December 27, 2013
Apple Slapped With Hefty Fine For Attempting To Dictate iPhone Pricing In Taiwan
Bryan P. Carpender for redOrbit.com - Your Universe Online
As millions of people around the world received iDevices as gifts for Christmas, Apple got a gift of a different sort – and we’re pretty sure it wasn’t on their wish list.
The tech giant landed in hot water with the FTC for allegedly interfering with pricing plans for the iPhone handset at the country’s three main mobile service providers, Chunghwa Telecom Co., Far Eastone Telecommunication Co. and Taiwan Mobile Co.
Apple is accused of violating Article 18 of the Fair Trade Act, which states that “Where an enterprise supplies goods to its trading counterpart for resale to a third party or such third party makes further resale, the trading counterpart and the third party shall be allowed to decide their resale prices freely; any agreement contrary to this provision shall be void.”
Apparently, that wasn’t exactly how things were working.
The case started in April of this year, when FTC Chairman Wu Shiow-Ming was urged by legislators to investigate why all local mobile service providers had set the same prices for iPhones, Sun said.
“Through the email correspondence between Apple and these three telecom companies, we discovered the companies submit their pricing plans to Apple to be approved or confirmed before the products hit the market,” FTC said in a statement.
Contracts between Apple Asia and the telecom providers confirmed that each company was required to submit their iPhone pricing plans – both the retail prices for newer iPhone models, as well as the difference in price between the iPhone 4S and the iPhone 5 – for its review and approval.
E-mail correspondence between high-ranking officials of the companies also revealed that in addition to pricing, they were also required to get promotional plans and subsidies offered for iPhones confirmed and approved by Apple, as well.
The FTC maintains that Apple Asia has no legal right to dictate pricing of iPhones sold by local carriers. Once the mobile carriers pay for the distribution rights for the handset, they are allowed to distribute or resell iPhones at whatever price they deem appropriate – without having to attain Apple’s approval.
“If Apple Asia hired local companies to provide services and sell iPhones, the company can set prices for them,” Sun Lih-chyun, Vice Chairman of the Fair Trade Commission said according to Camaron Kao of the Taipei Times. “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.”
This ruling is something of a milestone, Kao further reports. According to Sun Lih-chyun, “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.”
Apple Asia must cease the violating practice immediately once they receive official documentation from the government or risk further fines of up to 50 million New Taiwan dollars ($1.7 million) if it doesn’t comply with the ruling.
It should be noted that the ruling applies only to iPhones; pricing for other Apple devices such as iPads and Macs will not be investigated, the FTC statement said.
Together, the three companies account for 80 percent of the local market for telecommunication services in Taiwan, plus they account for 90 percent of iPhones sold there, with most of the headsets sold with contracts. By comparison, Taiwan’s iPhone sales account for 1 percent of all iPhones sold by worldwide.
Apple has yet to offer any sort of public response to the ruling.