[Report] Store Owners Relieved by Disappearance of 'Ponparachi'... Regulation Needed for Market Stabilization

Rising Doubts Over Effectiveness of Illegal Subsidy Reporting System
Phone Store Owners Relieved as It Is Temporarily Suspended
Year-End Free Phone Frenzy May Resurface
Fundamental Revision of Device Distribution Act Needed

A view of a mobile phone store in downtown Seoul (unrelated to the article content)

[Asia Economy Reporter Eunmo Koo] "I reluctantly agreed to lower the price by even 10,000 won because the customer persistently begged, but I got caught right away. It turned out to be a Phoneparazzi (phone + paparazzi).”

On the first day after the temporary suspension of the mobile phone unfair practice reporting reward system, known as the ‘Phoneparazzi’ system, most mobile phone store owners welcomed the abolition of the system on the 16th. This was because they no longer had to suffer mental stress caused by malicious Phoneparazzi who induced illegal subsidies and then reported them to claim rewards.

A, who runs a mobile phone agency in Gangseo-gu, Seoul, still feels frustrated when recalling being reported for illegal subsidies last September. It all started when a customer persistently demanded additional support money, and A reluctantly agreed. A said, "I gave just 10,000 won more (support) and ended up having to pay back 3 million won," adding, "Since then, even genuine customers are seen as people trying to catch me if they mention subsidies."

The Phoneparazzi system, which rewards whistleblowers who report illegal mobile phone subsidies, was a self-regulatory system introduced by mobile carriers in January 2013 before the enforcement of the Device Distribution Structure Improvement Act (Device Distribution Act) to prevent excessive illegal and unfair business practices in the mobile phone distribution market. The purpose was to prevent consumer discrimination caused by secretly paid illegal subsidies and to establish a sound distribution structure.

However, over the past eight years, the reporting reward system has been criticized for having minimal market stabilization effects contrary to its original intent, while fostering professional Phoneparazzi aiming for large rewards. With the enforcement of the Device Distribution Act in 2014, illegal subsidy competition intensified, and some even abused the system among competing companies. According to the Korea Communications Commission and the Korea Association for ICT Promotion (KAIT), the total reward amount paid over the past four years reached 12.05487 billion won. Last year, the average reward per person was as high as 2.74 million won.

Industry insiders also point to the Phoneparazzi system as a case where the disadvantages outweighed the benefits. A representative from a mobile phone agency near Euljiro 1(il)-ga Station sighed, saying, "Only reward hunters increased, and opportunities for consumers to buy phones cheaply actually decreased," adding, "It created a strange market where neither sellers nor buyers trust each other." Furthermore, the effectiveness declined as illegal subsidies shifted from offline to online, and the recent government efforts to improve the system, such as raising the limit on additional subsidies, are also interpreted as reasons behind this suspension.

A view of a mobile phone store in downtown Seoul (unrelated to the article content)

However, concerns are rising that with the disappearance of the Phoneparazzi system, a ‘free phone frenzy’ openly offering illegal subsidies may erupt by the end of this year. This criticism stems from the view that appropriate regulations should have been established despite the system’s low effectiveness. B, who has operated a store for over 10 years, said, "There is a widespread rumor online that illegal subsidies under 200,000 won will not be cracked down on, but if enforcement is lax, both business owners and consumers will suffer," urging the establishment of effective regulations focused on the online market.

Many also call for fundamental revisions to the Device Distribution Act. Store owner C said, "The fact that each business has a different sales style should be considered," adding, "I’m not saying to engage in cutthroat competition with perfect competition, but I hope the subsidy levels will be raised." The Korea Communications Commission has prepared a revision plan to raise the limit on additional subsidies by mobile phone sellers and agencies to up to 30% of the publicly supported subsidy.

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