'Fold4·Flip4' Half Price? ... The Recurring Controversy Over 'Illegal Subsidies'

A newly released smartphone is reportedly already being sold at 'half price' at some sales agencies. This is due to excessive illegal subsidy support from certain sales outlets. / Photo by Song Hyundo, Asia Economy intern reporter

[Asia Economy Reporter Lim Juhyung, Intern Reporter Song Hyundo] Samsung Electronics' foldable smartphone, officially launching on the 26th of this month, is already being sold at 'half price' in some stores. Some sales agencies are illegally bundling subsidies with pre-order products. As competition to attract customers intensifies among retailers, excessive illegal subsidies are rampant.

The three major mobile carriers, SKT, KT, and U+, conducted pre-order sales of Samsung's new foldable flagship models, the Galaxy Z Fold4 and Galaxy Z Flip4, from the 16th to the 22nd. KT offers a discount of about 575,000 KRW on the Galaxy Z Fold4 (256GB version) when subscribing to a plan worth approximately 90,000 KRW per month with a 24-month contract. SKT and U+ also provide official subsidies of 552,000 KRW and 500,000 KRW respectively under similar conditions.

The problem is that this discount competition has spread to both online and offline stores of each carrier. Although these stores display the logos of the three major domestic carriers, they are individually operated businesses not strictly affiliated with any specific corporation, allowing them relatively free operation.

Under current law, the subsidies provided by sales agencies for mobile phones must not exceed 15% of the publicly announced support funds from mobile carriers. / Photo by Yonhap News

Some stores provide additional subsidies equivalent to the official subsidies. Among some agencies registered on popular smartphone trading websites, there were places proposing a so-called 'pay-back' method, where customers receive a partial refund after a certain period once the phone purchase is confirmed.

As of the 22nd, the retail price of the Galaxy Z Fold is 1,998,700 KRW. When combined with the carriers' official subsidies and various benefits offered by the stores, the total discount support exceeds 1,000,000 KRW. This effectively allows customers to purchase the new smartphone model at less than half the price.

However, most of the subsidies provided by the stores are illegal. The current Device Distribution Structure Improvement Act (DanTong Act) stipulates that additional subsidies beyond the official subsidy must not exceed 15% of the official subsidy. Therefore, the legally permissible subsidy at stores is about 80,000 KRW, which is 15% of the official subsidy of 500,000 to 550,000 KRW. Stores caught providing subsidies beyond the legal limit face fines.

The reason stores risk illegal subsidy competition is commissions. Agencies receive 25% of the user's phone bill as a 'management fee,' generating profit. Even if they incur losses due to subsidy support, attracting as many customers as possible is more beneficial for the store's long-term survival.

Sales agencies offering extraordinary illegal subsidy benefits are sometimes referred to as 'Seongji' among certain netizens and are shared. / Photo by Online Community Capture

From the consumer's perspective, illegal subsidies are a 'poisoned chalice.' Some consumers take advantage of the overheated competition among stores to receive subsidies close to the full purchase price. This is called a 'free phone.' Stores offering free phones are referred to as 'holy sites' among netizens, and their locations are shared through online communities.

However, illegal subsidies have no legal binding force, so there is no guarantee that stores will provide the promised pay-back. On the contrary, consumers risk being scammed into paying additional amounts due to the stores' tactics. In cases of such 'holy site scams,' since the transaction itself is illegal, consumers find it difficult to file damage reports.

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