Facing hefty fine for price-rigging, KT threatens suit

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Facing hefty fine for price-rigging, KT threatens suit

Following the antitrust agency’s decision yesterday to slap hefty penalties on KT Corp. for price-rigging, the company rebutted the allegations and claimed that it had only followed the guidelines offered by the Ministry of Information and Communication. The nation’s biggest broadband Internet and fixed-line telephony operator, KT said it would consider going to court to avoid the penalties. The Fair Trade Commission levied nearly 26 billion won ($25 million) in combined fines on KT, Dacom Corp., Onse Telecom Co. and Hanarotelecom Inc. for rigging since 2000 the prices of their long-distance domestic and international phone services, as well as their broadband Internet services. A KT spokesman said the commission’s decision was inappropriate because the price fixing was the result of administrative actions taken by the information ministry, which oversees the telecommunications market. Kim Byung-bae, the director-general of the Fair Trade Commission’s competition bureau, said an investigation found the communication ministry may have requested that the firms take certain administrative actions, which were then likely used to justify the price rigging. An official from the information ministry admitted in a press briefing yesterday that in 2002 the ministry encouraged KT to reduce its long-distance call service charges in a bid to prevent possible competition with latecomers. But he noted that the antitrust agency also said that the ministry did so in order to stay in line with new legislation, and the fines were levied because the companies’ price-fixing was unrelated to the ministry’s guidelines. “Based on what we know, and what has been admitted by the communication ministry, there is the need to change the way government agencies exert their influence on companies,” said Mr. Kim. He added that the issue would be raised during the next government reform committee meeting. According to the corporate regulator, price rigging by local fixed-line telecom service providers is estimated to have cost consumers more than 932 billion won in damages. Mr. Kim said the estimate is based on a model used by the Organization for Economic Cooperation and Development (OECD). “Under the OECD system, the level of damage caused by cartel activities is equivalent to 15 to 20 percent of total sales from the services provided,” the official said. By this standard, the price fixing by KT, Dacom and Onse for only their international phones services may have cost consumers 76 billion won, while the bill for long-distance domestic phone services could top 143 billion won if Hanarotelecom were included. Taking into account the 123 billion won in extra charges that may have been transferred to consumers for ultra-high-speed Internet connections, the extent of the damage might reach 342 billion won, Mr. Kim said. by Seo Ji-eun, Lee Hee-sung
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