The Korea Fair Trade Commission (KFTC) and Apple are engaged in a fierce battle over restrictions on Apple Korea, which allegedly compelled local mobile carriers to pay iPhone advertising and repair costs in its place in 2016.
The KFTC held its second plenary meeting concerning Apple’s alleged abuse of market dominance on Jan. 16. The first plenary meeting took place in December last year after two years of investigation.
The second plenary meeting has three key issues, that is, whether Apple is a dominant entity, whether its funding for advertising with the mobile carriers was legitimate, and whether its involvement in advertising was legitimate. According to the KFTC, Apple ran commercials by using the joint fund and compelled the mobile carriers to bear some of its after-sales service center costs, both of which are unfair.
Meanwhile, Apple claimed that it has no dominant market position since its bargaining power is not stronger than those of the mobile carriers. “It is SK Telecom, KT, and LG U+ that are dominating the local mobile market, and the contract terms in question have been in effect all the way since 2008, when we entered the South Korean market and our share in the market stood at 1 percent or so,” it said, adding, “An increase in iPhone sales based on the joint fund is helpful for the three companies as well, and our involvement in advertising was a legitimate act for iPhone brand refinement.”
The KFTC refuted Apple’s argument. “It can be said that the mobile carriers are highly dependent on Apple in that they need to continue to do business with Apple and their sales are likely to be significantly affected once they turn down Apple’s requests,” it explained, continuing, “The advertising fund is nothing but additional means for exploiting them for profits, and Apple’s involvement in advertising went beyond industry practices.”
The third plenary meeting is scheduled for Feb. 20. The KFTC mentioned that specific acts will be discussed in depth at the meeting. Once Apple’s allegations are proven true, a penalty of at least tens of billions of won can be imposed on Apple. According to current rules, such a penalty can be up to 2 percent of a company’s sales, which are estimated at trillions of won in the case of Apple.