News
SK Telecom (SKT), KT, and LG Uplus allegedly coordinated to keep their sales incentives at the same level
This week, South Korea’s Fair Trade Commission (FTC) has announced a preliminary decision to impose fines of up to $4.1 billion on the nation’s three telco giants.
SK Telecom, KT, and LG Uplus are accused of sharing internal information with each other between 2015 and 2022, allegedly to align their sales incentives paid to mobile phone retailers.
According to local media, if the FTC’s decision is finalised, the regulator intends to charge SKT between $1.05 billion and $1.63 billion, KT between $750.7 million and $1.3 billion, and LG Uplus between $732.2 million and $1.2 billion.
If imposed, these fines could be catastrophic for the operators, with even the lower bounds of these fines being far greater than their respective net incomes.
It is worth noting, however, that what the FTC here may consider to be collusion could, in fact, be efforts to follow government guidance.
In 2014, the Korea Communications Commission (KCC) introduced guidance as part of the Mobile Device Distribution Improvement Act that told operators to provide sales incentives of around 300,000 won ($222).
This Act was intended to promote competition in the mobile market by preventing major handset discounts and thereby maintaining a level of pricing stability. A decade on, however, and the Mobile Device Distribution Improvement Act is largely seen as a failure, having inadvertently served to maintain high prices for customers.
As a result, the South Korean government announced plans to abolish the Act at the start of this year.
But regardless of the Act’s ultimately failure, the KCC points out that the telcos were nonetheless following government guidance in their incentive strategies during the period in question.
“The KCC has delivered its opinions to the FTC multiple times, highlighting that it is difficult to view the case as collusion,” said KCC Secretary General Cho Sung-eun at a National Assembly audit on Monday.
He added that the KCC’s own investigation had not found evidence of collusion.
“The FTC and KCC have been collaborating since the investigation of the allegation began and will continue to closely communicate with each other through the upcoming processes,” said the FTC in a statement.
The FTC’s final decision on the matter is expected to be delivered early next year.
Keep up to date with the latest international telecoms news by subscribing to the Total Telecom daily newsletter
Also in the news:
“We’re the best kept secret in data centre and cloud,” says Nokia at Connected Britain
Submarine cable damage in the Red Sea ‘severely underestimated’
Vodafone and Google deepen relationship with 10-year AI partnership