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Apple fined NT$20 million for Fair Trade Act violation

TAIPEI--Taiwan's Fair Trade Commission (FTC) slapped Apple Inc.'s Asia subsidiary with a fine of NT$20 million (US$666,838) Wednesday for violating the Fair Trade Act in selling its iconic iPhones in Taiwan.

It marked the first time the U.S. technology giant has been fined for imposing strict terms regarding sales commitments that amounted to anti-competitive practice, the commission said.

Noting that the European Union is investigating Apple's iPhone sales contracts with European telecom carriers, the commission said its decision can serve as a reference for EU regulators.

The FTC said in a statement that Apple Asia, which is responsible for marketing Apple products, including its iconic iPhones and iPads, in major Asian countries, has restricted local telecom operators' iPhone service contract prices for years.

The commission began to investigate the case after Taiwanese legislators repeatedly expressed concerns about what they called Apple's unfair trade practice, the FTC statement said.

After looking into contracts signed by Taiwan's three largest telecom operators — Chunghwa Telecom, Taiwan Mobile Corp. and Far EasTone — with Apple Asia and their email correspondence, the FTC said it found that the three telecom carriers signed dealership contracts with Apple rather than serving as commission-based sales agents.

Since the telecom operators have bought iPhones from Apple, the FTC said, they are entitled to set their iPhone prices without input from Apple.

All three providers, however, have consistently been required to send their proposals for telecommunication service charges and iPhone service contract prices to Apple for approval, the FTC said.

While telecommunication service charges are subject to approval by the National Telecommunications Commission, the FTC said, telecom operators should be free to decide payment terms for handset service contracts on their own.

In the normal mobile phone service model, consumers are usually required to pay an upfront cost for a handset and then pay a fixed monthly rate during a specified period of time as stipulated in their service contracts with telecom operators.

The FTC said Apple was found to enjoy the final say on the upfront cost for iPhones, operator subsidy amount and even the price spread between service contracts for new and older iPhone models.

Apple's practice is in blatant violation of Article 18 of the Fair Trade Act that bars suppliers from restricting the retail prices of their products, the FTC said.

Apple Asia will have to pay the NT$20 million fine within one month, the FTC added.

According to FTC investigations, the major distributors of iPhones in Taiwan are Chunghwa Telecom, Taiwan Mobile and Far EasTone, all of which have sold iPhones through service contracts. Less than 10 percent of the iPhones sold in Taiwan have been sold without the support of service contracts.

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An advertisement for the iPhone 5s showing customers details of contracts offered for the new iPhone is seen posted on the glass in front of a telecoms shop in Taipei yesterday. The Fair Trade Commission (FTC, 公平會) yesterday pointed out that Apple Asia's restrictions on local telecoms operators' contract prices violated the Fair Trade Act (公平交易法).


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