[2020 National Audit] KCC Favoring Apple? Controversy Over 'Advertising Cost Pass-Through' Exemption

[Asia Economy Reporter Seulgina Jo] The Korea Communications Commission (KCC) has been criticized for effectively giving a free pass by excluding the key issue of advertising cost shifting in the process of submitting opinions to the Fair Trade Commission (FTC), which is conducting a consent decree procedure against Apple Korea.

Kim Young-sik, a member of the National Assembly’s Science, Technology, Information and Broadcasting and Communications Committee (STIBC) from the People Power Party, announced on the 8th that after obtaining and analyzing the KCC’s opinion letter on the FTC’s ongoing consent decree proposal for Apple Korea, it was confirmed that the part regarding advertising cost shifting was omitted, and only user protection contents such as incentives and after-sales service (AS) were submitted.

Kim said, “While the KCC proposed effective and sustainable alternatives from the perspective of user protection, it ignored the core issue of advertising costs in the consent decree,” adding, “As a result, there is a high risk that the consent decree amount (100 billion KRW) for global operators will be set excessively low compared to the violations.”

The FTC is currently conducting a consent decree procedure on six violations, including Apple’s setting of transaction conditions for device advertising costs, and collected opinions until the 3rd of this month.

The KCC’s opinion letter included that Apple Korea should, like other manufacturers, engage in reasonable discussions with mobile carriers to provide publicly announced subsidies from both parties’ funds, or if manufacturer incentives are not provided, the need to lower the device’s retail price. Regarding device AS, the letter contained details such as prior detailed notification of major parts prices, introduction of loss insurance for users, and improvement of service quality by private AS providers.

However, the KCC did not present any specific opinion on the most serious violation among the six committed by Apple Korea?the act of setting transaction conditions for device advertising costs and receiving payments?leading to criticism that it effectively gave a free pass. Industry estimates suggest that since 2009, Apple Korea has shifted advertising costs to carriers amounting to approximately 180 billion to 270 billion KRW, but the consent decree proposal was far below this. Kim had also pointed out in September that “the consent decree amount of 100 billion KRW is set too low.”

Such passive administration toward global operators has been criticized as an inherent flaw in the consent decree system that the KCC is considering introducing. The consent decree system allows regulatory agencies and operators to agree on corrective measures during investigations or deliberations, ending the case without a final judgment on illegality.

Kim emphasized, “I understand that the KCC also wants to introduce the consent decree system, but if it continues with such passive administration toward global operators, it will be difficult to avoid claims of reverse discrimination against domestic operators,” and added, “It is desirable to introduce the consent decree system only when the KCC can firmly regulate global operators through strengthened investigative and enforcement capabilities.”

Earlier, the FTC announced six violations by Apple Korea, including ▲setting transaction conditions for device advertising costs and receiving payments ▲ setting transaction conditions for warranty repair promotion costs and receiving payments ▲ setting transaction conditions to provide licenses for patents held by carriers (including affiliates) free of charge ▲ setting transaction conditions allowing unilateral contract termination ▲ setting minimum subsidies for Apple devices ▲ involvement in carriers’ advertising-related activities.

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