[Q&A] Fair Trade Commission: "Decrease in Telecom Number Portability Indicates Collusion"… Controversy Over Clash with Korea Communications Commission

"Collusion to Restrain Customer Acquisition Competition Causes Serious Market Harm"
"114 Billion KRW Fine Is Substantial Considering the Scale of Collusion"
"Even with KCC Guidance, Failure to Meet Legal Requirements Constitutes Violation of Fair Trade Act"

Yonhap News

As the Korea Fair Trade Commission (KFTC) imposed a fine of 114 billion KRW on the three major mobile carriers for collusion, controversy arose over a clash with the Korea Communications Commission (KCC). In response, the KFTC drew a clear line, stating, "We judged that the three carriers violated the Fair Trade Act by agreeing on matters beyond the administrative guidance of the KCC."

On the 12th, Moon Jae-ho, head of the KFTC Cartel Investigation Bureau, said at a briefing on "Sanctions against Collusion by the Three Mobile Carriers," "Collusion involving administrative guidance is illegal under the Fair Trade Act if it does not meet the principles established by laws and Supreme Court precedents," adding, "The act of the three carriers adjusting the net increase and decrease of number portability beyond the scope of the Mobile Device Distribution Structure Improvement Act (the 'Handset Act') constitutes collusion."

He explained, "Exceptions to free competition only apply to the minimum necessary acts specifically recognized by law," and said this case did not meet those requirements. Previously, the KCC had issued administrative guidance limiting sales incentives paid to the three carriers to within 300,000 KRW since the Handset Act was enforced in 2014.

According to the KFTC, from November 2015 to September 2022, the three carriers agreed to mutually adjust the net increase and decrease in number portability so that it would not be concentrated on a specific operator and executed this agreement. Initially, the fine was expected to reach up to 5.5 trillion KRW, but considering that the collusion occurred during a process of self-regulation and that the KCC's administrative guidance was involved, the fine was reduced to 1% of the revenue generated from number portability subscribers.

Below is a Q&A session.

- The KCC reportedly submitted a statement asserting that it was not collusion. How should this disagreement be interpreted?

▲We held seven rounds of working-level consultations with the KCC, and the KCC submitted opinions multiple times. The KCC also expressed its views at the plenary meetings held last week and the week before. The opinions raised by the KCC were reflected during the commission's agreement process.

- What is the consumer harm caused by the collusion?

▲Competition to attract number portability subscribers was restricted, resulting in reduced monetary benefits when switching carriers. This case is a type of hard-core collusion (where competitors jointly limit prices or production volume in the market), which causes significant consumer harm.

- How was the fine amount determined?

▲The fine was calculated based on the revenue generated from number portability subscribers by the three carriers, with the rate set at 1%.

- Why was the fine reduced from a maximum of 5.5 trillion KRW to 114 billion KRW? Does 1% classify the act as less serious?

▲A fine of 114 billion KRW is not a small amount. According to the fine notification, we comprehensively considered the circumstances of the violation, the effect on competition, and the market situation. The agreement among the three carriers occurred during a self-regulation process aimed at preventing violations of the Handset Act, and the involvement of the KCC's administrative guidance was also taken into account.

- I understand that the Korea Association for ICT Promotion (KAIT) was also subject to sanctions related to adjusting penalty criteria. Why was it excluded?

▲This matter concerns the agreement among the three carriers to adjust the net increase of number portability subscribers. However, KAIT, as an association, was not in a position to directly control subscriber net increases, nor did it appear to lead the agreement, so it was excluded from sanctions.

- Isn't a 1% fine for collusion restricting trade unusual?

▲There have been cases where fines below 1% were imposed. We decide whether to file charges by comprehensively considering various circumstances, and since this occurred in a self-regulation context, it did not lead to prosecution. During the investigation, we confirmed the agreement and proved collusion through records prepared by a telecommunications association employee in the form of logs and work diaries that monitored and recorded the situation continuously. Additionally, we presented comprehensive evidence including exchanges of opinions via SNS and group chats among association and carrier employees to prove collusion.

- The three carriers claim they followed the KCC's guidance. Is this reflected in the fine?

▲We did not specify the fine amount in the review report. The respondents mechanically calculated the maximum possible fine and estimated the amount. The KCC also sanctioned carriers that paid excessive or discriminatory sales incentives after consulting with the commission.

- Some argue that regulatory agencies should recognize the KCC's guidance. Isn't there a conflict between the two agencies? How do you interpret this?

▲There is no conflict. Even in collusion involving administrative guidance, if the principles established by laws and Supreme Court precedents are not met, the act is punishable under the Fair Trade Act. Exceptions to free competition are only allowed when specifically recognized by law and limited to the minimum necessary acts within that legal scope. This case does not meet those conditions. We judged that the agreement on matters beyond administrative guidance violated the Fair Trade Act.

- Can it be said that the KCC encouraged collusion?

▲The KFTC's regulation of joint acts punishes the agreement to adjust the net increase and decrease of number portability subscribers. The KFTC's judgment is that deciding by agreement instead of competing is illegal. The KCC's fines were imposed on carriers that paid discriminatory or excessive sales incentives under the Handset Act, sanctioning unilateral decisions by specific carriers, which is clearly different from the KFTC's disposition in this case.