The Fair Trade Commission is set to look into allegations involving irregular practices in smartphone subsidy policies.
The move came as a number of handset agencies and stores filed a complaint with the FTC against telecom operators that allegedly force them to attain a certain sales target, according to the FTC and industry sources on Sunday.
Korea’s mobile carriers have been providing subsidies for agencies based on their sales performance in a bid to promote sales and tap into new markets.
“As competition to attract subscribers among mobile operators is getting fierce recently, the number of complaints regarding forcing sales goals from agencies and stores have surged,” the FTC said.
Even though this subsidy policy seems legal on the surface, it could lead to telecom operators being accused of abusing their market power.
“If the sales do not reach the target set by agencies, we receive fewer subsidies. So we reduce margin and provide more subsidies for customers based on the level of sales target,” said one handset store employee.
He added agencies are also under pressure from their headquarters as subsidies depend on the total sales of smartphones.
Against this backdrop, the FTC is aiming to set a clear standard of unfair business practices by ascertaining the actual economic effect of the subsidies through market analysis.
Korea Communications Commission also serves as a regulator of the subsidy policy. KCC imposed total fines of 67 billion won ($60 million) on three telecom firms, KT, SK Telecom, and LG Uplus, last month and issued-KT a ban on new subscribers for seven days on charges of leading the subsidy war.
The committee fixed the limit at 270,000 won ($243) for handset subsidies and imposes sanctions on companies which violate the rules.
As the issues are becoming more politicized, three bills were brought up to limit or ban subsidies and are pending in the National Assembly.
Earlier this year, President Park Geun-hye upon taking office said “As the excessive payment of handset subsidies is becoming a social issue, measures to control and root out the problems are being prepared.”
By Shin Ji-hye (firstname.lastname@example.org