The South Korean anti-trust regulator is set to start deliberation on Apple Korea’s alleged unfair trade practices. The company has continued to deny the allegations or pretend not to know. However, it can face a fine of tens of billions of won to hundreds of billions of won if the regulator rules the allegations as true.
The Fair Trade Commission (FTC) is set to hold a first full session on Dec. 12 to deliberate on whether Apple Korea has abused its powerful market position and shifted the burden of advertising costs and other expenses, including retail store counter installation costs and product repair costs, to three South Korean mobile carriers – SK Telecom, KT and LG Uplus.
To secure the evidence is the key to the deliberation. Officials from domestic mobile network operators are complaining about Apple Korea’s unfair practices at the unofficial occasions but having difficulty in making an official statement.
A senior executive from a large mobile carrier said, “All kinds of contracts made with Apple Korea include a mutual confidentiality obligation. This is why it is not easy for mobile carriers to testify in public (at the full session of the FTC) even they are unfairly treated by Apple Korea. The U.S. firm has closed up or denied the allegations because it counts on the confidential agreement signed with domestic partner companies.”
Accordingly, the decisive factor will be whether the FTC has secured material evidences that can prove Apple Korea’s unfair practices, such as documents and recorded tapes, through its own investigation in addition to mobile carriers’ testimony. The FTC is said to be confident in proving Apple Korea’s market power abuse as it has examined the issue for nearly two years.
Domestic partner companies suffered losses mostly from Apple allegedly having shifted advertising expenses to them. Another official from the telecommunication industry said, “Apple Korea ran TV commercials with its own budgets for a year after it released the iPhone in South Korea at the end of 2009. Then, the company started talks with domestic mobile carriers in 2011 about sharing the burden of advertising costs. I heard that the advertising expenses have amounted to at least 20 billion won (US$17.69 million) a year since then.”
If Apple Korea has forced its partner firms to pay 20 billion won (US$17.69 million) every year for advertising costs from 2011, the domestic mobile carriers have suffered more than 160 billion won (US$141.53 million) of losses for eight years. In addition, the losses will grow further considering other expenses, such as product repair costs and stand installation costs.
However, mobile carriers all said that Apple Korea has continued to be on a power trip even after 2016 when the FTC started the investigation. An executive from a mobile carrier said, “I couldn’t feel that Apple Korea changed its attitude toward us (domestic mobile carriers) over the past two years. I didn’t think the past practices changed last year and this year when the company launched a new iPhone.”
In fact, Apple Korea doesn’t admit the controversy over unfair business practices in the domestic telecommunications industry. Apple Korea CEO Brandon Yoon attended the parliamentary inspection this year but denied to answer the questions about the unfair practices by lawmakers.