Massive fines considered for KT, Hanaro

Saying that fixed-line phone companies, including KT and Hanaro Telecom, have been overcharging the public after conspiring to raise rates, the Fair Trade Commission is seeking to impose combined fines of as much as 178 billion won ($178 million). The commission was supposed to announce the exact amount of the penalties yesterday at a meeting, but postponed the decision. “The companies asked for more time to state their cases,” a Fair Trade official said. The next meeting will take place on May 25. On March 28, the commission said that the companies had conspired in 10 cases of price-fixing between 2002 and 2004. It said KT and Hanaro raised their rates for local calls in the summer of 2003 on the condition that KT give 1 to 2 percent of its market share to Hanaro. That violated two laws ― one that bans companies from colluding on prices, and another forbidding a company with a dominant market presence from abusing its power to influence prices. KT controls more than half of the fixed-line phone market. In price-setting cases, the commission can impose fines of up to 5 percent of sales in the related sector. Maximum penalties for abusing power are lower. In a worst-case scenario, KT would face fines of about 140 billion won. This action is the latest in the commission’s crackdown on telecoms. On Monday, the agency imposed a record fine of 26.9 billion won on mobile phone operators. After dealing with wrongdoing related to local calls, the commission will scrutinize long-distance calls, high-speed Internet, international phone calls, and Internet services for PC rooms. It has been monitoring the fixed-line providers KT, Hanaro, Dacom and Thrunet in these areas. The commission will reduce the fines if it finds that the companies fixed prices as a result of government policies. Last month, Information Minister Chin Dae-je said in a report to the National Assembly that the ministry in 2002 asked phone companies to stop excessive price cuts, but said he was not sure whether that could have led to the price rises in 2003. by Wohn Dong-hee