Stores, mobile carriers fined for iPhone 6 subsidies

The Korea Communications Commission (KCC) on Thursday said it would fine mobile carriers and retailers that were found to have offered illegal subsidies on the iPhone 6 from Oct. 31 to Nov. 2.

The prosecutors’ office is also investigating the case. This is the first time the KCC has imposed fines on retailers. Previously, mobile carriers have always taken responsibility for giving illegal subsidies.

Each of the three carriers - SK Telecom, KT and LG U+ - was fined 800 million won (about $717,000).

Of the 34 retailers that were found to have given illegal subsidies, three stores that sold fewer phones illegally were fined 1 million won, and 19 stores must pay 1.5 million won to the KCC. Penalties have yet to be issued for the remaining 12 shops.

According to the Mobile Device Distribution Improvement Act, a mobile carrier can be fined up to 4 percent of the company’s sales from the period of the illegal actions.

The KCC said it decided to impose a fine of 800 million won because it did not have accurate data that it could use to estimate the precise amount that the mobile carrier made in sales during the three days of illegal subsidies in early November.

“The illegal offers lasted for only three days, so the fines are small,” said Bae Choon-hwan, a public relations officer at the KCC. “The case was very complicated. First of all, we had a hard time distinguishing between normal sales and illegal sales, because the sales records are made based on the day a new phone number was opened.

“Some iPhones were pre-ordered online and were registered in the system during the three days. Also, some customers who illegally obtained iPhones in the 100,000 won range later canceled their purchases.”

Industry sources speculate that the mobile carriers made a total of about 500 million won during the period.

According to the Mobile Device Distribution Improvement Act implemented on Oct. 1, subsidies cannot surpass 300,000 won per device, but the KCC found out that all three mobile carriers had given written instructions to their retailers to raise subsidies to 410,000 won to 550,000 won for the 16-gigabite iPhone 6.

From Nov. 3 to Nov. 20, the KCC investigated 44 retailers that recorded unusually high sales on the first three days of iPhone 6 sales, and found that 34 stores had recorded selling 425 units of the iPhone 6 at low prices.

On Dec. 2, the KCC reported the three mobile carriers and their executives to the Seoul Supreme Prosecutors’ Office because the carriers allegedly ordered retailers to offer the huge subsidies on the iPhone 6 series.

BY KIM JI-YOON [jiyoon.kim@joongang.co.kr]