[At the Brink of the 단통법] "Introduce a Separate Disclosure System to Fix the 'Half-Measure'"

Introduce Separate Disclosure System to Remove Device Price Bubbles
Failure to Implement in 2014 Led to 'Half-Baked' Device Price Stabilization Act
Revise Penalty System to Prevent 'Slave Contracts'

[Asia Economy Reporter Koo Chae-eun] Although the Device Distribution Act has been in effect for six years, the reason why the world’s highest level of device price inflation has not been eliminated is attributed to the insufficient introduction of the 'Separate Disclosure System.'

The Separate Disclosure System refers to separately disclosing the subsidies provided by mobile carriers and manufacturers when selling mobile phone devices. For example, if you receive a subsidy of 300,000 KRW when purchasing a new smartphone, you can verify that 100,000 KRW was provided by the carrier and the remaining 200,000 KRW by the manufacturer.

When the Device Distribution Act was introduced in 2014, the Separate Disclosure System was supposed to be included, but stakeholders opposed it, and it was rejected by the Regulatory Reform Committee, so it was not implemented. At that time, this was referred to as the 'half-baked Device Distribution Act.'

Jeon Hye-sook, a member of the Democratic Party of Korea representing Seoul Gwangjin-gu Gap, who has consistently pointed out this issue, said in an interview with Asia Economy on the 6th, "The Device Distribution Act was created to eliminate price discrimination, but the deletion of the Separate Disclosure System clause at the time of legislation rendered its purpose meaningless."

She explained that the manufacturer's subsidy (rebate) portion must be transparently revealed to prevent the practice of inflating device prices, but since the Separate Disclosure System was excluded during the system design, the operation could not be effectively managed.

Accordingly, the amendment to the Device Distribution Act proposed by Representative Jeon on the 18th of last month focuses on filling the legislative gaps of the 'half-baked Device Distribution Act,' including the introduction of the Separate Disclosure System and the announcement of penalty fee caps. The main emphasis is on enhancing price transparency through 'introduction of Separate Disclosure System → disclosure of subsidy sources → prevention of price inflation.'

Representative Jeon stated, "Before the enforcement of the Device Distribution Act, due to information asymmetry, there was a significant price disparity among users subscribing to telecommunication services, and the Act improved that aspect," but she also evaluated, "With the exclusion of the Separate Disclosure System, the source of sales incentives paid to retailers became unclear, which led to excessive competition among carriers for sales incentives, creating the current 'holy ground'."

She believes that by separating the subsidies from carriers and manufacturers, price discrimination?where excessive subsidies are concentrated only on expensive plans?can be reduced, and if the pure device price excluding marketing costs is disclosed, it could also lead to pressure to lower the device’s retail price.

Representative Jeon also included a 'penalty fee cap system' in the amendment. The core is to reform the carrier penalty fee system, often called the 'slave contract,' to expand user choice. She mentioned, "When trying to cancel a contract, excessive penalty fees act as an obstacle to contract termination, so it is necessary to prevent this, secure transparency and fairness in penalty fee imposition, and enhance consumer benefits."

Jeon Hye-sook pointed out that to improve the Device Distribution Act, ▲ thorough management by the Korea Communications Commission, ▲ mandatory submission of data by manufacturers related to self-supplied phones such as incentives, and ▲ activation of discussions on a complete self-supply system are needed. Regarding the issue of retailers’ livelihoods becoming difficult due to the spread of non-face-to-face transactions caused by COVID-19, she said, "The government, National Assembly, carriers, and related organizations must put their heads together and do their best to improve distribution networks and resolve livelihood and employment issues of workers."

This content was produced with the assistance of AI translation services.