Dubious car discounts did no harm, says FTC

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Dubious car discounts did no harm, says FTC

Three popular imported vehicle brands were let off the hook by the antitrust agency for false advertising Wednesday.

According to the Fair Trade Commission, BMW Korea, Audi Volkswagen Korea and Nissan Korea were absolved of deceiving consumers about discounts when they were actually selling them cars on which taxes had been lowered.

The FTC said it didn’t make much difference to the buyers.

The antitrust watchdog said the foreign car companies imported the vehicles in question in the second half of 2015, when the individual consumption tax was lowered to 3.5 percent. The Korean government eased the consumption tax on vehicles and other items through the end of 2015 in hopes of stimulating spending to boost a domestic economy that was slammed by an outbreak of Middle East Respiratory Syndrome.

When the consumption tax was raised back to 5 percent in January 2016, the imported brands didn’t raise their prices and said they were offering discounts.

But technically they weren’t.

For imported vehicles, the consumption tax is applied when they go through customs. The cars in question were imported when the tax was temporarily lowered but sold after it had been restored to 5 percent.

That allowed the foreign brands to sell some vehicles with the lower 3.5 percent tax even after it had been raised.

They described those prices as discounts and promoted them aggressively on their websites and through press releases.

“Whether to apply the raised or lowered individual consumption tax on the sales prices is up to the company and not a legal requirement,” the FTC said. “What we have found was that although it was deceptive for the imported brands to pretend they were assuming the cost of the raised consumption tax, eventually no harm was inflicted on consumers since they still got a discount on their purchase.”

The official said the car companies could have sold the vehicles with the newly raised 5 percent tax and taken more profit but didn’t.

The FTC also said their actions did not diminish competition among imported vehicle brands in Korea as sales for other imported brands didn’t see a significant drop as a result.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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