KCA blames carriers for subsidy fraud

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KCA blames carriers for subsidy fraud

The Korea Consumer Agency (KCA) said Tuesday that mobile carriers and their direct subsidiary dealer shops are responsible for illegal subsidies on smartphones by independent dealers posing as subsidiaries.

Subsidies of more than 270,000 won ($251) are illegal, but they have been used by dealers trying to lure customers.

The consumer dispute resolution committee of the KCA decided that mobile carriers and their subsidiary dealer shops should offer compensation of 50 percent of consumer costs caused by fraudulent dealers, even though they were not directly involved in the failure to provide subsidies.

According to the committee, a 40-year-old surnamed Kim purchased a smartphone last September after he received a call from an independent dealer who said it was a subsidiary dealer shop of a mobile carrier. He was told the carrier would provide a subsidy of 1,389,000 won for purchasing a smartphone and subscribing to the mobile carrier.

However, the smartphone dealer did not provide the full subsidy it had promised.

Eventually, Kim reported the case to the committee of KCA, requesting the mobile carrier and its subsidiary dealer shop to complete the agreement.

The committee held the carrier and its subsidiary dealer shops responsible for the damage because they did not take any action even though there have been about 1,500 such cases.

In addition, they were partly responsible for consumers’ misunderstanding that the subsidy they are receiving was the responsibility of the carriers, as they did not crack down on independent dealers.

The KCA committee said carriers neglected regulating their subsidiary dealer shops as well as independent dealers, even after they have been penalized for providing illegal subsidies themselves.

However, the committee limited the responsibility of mobile carriers and their subsidiary dealer shops to 50 percent, as consumers are also culpable in that they concluded contracts without verifying offers of far more than the 270,000 won limit mandated by the KCA.

“The decision has a significance in that it held mobile carriers, which are actual sellers of the goods and the subject of profits, accountable for neglecting their duties of management and supervision of dealers, which resulted in damage to consumers caused during the sales process of handsets and mobile service subscriptions,” said a spokesman for the committee.

“Although the KCA has recommended several times that smartphone dealers introduce a display method that clearly notifies consumers of any subsidies and their amounts in addition to the prices of handsets and installment principal in the handset sales contract column, most of the dealers are not conforming with this custom. We once again urged them to adhere to the rules of the committee.”

BY KIM JUNG-YOON [kjy@joongang.co.kr]
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