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What is the real price of a mobile phone? When a person goes to a shop, the salesperson usually shows an eye-popping price at first; then tries to set the customers at ease by adding that they can get subsidies from mobile carriers. It turns out, however, that people have no reason to thank them for the subsidy ― mobile carriers and handset manufacturers have been pumping up handset prices in the first place to fool consumers.
The Fair Trade Commission (FTC) levied 45.3 billion won in fines on mobile carriers and handset manufacturers, Thursday, for inflating handset prices.
SK Telecom, the country’s largest mobile carrier, was fined 20.2 billion won, followed by Samsung Electronics, which has a 70 percent share of the handset market here, with 14.3 billion won. Telecommunications companies KT and LG Uplus as well as manufacturers LG Electronics and Pantech were also fined.
According to the commission, the three mobile carriers raised the original price of mobile phones by 225,000 won, on average, between 2008 and 2010. They then pretended they were giving that much in subsidies to subscribers buying the phones. The manufacturers colluded with the mobile carriers, suggesting putting bigger price tags on their handsets as this would help their phones be recognized as premium products on the market.
Manufacturers also pumped up the supply price to carriers. The commission noted that one of the manufacturers was supplying its phone to the local market at a price 313,000 won higher than the export price. After upping the supply price, the manufacturers pretended as if they were giving the same amount as a discount on sales of the phones.
In another case, the manufacturer supplied the handset to the carrier at 639,000 won. The mobile carrier, however, set the price tag at 949,000 won. Consumers, who had no idea about the price fixing, were happy to get on average a 78,000 won subsidy from the carrier, but in fact they were being ripped off.
“As the handset manufacturers and mobile service providers colluded in retail channels, it was really difficult for consumers to understand how the price was set. They were creating an illusion by abusing consumers who trusted them,” the commission announced.
SK Telecom, however, said that the commission didn’t understand that subsidies were a normal means of marketing. “Consumers are fully aware that manufacturers and mobile carriers use subsidies as a means of competing to draw consumers. They are purchasing after making comparisons,” the carrier said in an announcement. It added that the Fair Trade Commission shouldn’t be regulating the telecommunications market as it is subject to rules set by the Korea Communications Commission.
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