Korea FTC Allows Apple to Draw Up Measures to Correct Anti-Competitive Practices

[MacRumors]

South Korea's antitrust regulator has decided to allow Apple to map out a set of measure to address its anti-competitive business practices in the country, reports the Korea Herald.

The Fair Trade Commission investigated Apple Korea for requiring SK Telecom, KT Corp, and LG Uplus Corp to pay the cost of television advertisements and warranty service for its iPhones.

The investigation found that Apple holds a clear advantage over local mobile carriers and that handing over the cost of advertisements was another means of squeezing the profits of the carriers, according to the report.

The law requires that Apple comes up with a correction scheme necessary to restore competition practices or to improve business practices. The commission said it will review detailed corrective measures crafted by Apple Korea and decide whether to approve them.

Apple Korea welcomed the commission's decision and issued the following statement.

"We don't believe we have done anything wrong but are happy to put this process behind us so we can focus on doing even more for our customers and communities," Apple Korea said in a statement.

Apple has faced criticism over its business practices in the country before. In April, the FTC ordered the company to change unfair provisions in its contracts with certified repair service partners which stipulated that the firms could not file lawsuits against Apple within a year after any dispute.

The repair service partners were seen to have little choice but to agree with the terms, due to the market power of Apple's iPhones. Apple complied with the FTC order and changed the contracts.

In 2015, the FTC also ordered Apple to allow customers refunds for repair services.

Article Link: Korea FTC Allows Apple to Draw Up Measures to Correct Anti-Competitive Practices

 

[4jasontv]

I’m confused. Did Apple advertise their own products and than send the bill to the carriers? It can’t possibly be anticompetitive to simply not run ads. If the carriers want to tell people they sell the iPhone they should shoulder that cost.

 

[velocityg4]

I’m confused. Did Apple advertise their own products and than send the bill to the carriers? It can’t possibly be anticompetitive to simply not run ads. If the carriers want to tell people they sell the iPhone they should shoulder that cost.

Hard to say from the press releases. Although one sounds like Apple Korea is requiring the Korean telecoms to pay for Apple's marketing in that country. Not the telecoms marketing of the iPhones but Apple's marketing. I expect more will be know if they go to court and don't settle.

"As Apple does not allow mobile carriers to offer subsidies for iPhones, they may have been forced to pay for Apple Korea's marketing activities," said another source.

Apple Korea under probe over unfair contracts with carriers - The Korea Times

By Lee Min-hyungThe nation’s antitrust watchdog is investigating Apple Korea over the terms of its marketing contracts with local mobile carriers, sources said Tuesday.It is the latest in a seri...

www.koreatimes.co.kr

 

[sw1tcher]

If the carriers want to tell people they sell the iPhone they should shoulder that cost.

Should carriers also be expected to shoulder the cost of repairs?

The Fair Trade Commission investigated Apple Korea for requiring SK Telecom, KT Corp, and LG Uplus Corp to pay the cost of television advertisements and warranty service for its iPhones.

 

[macfacts]

I’m confused. Did Apple advertise their own products and than send the bill to the carriers? It can’t possibly be anticompetitive to simply not run ads. If the carriers want to tell people they sell the iPhone they should shoulder that cost.

Carriers can't sell the iPhone unless they also run/pay for iPhone ads.

 

[4jasontv]

Carriers can't sell the iPhone unless they also run/pay for iPhone ads.

That’s true for any business. If you want people to know you sell something you need to advertise it. People want the iPhone, and more than one carrier has it. So Apple doesn’t need to advertise it they can let the carriers fight over doing so.
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Hard to say from the press releases. Although one sounds like Apple Korea is requiring the Korean telecoms to pay for Apple's marketing in that country. Not the telecoms marketing of the iPhones but Apple's marketing. I expect more will be know if they go to court and don't settle.

"As Apple does not allow mobile carriers to offer subsidies for iPhones, they may have been forced to pay for Apple Korea's marketing activities," said another source.

Apple Korea under probe over unfair contracts with carriers - The Korea Times

By Lee Min-hyungThe nation’s antitrust watchdog is investigating Apple Korea over the terms of its marketing contracts with local mobile carriers, sources said Tuesday.It is the latest in a seri...

www.koreatimes.co.kr

So they were locked from doing business as normal and they found an alternative to raising prices. Meanwhile, the carrier that works the hardest pushing the device sells more lines. It sounds like Korea is upset because Apple followed the letter of the law.
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Should carriers also be expected to shoulder the cost of repairs?

If they want to offer that service, yes.

 

[simply258]

If it’s for Apple’s iPhone ads that show the carrier’s name at the end for a split second then it’s not fair that carriers bear the full cost or even half of it. If you blink you’ll miss the carrier’s name.

 

[JMO1]

this is honestly no different than selling product in mass retail in the USA. Every time you get an ad from Target, Walmart, their flyer, their discounts, it’s a combination of both (mfg and retailer) that bear the costs. Retailers are required to buy minimums for price breaks and do have an allotment for returns and repairs on their end before Apple would incur costs. To me this seems pretty standard.

 

[VictorTango777]

Should carriers also be expected to shoulder the cost of repairs?

If they want to offer that service, yes.

The original quote:

The Fair Trade Commission investigated Apple Korea for requiring SK Telecom, KT Corp, and LG Uplus Corp to pay the cost of television advertisements and warranty service for its iPhones.

Not sure what type of warranty service they are referring to, but aren't repairs under warranty supposed to be free of charge from the manufacturer? If an authorized third party performs a warranty repair, the manufacturer is supposed to pay the service center.

