Are domestic electronics a rip off?

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Are domestic electronics a rip off?

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Amid a roiling price-fixing scandal of consumer electronics that has enveloped the nation’s leading brands, reports have surfaced showing that Samsung and LG may be selling their products at higher prices in Korea than overseas.

One local newspaper claimed that a 55-inch Samsung TV cannot be bought for less than 2.91 million won ($2,600) at Danawa.com, a Korean online shopping site, while the same model goes for 2.37 million won on Amazon.com. It said a similar discrepancy can be found among LG TVs.

The daily also alleged other Korean-made electronic goods, such as refrigerators, smartphones and laptop computers, are being sold in Korea at prices between 10 percent and 20 percent higher on average than what they retail for in the U.S.

Samsung and LG have countered that their domestic products are more expensive because they contain more functions.

“Korean consumers prefer high-tech functions, so only premium models sell well here,” a spokesman at one of these firms said. “Also, the price tag in Korea includes an installation fee as well as after-sales service fees.”

This has hardly thrown a pail on the burning anger of consumers already pressed by raging inflation, growing household debt and contracting wages.

One 35-year-old office worker surnamed Park bought Samsung’s 55-inch flat-screen TV at 3.2 million won last year, but says he barely uses all the fancy options it offers, such as Web connectivity.

“All I wanted was a simple TV with a good resolution. I didn’t need all the complex functions. But I couldn’t find a model [without them],” he said.

The recent success of discounted TVs being sold by discount stores, online marketplaces and home shopping channels suggests there is high demand for cheaper models with limited capabilities. E-Mart, a leading discount store, rolled out its own brand of 32-inch flat-screen TVs at just 499,000 won last October and saw its first batch of 5,000 sell out in just two days. It claimed the TVs were 40 percent cheaper than similar models sold by LG and Samsung.

Meanwhile, Grand National Party lawmaker Lee Kyeong-jae claimed last September that Korean consumers were buying domestically made handsets at prices far higher than what consumers in other countries pay for the same products.

He said Korean handsets in 2010 cost an average of 638,922 won in Korea, compared to 477,483 won abroad, adding that the difference - about 160,000 won - has risen from around 88,000 won in 2008.

Price-fixing addressed

Samsung Group, Korea’s No.1 business conglomerate, has vowed to take stern measures against price-fixing amid a growing public outcry against such activities by wealthy technology giants.

Such a conviction comes as the country’s antitrust watchdog has been intensifying its crackdown on price rigging and other anticompetitive activity out of fear that it could result in price hikes on products that people use on a daily basis, or necessities.

Korea’s Consumer Price Index rose 4 percent last year, hitting the upper ceiling of the Bank of Korea’s target band of between 2 percent and 4 percent. The government and the central bank have vowed to keep inflation within 3.3 percent this year.

Damage done

At a weekly meeting of Samsung presidents yesterday morning, Kim Soon-taek, head of the group’s revived control tower - dubbed the Samsung Corporate Strategy Office - said that “price collusion is clearly an act that harms a company.”

He asked the presidents to come up with “fundamental, detailed and realistic measures to root out price-fixing.” Although Samsung Electronics Chairman Lee Kun-hee did not make any official comments, Kim’s words can be assumed to reflect Lee’s wishes.

The group, which has over 80 affiliates in areas such as electronics, engineering, finance, textiles and hospitality, plans to investigate why price collusion is still a problem until the middle of next month. It said that in the last two years it has created a number of anti-collusion programs but will devise new measures if needed to resolve the issue.

The news comes after the Fair Trade Commission on Jan. 12 fined Samsung and LG a combined 44.64 billion won for fixing the prices of their key home appliance products. Samsung was fined 25.81 billion won and LG 18.83 billion won for rigging the prices of clothes washers, flat-screen TVs and laptops. The companies claimed they had done this out of fear that their profits would be eroded by the global financial crisis in 2008.

Green Consumer Network, a consumer advocacy group, has been seeking to lodge a class-action suit against the two companies on behalf of consumers that suffered losses from such practices.

And in a rare move, the country’s antitrust watchdog said on Tuesday that it will cover some of the expenses needed to gather consumers to participate in the suit. The companies pay far lower fines since they voluntarily reported them to the FTC under the so-called “lenience regulations,” but consumers have few ways of retrieving their losses or of being rightfully compensated, it said.


By Kim Hyung-eun [hkim@joongang.co.kr]

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