"Chairman Joseph Sung-wook's Message on Active Use of ICT Consent Decree" Optimism and Numerous Overseas ICT Company Sanctions... "Cannot Be Careless" Caution Exists
[Asia Economy Reporter Moon Chaeseok] The Korea Fair Trade Commission (KFTC) will review next week whether to initiate the consent decree procedure regarding Apple Korea's alleged 'gapjil' (abuse of power) involving advertising fees and free repair costs with the three domestic mobile carriers. The key issue is expected to be how specifically and sincerely Apple has revised the advertising fees, free repair costs, and patent rights agreements made with SK Telecom, KT, LG Uplus, and other telecom companies. The consent decree system allows the KFTC to close a case before imposing fines or criminal charges if it accepts a voluntary corrective plan proposed by the company.
According to the KFTC on the 10th, the issue concerning Apple Korea's 'abuse of bargaining position' will be placed on the agenda for the plenary meeting on the 13th to begin deliberations. The KFTC is reportedly concerned that Apple jointly established an advertising fund with telecom companies but only aired advertisements for Apple products and brands. It also believes that Apple operated after-sales service facilities exclusively for its products while shifting part of the operating costs to the telecom companies.
Earlier, Apple applied for a consent decree in July last year, stating it would prepare a corrective plan voluntarily during the KFTC's investigation and deliberation. However, in the September deliberation last year, the KFTC withheld the decision to initiate the consent decree, judging that Apple's proposed corrective plan for transaction practices was insufficient. This was because the plan's improvements to transaction conditions and mutual growth support measures were deemed inadequate. Since then, Apple has submitted revised plans to the KFTC several times.
The KFTC stated it will closely examine the revised contracts Apple submits regarding advertising fees, free repair costs, and patent rights. It will focus on how specifically Apple has reflected the reasons for shifting advertising and repair costs and acquiring patent rights free of charge, as well as the improvement measures compared to the past. If transaction practices and mutual growth support measures remain insufficient, the consent decree can be rejected at any time.
Those who expect the KFTC to accept Apple's voluntary corrective plan point to ▲ Chairman Cho Seong-wook's New Year's address, in which he announced plans to utilize the consent decree system, and ▲ the fact that the KFTC recently accepted a consent decree from Namyang Dairy Products on the 6th, the most recent case after Chairman Cho's remarks, suggesting that Apple could also receive flexible standards if it presents a good explanation.
The reason Chairman Cho announced the use of the consent decree system is that overseas competition authorities are actively using consent decrees for information and communication technology (ICT) companies. The ICT market changes so rapidly that competition authorities find it difficult to regulate clearly.
However, there are counterarguments that the situation is not optimistic for Apple. This is because the KFTC has consistently imposed sanctions on overseas ICT companies such as Netflix until recently.
The KFTC has repeatedly intervened in the terms and conditions of Silicon Valley IT companies like Netflix, Facebook, Google, and Amazon. In January, the KFTC became the first in the world to order Netflix to revise its terms, and after the measure, Netflix agreed to obtain member consent whenever changing service fees in Korea.
Last month, the KFTC required Twitch TV, a subsidiary of Amazon, to change its internal rules that allowed it to terminate contracts or delete content without notifying consumers.
Regarding the ongoing dispute over network usage fees between Netflix and SK Broadband, the KFTC stated that it is "closely monitoring the litigation process, the opinions of the Korea Communications Commission, and the calls for sanctions from the Citizens' Coalition for Economic Justice (CCEJ)."
If the KFTC accepts Apple's voluntary corrective plan and proceeds with the consent decree procedure, it will create a provisional consent plan within 30 days after the initiation decision and report it to Chairman Cho, who will then decide on it. Subsequently, the opinions of stakeholders such as the three telecom companies, related administrative agencies, and the Prosecutor General will be collected for a period of 30 to 60 days, after which the final consent decree plan will be submitted and confirmed.
If the consent decree is rejected, the KFTC is likely to take administrative actions such as imposing fines. If the KFTC takes action, competition authorities in other countries may also intervene in Apple's advertising and business strategies on the grounds that Apple is abusing its power over domestic telecom companies without correcting its behavior.
A KFTC official said, "Since the opinions of the nine plenary members may differ, at this point, neither the daughter-in-law, the mother-in-law, nor a ghost knows" regarding whether Apple's voluntary corrective plan will be approved, withholding further comment.
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