Fair Trade Commission imposes a 6.4 billion won fine on SKT and SKB for unfair support practices

[Sejong=Asia Economy Reporter Kwon Haeyoung] The Fair Trade Commission announced on the 24th that it has decided to impose a corrective order and a total fine of 6,396 million KRW on SK Telecom for unfair support practices involving SK Broadband.

The fine is split equally, with SK Telecom fined 3,198 million KRW and SK Broadband fined 3,198 million KRW.

The Fair Trade Commission judged that SK Telecom, through its own agencies, bundled SK Broadband's IPTV products with its mobile communication products and consigned sales, but did not properly receive commissions from SK Broadband. According to the FTC investigation, SK Telecom bore approximately 19,992 million KRW of IPTV sales commissions that SK Broadband was supposed to pay to sales agencies. The FTC concluded that as the proportion of bundled product sales increased, SK Telecom engaged in unfair support to protect its mobile communication market while increasing the market share of its affiliate SK Broadband.

Furthermore, it was revealed that SK Telecom recognized that such transaction forms could constitute unfair support and shared this fact with SK Broadband. Around 2016, when concerns about exposure of unfair support issues arose externally, they changed the method to share sales commission costs through post-settlement. SK Telecom paid SK Broadband advertising revenue corresponding to the post-settlement burden, and if loss compensation through advertising revenue was not made, post-settlement was not conducted.

Due to these unfair support practices, IPTV sales through SK Telecom agencies accounted for about 49% of SK Broadband's total IPTV sales as of 2019, significantly contributing to subscriber acquisition. SK Broadband's financial performance in this sector also rapidly improved, greatly strengthening its competitive position.

Jung Jinwook, Director of the Corporate Group Division at the Fair Trade Commission, stated, "Through this support act, the influence and financial power of SK Telecom, the supporting entity, transferred to SK Broadband, the supported entity, in the mobile communication market. As a result, SK Broadband maintained and strengthened its position as the second-largest operator in the digital paid broadcasting market, which was shaped favorably for itself, thereby undermining fair trade order."

The Fair Trade Commission explained that this measure confirmed and corrected illegal acts where large business groups caused economic concentration through unfair competition methods in other markets where their affiliates belong, based on market dominance and huge financial power in a specific market. It also noted the significance of clarifying the unfairness of financial support between affiliates by calculating the normal sharing ratio of common costs between affiliates, which are difficult to verify externally, based on the average revenue per user (ARPU) of service subscribers.

An FTC official said, "Through this measure, we expect that the sound market competition principle based on price and quality will properly operate in the digital paid broadcasting market used by the majority of the public in daily life, creating a fair competitive environment. The FTC will continue to thoroughly monitor unfair support acts by large business groups that undermine the soundness of competition order and strictly deal with violations."

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