FTC likely to fine Ap­ple for un­fair busi­ness prac­tices

The Korea Times - - BUSINESS - By Jun Ji-hye [email protected]­re­atimes.co.kr

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 iPhone promo- tion 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 Sin­sadong, Nov. 2, when the iPhone XS was of­fi­cially re­leased here.

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