical marketing, however, the companies have no legal responsibility for unauthorized stores, even though they are engaged in illegal marketing for the company," an official from one of the three major telecommunication companies told The Korea Times.

The "unofficial" stores are allowed to sell products from all three companies, and their marketing strategy depends on which one provides the most incentives at any given time, an official familiar with the issue said.

KT Chairman Koo Hyun-mo
KT Chairman Koo Hyun-mo
A woman in her mid-30s surnamed Chung received a random call at work from a telecom marketer on Jan. 7, who tried to force a change to her TV and internet plan, falsely claiming her current plan would no longer be valid at her apartment complex in Seoul.

"There has been a structural change in the cable industry, I know you are using KT but you will need to change to LG Uplus as KT will no longer offer the current plan in your region. It is not a matter of choice but a must due to structural changes," an unofficial store marketer said. "Despite the structural changes, your contract will be automatically extended by three years when you change companies, but your monthly bill will be reduced by 10,000 won ($8.6). We need to set a date so we can install the new cable box," he said.

"The marketer was very persuasive and I almost consented to the changes. I believe a lot of customers were falsely deceived into signing the contract that binds them for three years," Chung said.

The telecommunication companies are well aware of the situation, however, they turn a blind eye as they continue to create profits, even though they are achieved by illegal means that tarnish the companies' reputations.

LG Uplus Vice Chairman Ha Hyun-hwoi
LG Uplus Vice Chairman Ha Hyun-hwoi
"They are not our official stores so we do not have direct relations with them, they submit their performance results to official stores and receive incentives, we are aware they tend to engage in aggressive and illegal marketing and that sometimes it could tarnish our reputation. However, the government regulates illegal marketing of unofficial stores with fines," another major telecom company official said.

Although unofficial stores are not regulated by the telecom companies, the government can slap them with fines for illegal marketing.

In recent times the government has strengthened fines for offenders. Last year, the government responded with a 1 million won fine for a first illegal marketing offense, 3 million for a second, 6 million for a third and 10 million for a fourth or over offense. However, the fines have now been strengthened to 3 million won for the first offense.

"We have strengthened fines regarding illegal marketing from unofficial stores and increased the fines for repeat offenders. We impose a 5 million won fine for second offenders and 10 million won for a third, but we do not suspend their operations. It's up to the telecom companies to restrict them," an official at the Korea Communications Commission (KCC) said.

Despite the strengthened penalties many have criticized the KCC for not cracking down on violators with the full force of the regulations.


Kim Hyun-bin hyunbin@koreatimes.co.kr


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