Korea Communications Commission (KCC) has fined mobile operators SK Telecom, KT and LG U+ a total of KRW 3.4 billion won (approximately USD 3 million) for reducing new smartphone prices by offering illegal bargains to customers subscribing to high-end monthly plans. SK Telecom was fined KRW 930 million, KT got a KRW 870 million fine, while LG U+ was fined KRW 1.59 billion, Korea Joongang Daily reports.
LG U+ received the highest fine for being the first to offer illegal deals in October 2014, and continuing it even after its two competitors suspended their sales. SK Telecom suspended its ‘Free Club’ offer, while KT interrupted its ‘Sponge Zero Plan’ in January this year, while LG U+ ended its Zero Club service on 2 March. Back in February, the KCC has declared these offers as illegal under the Mobile Distribution Act.
LG U+ provided customers with new phones with an advance discount for handing in an old phone in good condition. The operator said customers could get the discount in advance when purchasing a phone on the promise that they would turn in the device 18 months later.
“There is nothing wrong about the used-phone compensation policy itself”, said KCC Chairman Choi Sung-joon said. “I just want to emphasize that the compensation fee goes against the Mobile Device Distribution Improvement Act because the policy has been only offered to customers on certain monthly plans [high-end monthly plans] and there were no standards for the customers to follow later when returning the used phones. “If such problems are solved, offering the used-phone compensation fee in advance will not be illegal anymore,” Choi added.
SK Telecom and KT provided the discounts only to customers who paid KRW 800,000 or more as cumulative base rate. LG U+ customers were required to take up a postpaid tariff plan of KRW 62,000 or higher for a minimum of 18 months. According to the KCC, all three operators required customers to pay back the initially discounted amount in a lump sum if they moved to another network within 18 months.
The KCC said around 185,000 SK Telecom customers, as well as 168,600 KT users and 206,000 LG subscribers bought new phones such as the Samsung Galaxy Note 4, Galaxy S5 and iPhone 6 using such discounts as of 2 March.
