Potential remedies against Apple Korea could harm business, trigger probes by other regulators

20 March 2017 1:20pm

16 February 2017. By Ron Lubosco.

The investigation into Apple Korea's alleged abuse of dominance against local telecom companies by the Korea Fair Trade Commission, or KFTC, has the potential to damage the company's business in the country if remedies are imposed, MLex has learned.

Apple Korea is being investigated for allegedly abusing its dominant market position to force local mobile phone carriers SK Telecom, KT and LG UPlus to bear the marketing costs for its products, including the installation of mobile-phone sales stands, the purchase of shop display phones and payment for some of the mobile-phone repair costs for customers.

A source told MLex that if the regulator decides to impose behavioral remedies that would require the company to help local telecommunications companies with the cost of marketing its products, this could prove very costly for the US tech company.

The source added that because Apple doesn't pay these additional costs, it allows them to maintain a higher profit margin overall and keep a considerable amount of extra income compared to competitors such as Samsung, which provide telecommunications companies with such amenities to market their products.

Additionally, if the KFTC imposes remedies and fines in this case, it could potentially trigger investigations in other jurisdictions for such practices, it is understood.

A second source told MLex that if the case against Apple in South Korea is successful, other regulators may opt to launch their own investigations into the company if they haven't already done so.

The investigation into Apple Korea was triggered in part by pressure from Samsung, it is understood.

The second source said that local mobile phone companies and Samsung have a lot to gain if Apple Korea were hit with remedies and fines, and they are calling on the KFTC to take action.

While many expect the regulator to take action, some believe that the KFTC shouldn't step into the dispute, because the issue itself isn't an antitrust one but rather a difference in business and marketing practices.

As previously reported by MLex, local media have reported that the KFTC's examiner's report will be released soon and that the company is likely to face fines in early 2017.

However, the regulator is likely to take more time to complete its investigation and prepare its report against the company, so the timing on the release of the report is still difficult to predict, it is understood.

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