 

[4jasontv]

The original quote:


Not sure what type of warranty service they are referring to, but aren't repairs under warranty supposed to be free of charge from the manufacturer? If an authorized third party performs a warranty repair, the manufacturer is supposed to pay the service center.

It should be free for the customer. Not for the carrier. The carriers are offering in-store warranty services as a way to increase the value of their brand. They should pay for that because they are taking away opportunity for Apple to work with the customer directly. If the carriers want people to know they sell the iPhone than they should pay for it and if they want to maintain the relationship across all aspects of service than they should pay for that as well.

Let's be clear about something. Apple wants to work with customers directly and they have the resources to service those customers directly. Providing warranty services via the carrier benefits the carrier not Apple. It costs Apple to support supporting the carriers support services above the costs to provide warranty support for the customer. The carrier should carry the burden of that cost.

If selling the iPhone comes with the requirement that they must advertise it and service it at the carriers expense than the carriers are more than welcome to not sell Apple's devices. Of course they would not be able to directly attract customers seeking a highly requested device.

 

[VictorTango777]

It should be free for the customer. Not for the carrier. The carriers are offering in-store warranty services as a way to increase the value of their brand. They should pay for that because they are taking away opportunity for Apple to work with the customer directly. If the carriers want people to know they sell the iPhone than they should pay for it and if they want to maintain the relationship across all aspects of service than they should pay for that as well.

Let's be clear about something. Apple wants to work with customers directly and they have the resources to service those customers directly. Providing warranty services via the carrier benefits the carrier not Apple. It costs Apple to support supporting the carriers support services above the costs to provide warranty support for the customer. The carrier should carry the burden of that cost.

If selling the iPhone comes with the requirement that they must advertise it and service it at the carriers expense than the carriers are more than welcome to not sell Apple's devices. Of course they would not be able to directly attract customers seeking a highly requested device.

Authorized service providers already pay the manufacturer for administration and licensing fees required to maintain their authorized status. In return, the manufacturer is supposed to pay the service center an agreed amount for performing warranty repairs. Otherwise, the service center is working for free (losing money if you include licensing fees). The quote seems to imply that in addition to the licensing fees, Apple is also:
1. Charging carriers for each warranty repair performed by the carrier, or
2. Charging carriers for warranty repairs even if the carrier just ships the device directly to Apple.

There is a difference between a carrier's iPhone ads and Apple's own iPhone ads. Of course, a carrier would pay to run the carrier's own ads. But the quote implies that Apple is making carriers pay for Apple's own ads which don't involve the carriers. If it helps makes things clearer and reduce bias, imagine a local Honda dealer running a Honda commercial as opposed to Honda corporation running their own TV commercials.

 

[4jasontv]

Authorized service providers already pay the manufacturer for administration and other fees required to maintain their authorized status. In return, the manufacturer is supposed to pay the service center an agreed amount for performing warranty repairs. Otherwise, the service center is working for free (losing money if you include licensing fees). The quote seems to imply that in addition to the standard license fees, Apple is either:
1. Charging the carriers for each item repaired by the carrier, or
2. Charging the carrier for warranty repairs even if the carrier just ships the device directly to Apple.

Yes, they should pay for performing either 1 or 2 for the reasons I stated.

It should cost the carrier to perform those services.

 

[VictorTango777]

Yes, they should pay for performing either 1 or 2 for the reasons I stated.

It should cost the carrier to perform those services.

Are you suggesting that authorized service centers who do warranty repairs should work for free or even lose money? Does this apply to any service center doing warranty work for any manufacturer, or just mobile carriers working on Apple devices? I ask because mobile carriers have a reputation for being hated in these forums while Apple has a reputation for being unconditionally defended no matter what they do.

 

[4jasontv]

Are you suggesting that authorized service centers who do warranty repairs should work for free or even lose money? Does this apply to any service center doing warranty work for any manufacturer, or just mobile carriers working on Apple devices? I ask because mobile carriers have a reputation for being hated in these forums while Apple has a reputation for being unconditionally defended no matter what they do.

Authorized repair centers are extensions of the company who authorized them. As long as they operate under the instruction of the manufacture then they serve the need for repair to customers who otherwise live outside of an area directly supported by the manufacture. Their ability to support the customer will and should always be regulated by the manufacture. A good manufacture should pursue this to the degree that the customer isn't mindfully aware that they are not working with the manufacture directly.

Carriers don't operate that way. They frequently try and turn service support into new sales. They try and push new plans, add a lines, and upgrades on customers. These are behaviors that prey on customers who expect to get manufacture support only to feel like they are being baited by sales reps. The carrier steps between the customer and the manufacture to try and modify a purchase decision. When that happens they are no longer performing warranty repairs. Now it is sales.

It's not a situation that should be assessed on a customer by customer situation. Either it happens or it doesn't. If it does than they should pay.

One of the reasons Apple likely gets a pass on their behaviors is because they did so much to break up the carriers control of the situation. Prior to Apple the carrier managed tech support, and if you didn't go to the carrier you went to a repair center authorized by the carrier. If you were lucky you had a repair place that was not authorized by the carrier. They couldn't do as much, but they often did a better job with the things they could do. The was only one app store, and it was run by the carrier and apps only worked on the phone you purchased it on. There was a time when you had to repurchase apps if your phone was warranty serviced but you didn't need to do that with some devices at unofficial service centers. One of Apple's best moves when they entered mobile devices was regulating how tech support was handled. Sales reps at Verizon used to use that as an argument against the ATT exclusive iPhone - claiming that if they had issues they couldn't get support from ATT as they had to go through Apple. What they didn't mention was that in doing so they would get an improved support experience.