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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] The Korea Fair Trade Commission (KFTC) has imposed a fine of 114 billion KRW on South Korea's three major telecom companies—SK Telecom, KT, and LG Uplus—over allegations of colluding on sales incentives. The telecom companies have signaled their intention to take legal action, arguing that they are being penalized with double fines by different regulatory bodies.
On Wednesday, the KFTC revealed that the three telecom giants had agreed to coordinate their number portability increases and decreases from November 2015 to September 2022, so that no operator would dominate the number transfers. The KFTC imposed a corrective order alongside the fine, with SK Telecom facing 42.66 billion KRW, KT 33.03 billion KRW, and LG Uplus 38.33 billion KRW.
The KFTC's ruling is based on the accusation of collusion on sales incentives, or "sales incentives manipulation." The commission found that the three telecom companies shared real-time number portability data to maintain similar levels of incentives. When their market share dropped, they would increase the incentives, and when the share went up, they would decrease them, ultimately hindering market competition.
Moon Jae-ho, Director of the KFTC's Cartel Investigation Bureau, emphasized, "The KFTC punishes the companies for agreeing to adjust the number portability increase and decrease figures. What they did was illegal because they agreed to something instead of competing."
The collusion occurred when employees from the three telecom companies and the Korea Association for Information and Communication (KAIT) gathered in one location to coordinate their actions. After being penalized by the Korea Communications Commission (KCC) for excessive sales incentives in December 2014 (violating the Telecommunications Device Distribution Act), the telecom companies established a self-regulatory market situation committee with KAIT.
Sales incentives are subsidies provided by telecom companies to mobile phone sellers and agents to increase discounts on devices. Although there is no strict cap, the KCC has set a guideline capping the incentives at 300,000 KRW. Since the introduction of the Telecommunications Device Distribution Act, telecom companies were required to share number portability data to prevent discrimination in incentives.
The KFTC argued that the telecom companies should have only worked to ensure they adhered to the cap on sales incentives, but instead, their coordination limited competition in attracting number portability customers. In fact, the daily number portability increase and decrease figures dropped drastically—from about 3,000 in 2014 to fewer than 200 in 2016, when collusion appears to have started. The total number of number portability transactions also shrank by 45.7% from 28,872 per day in 2014 to 15,664 in 2016, and further dropped to 7,210 in 2022.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
