Mar 15 AT 3:48 PM Edgar Cervantes 25 Comments

Major Korean manufacturers and carriers fined $40 million for illegal price rigging and fraud

lego-lawyer-gun-briefcase Image via: pasukaru76 with Creative Commons

Popular Korean manufacturers and carriers have found themselves in a bit of trouble with the authorities. The affected companies include Samsung, Pantech, LG, LG Upius, KT and SK Telecom. Some of these are major world-wide players. And the Korean government, along with the FTC, has fined them with a 45.3 billion won (about $40.1 million US dollars) fee for price rigging and consumer fraud.

In case you have not heard of price rigging before, this is the act of conspiring with competing companies to virtually inflate the prices of their products. This concludes with customers believing that they are getting good offers, and companies deceitfully earning more profits and conducting higher sales.

Such practice is illegal and considered fraud, as it harms fair competition. Not to mention that it is unfair to the consumer. And while the fee is substantial, it may not be very significant. Those $40 million will be paid by all the companies, in conjunction.

The companies with the largest fees are Samsung and SK Telecom. With a bill of 14.2 billion won and 20.2 billion won, relatively. These are followed by KT, which has to pay out 5.1 billion won.

Samsung has sold over 5 million Galaxy S II devices in Korea alone, with about 10% of the country’s population owning the flagship device. This is only counting one country and one of the manufacturers. It is hard to imagine how much extra income said companies drove by price fixing.

In order to find more details, the companies have been ordered to hand in extra details on “offers” provided. And the FTC has banned said companies from offering any new sales incentives.

While it is hard to prove, this may be a world-wide issue. In the US, we have subsidized smartphones that go for very high amounts of cash. While other countries have much lower subsidized prices for the same device, many times free. Of course, the markets are very different, and many factors come into play. But this is just an example.

As we usually say, if a company can get away with charging more, they will. But the major issue here is that competing manufacturers and carriers were working together to inflate prices. Instead of fairly competing with each other to bring the best (real) offers to customers. It is a large plot to benefit from the consumer’s lack of options.

Via: Phandroid

Source: Korea Times

Hello, I am Edgar Cervantes. I am an avid Android fan, and keeping myself updated on the topic is part of my daily life. I will always work hard to give the best of me to our community of Android enthusiasts, and I am very honored to be part of this ship. Hopefully we can all enjoy sharing our knowledge and opinions!

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  • jaxidian

    I wonder if this has anything at all to do with standard subsidized flagship phones going for $299 on contract here in the US…

  • thechad

    it is a bummer to see Samsung among the list of offenders. However I don’t think this will slow down sales any but lets hope it brings pricing down.

    • putan

      shut up

    • thel0nerang3r

      Bribes are expected in many countries in Asia. The US passed a foreign corruptions act, which makes it difficult for US companies to compete. You got to pay to play. Unfortunately, the fines are less then what companies gain by breaking the law. So, fines don’t stop the practices.

  • Trinhbo

    Serves them right those bunch of greedy ~#$%^&!

    • thel0nerang3r

      How is your volunteer work going?

  • wuZheng

    Now if only someone would do something about the obvious collusion of the major telcos on this continent (North America). *holds breath*

    • thel0nerang3r

      I wouldn’t hold my breath… it’s a rather sad situation.

  • Vance

    So, where does the $40Mil in fines go? Is it redistributed to consumers or does the government keep it? If it’s the latter, I’d say the collusion runs much deeper than the companies indicted. In that case I’d call the $40Mil more of a bribe since it’s clearly a mere fraction of the financial gain these cheaters enjoyed.

    • WlfHart

      Seriously… Just a public bribe that only had to be paid because they got caught. Not like the consumer is actually given back anything.

  • Kensall

    @ Vance

    You nailed it right on the head. its all a con

  • Naitsaves

    Hopefully this means the GS3 will sell for a lower price. I doubt it though :(

  • aranea

    That would be really good Naitsaves. If the prices actually become more reasonable it may start making sense to buy unlocked phones off the contract and lat carriers compete for the customers in US.

    • thel0nerang3r

      Not really. That I know of, only T-Mobile gives you a lower monthly plan if you bring your own phone. If you buy a phone for Att, it most likely will not support T-Mobile HSPA+ network. Obviously, a GSM phone will not work on VZW/Sprint.

  • Nathan D.

    well hopefully this will lower the prices of the product they produces to it actual retail price because it is ridiculous to buy a phone full retail prices.

  • Angel

    Hey samsung how does it feel to be overcharged for something? The only thing that could make this story better is if they gave the 45 billion to charities… still nice to see these companies get caught and red faced.

  • spazby

    i doubt this will have any effect on pricing

  • Max.Steel

    Money is the root of all evil in indeed.

  • msgnyc

    Too bad this will have zero impact on how much they charge for the devices………

  • Johnboy

    Actually it will have an effect. They now need to make up 40 mil next quarter. Guess who they will get that from?

    • honourbound68

      but if they continue with the same practices then wouldn’t they get fined more?? more than likely, they’ll just change the game and get their money a different way… phones may cost less but activation will now cost “more” or another thing because of some backroom handshakes between the mfrs and carriers.

  • http://None Javier Bastardo

    Sadly to see Samsung and LG among the listed but it is normal, they are corporate companies in the end, they’re here for the innovation, and the money, oh yeah the money. Serves those greedy pigs, and I’m sorry if I sound harsh on this, but I can’t avoid my disgust for this kind of practices. And the punishment for the companies, although it is a large sum of money, in the how many didn’t they make out of us, the costumers, and the money is going to who? the state? what about us? what about fairness and justice?

    Shame on them, the morality, transparency and honesty in today’s modern world is 404.

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