Philips fined for prices after EU tariffs dropped

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Philips fined for prices after EU tariffs dropped

Korea’s antitrust agency imposed a fine on Philips Korea, a local branch of Royal Philips Electronics of the Netherlands, for prohibiting domestic retailers from lowering prices on its products even after tariffs were lifted when the Korea-European Union free trade agreement took effect last July.

The Fair Trade Commission announced yesterday it slapped the Dutch electronics maker with a 1.5 billion won ($1.3 million) fine for internally agreeing to set minimum prices for small electronic items being sold by Korean retailers on online marketplaces and not allowing them to lower them.

“It is the first penalty on an unfair trade practice committed by a foreign company since implementation of the EU FTA,” the FTC said in a statement.

The agency’s move came as part of its efforts to remove unfair practices in the distribution of imported goods and to eliminate price bubbles in the local small electronics market, especially since the EU FTA went into effect, it said.

Philips had set minimum prices for small electronic products such as mixers, toasters, electric razors and coffee makers being sold on the country’s major online retailers, Auction, Gmarket and 11st.

According to the FTC, 8 percent tariffs on European-made electronics were lifted after the Korea-EU FTA went into effect on July 1, 2011.

Philips is the No. 1 foreign brand for small electronic products in the country. It is most famous for electric razors, claiming a 61.5 percent of the market.

The Dutch company formed a task force to strategically limit competition in the Korean online market in 2010, the FTC said. The company thought fierce price competition online might force offline shops to cut prices.

It came up with a policy in May last year that all small electronic products by Philips should be sold online at prices 50 percent higher than in stores, the FTC said.

If local sellers violated the policy, they were told by Philips that they would face problems like suspended shipments or higher supply prices.

As evidence, the FTC found e-mails between employees at Philips headquarters and Korean retailers.

In March 2011, the company banned sales of the SensoTouch 3D shaver, Sonicare electric tooth brush, Seco espresso machine and its docking speakers on Internet markets in Korea. It gave a one-day notice to Korean retailers to remove the products from online marketplaces. Otherwise, they were threatened with halted shipments.

Philips added its new air fryer to the list of banned online sales back in July.

“The act of intentionally setting prices and banning online discounts of particular products could have similar effects on the market as an act of colluding with other retailers to not cut prices,” said Roh Sang-seob at the FTC. “Prohibiting online sales is equivalent to directly cutting off one of the channels for consumers,” the official said.

By Song Su-hyun []
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