Thu, Dec 26, 2013 - Page 1 News List

FTC fines Apple Asia for setting iPhone prices

ANTI-COMPETITION:The commission found Apple Asia had no right to set the prices for handsets it had sold to local telecom firms, or to set contract conditions

By Camaron Kao  /  Staff reporter

A consumer checks an Apple cell phone yesterday. The Fair Trade Commission has given the company’s local subsidiary a fine of NT$20 million for violating the Fair Trade Act.

Photo: Lo Pei-der, Taipei Times

The Fair Trade Commission (FTC) yesterday fined Apple Asia Ltd NT$20 million (US$666,220) for restricting local telecommunications companies to set their sale prices of iPhones — a move that inhibits competition.

“The commission’s ruling makes Taiwan the first country to fine Apple Inc’s subsidiaries concerning their handset distributors’ pricing, while there is a similar ongoing investigation concerning Apple Inc for impeding competition in Europe,” Fair Trade Commission Vice Chairman Sun Lih-chyun (孫立群) said.

Apple Asia Inc has to stop the practice immediately once the company receives official documentation from the government, otherwise the company may be subject to another fine of NT$100,000 up to NT$50 million, Sun said.

“If Apple Asia hired local companies to provide services and sell iPhones, the company can set prices for them,” Sun said. “However, based on the contracts between Apple and their handset distributors, the company actually sold its iPhones to local companies, therefore local companies should have the right to set prices themselves.”

According to Sun, Apple Asia violated Article 18 of the Fair Trade Act (公平交易法), which states that when an enterprise supplies goods to its trading counterparts for resale to a third party, the trading counterparts shall “be allowed to decide their resale prices freely.”

The contracts between Apple Asia and Chunghwa Telecom Co (中華電信), Taiwan Mobile Co (台灣大哥大) and Far EasTone Telecommunications Co (遠傳電信) showed that Apple Asia demanded the three companies to send their iPhone pricing plans for its review, Sun said.

In e-mails between high-ranking officials of the companies, the commission also found evidence that Apple Asia required local companies to adjust plans they proposed concerning the prices for iPhones, the subsidies they offer for iPhones with contracts, and the price difference between the iPhone 4S and the iPhone 5, he said.

The contracts between Apple Asia and the three local companies also stipulated that the conditions they set for buying iPhones, such as subsidies these companies offer for buying iPhones with contracts, cannot be lower than those of their competitors, Sun said.

The three local companies also needed to submit their promotion plans for iPhones for the approval and confirmation of Apple Asia, he added.

Sun said the commission investigated three other smartphone makers, HTC Corp (宏達電), Sony Corp and Samsung Electronics Taiwan, but none of them has reached similar contracts with local service providers.

The three companies account for 80 percent of the local market for telecommunication services, Sun said, adding that 90 percent of iPhones sold in Taiwan are from the three companies, with most of the headsets sold with contracts.

Sales of iPhones in Taiwan account for 1 percent of iPhones sold by Apple Inc around the world, Sun said.

The commission established the case in April this year when FTC Chairman Wu Shiow-Ming (吳秀明) was urged by legislators to investigate why all local mobile service providers had set the same prices for iPhones, Sun said.

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