Taiwan FTC fines Apple for restrictive practices

Taiwan FTC fines Apple for restrictive practices

ROC Fair Trade Commission fined Apple Asia Ltd., the local subsidiary of U.S.-based Apple Inc., NT$20 million (US$665,624) Dec. 25 for restrictive practices governing its cell phone distributor contracts with local telecommunications companies, in contravention of Article 18 of the Fair Trade Act, the FTC said.

Apple Asia was also ordered to put an immediate stop to such illegal actions, which is deemed to impede competition. According to the FTC, Apple Asia is responsible for sales of iPhone handsets in Taiwan through three main telecoms operators: Chunghwa Telecom Co. Ltd., Taiwan Mobile Co. Ltd. and Far Eastone Telecommunications Co. Ltd.

Apple Asia’s contracts with the carriers specify aspects such as procurement, payments and invoicing, with the burden of responsibility for all disputes in such matters to be on the carrier, the FTC said. Security and inventory risk is likewise borne by the carriers, as the telecom firms are involved in a buyout distribution relationship with Apple Asia.

Moreover, Apple Asia requires that the three carriers submit initial tariff schedules for iPhones they sell for approval, the FTC said. Prior to launching new cell phone models, the firms are also required to submit the tariff schedule and handset subscription pricing to Apple Asia for approval and confirmation.

Email exchanges between Apple Inc. and the Taiwan carriers further showed the U.S. parent demanded that the carriers adjust subscription pricing and sales subsidies for its review and approval. The price spread between new and old phone model bundled packages was also subject to audit by Apple and the carriers were forced to comply with its decisions.

In addition to auditing tariff schedules covered by the distribution contract between Apple Asia and the carriers, restrictions were placed on the telecom firms regarding all related conditions. For example, subsidies and sales packages cannot be lower than competitors, and advertisements and minimum volume purchases must be first vetted by Apple Asia.

The carriers’ freedom to determine their own pricing and cost structure in light of market conditions was thus infringed, hampering competition within and between brands, the FTC said. Article 18 of the Fair Trade Act stipulates that enterprises supplying goods to a trading counterpart for resale to a third party must allow the counterpart to set its resale prices freely. (SDH)