Trial threat for telecom execs

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Trial threat for telecom execs

The Korea Communications Commission will take a sledgehammer approach to force telecommunications companies to comply with rules on smartphone subsidies by threatening criminal charges against executives.

The KCC on Thursday said it will ratchet up punitive actions against the telecoms by reporting abuses to police and prosecutors and ask them to prosecute violations of the Mobile Device Distribution Improvement Act, which went into effect on Oct. 1.

Until now, the government communication agency punished the companies through fines and suspension periods in which they couldn’t sign up new customers.

But even if executives are convicted of violating the act, no one will go to jail. Convictions are likely to end with fines of 300 million won ($273,300) or more for companies and executives.

Instead, they will likely have criminal convictions on their publicly disclosed personal records.

“If similar incidents repeat, even the CEOs of telecom companies will not be spared from criminal lawsuits,” said KCC Chairman Choi Sung-joon on Thursday. “I believe the prosecutors’ office will be able to uncover some facts that we missed in our own investigations.”

A KCC official told the Korea JoongAng Daily that the commission decided on the action after it became clear that executives allegedly ordered excessive subsidies to be offered on the latest iPhone models even when the ink on the revised law had barely dried.

At the end of last month, guerrilla offers of the iPhone 6 offered the hot model almost for free during the first three days of its sales.

Although the revised act prohibits telecommunications companies from providing excessive subsidies to attract more subscribers - the government claims they disadvantage less tech-savvy consumers who have no access to information about such sales - they were offered anyway, enraging the KCC.

The mobile distribution act set the maximum amount of subsidies at 300,000 won per device. But some 16-gigabite iPhone 6s were sold in the 100,000 won range. The new iPhone 6 is officially priced at 789,800 won.

On Nov. 3, the KCC started investigating 44 retailers that recorded unusually high sales on the three first nights of iPhone 6 sales.

The investigation, which came to an end on Nov. 20, found that all three mobile carriers - SK Telecom, KT and LG U+ - gave written instructions to their retailers to raise the subsidies to a range of 410,000 won to 550,000 won for the 16-gigabite iPhone 6.

According to market analysts, smartphone retailers competitively offered the iPhones with excessive subsidies after the revised act put a dent in their businesses as consumers became reluctant to buy new smartphones. The much-hyped iPhone was an opportune product with which they could revitalize their slumping sales.

Meanwhile, the KCC will also launch a joint market watch team next month with the three mobile carriers and the private-sector telecom market association to prevent more illegal subsidies.

BY kim ji-yoon []
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