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Another Strike against Apple: Fair Trade Commission to Investigate Apple's Pricing Practices in Taiwan

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It's being reported today in Taiwan that The Fair Trade Commission (FTC) have officially stated that they'll be investigating allegations that Apple Inc. has been interfering in the pricing of iPhones sold by Taiwan's telecom operators.

The issue of whether Apple's actions amount to a fair trade violation depends on the status of the telecom operators -- either as distributors of iPhones or consignment-based sellers, according to FTC Chairman Wu Shiow-ming.


If a telecom company has distributor rights, it means that it owns the products and Apple should have no say in the selling prices, Wu said. In the case of consignment sellers, the consignor can decide the prices, he added. The maximum fine for violation of the regulations regarding interference in selling prices is NT$25 million ($838,000 US).


Taiwan's Democratic Progressive Party Legislator Gao Jyh-peng stated that Apple has asked Taiwan's telecom operators to submit their proposed iPhone prices for approval. The lawmaker said an investigation should be conducted into whether Apple, which he described as a "domineering" company, is violating Article 18 of the Fair Trade Act that stipulates traders can decide their sale prices freely.


It was reported last month that the European Union regulators were examining the contracts Apple strikes with cellphone carriers that sell its iPhone for possible antitrust violations after several carriers complained that the deals throttled competition.


Although they have not filed formal complaints, a group of European wireless carriers recently submitted information about their contracts with Apple to the European Commission, according to a person briefed on the communications with the carriers who asked not to be identified.


This person said the accusations focused on Apple's contracts with French carriers, though other countries may also be involved.


In a statement, the European Commission, the union's administrative arm, which oversees antitrust enforcement in the 27-nation bloc, confirmed that it was examining Apple's carrier deals. But it said it had not begun a formal antitrust investigation. The commission is not obligated to act until it receives a formal complaint of anticompetitive behavior. That it is already examining the contracts suggests that it is taking the carriers' concerns seriously.


Apple's iPhone 5 was the best-selling smartphone in the world during the fourth quarter of 2012, outselling competing models from Samsung, the biggest maker of mobile devices in the world, according to Strategy Analytics. But some feel that without Apple's stranglehold on the carriers Apple's iPhone wouldn't have been the number smartphone in Q4 2012.


Some of Apple's competitors have complained that the big purchases Apple requires from carriers strongly pressure them to devote most of their marketing budgets to the iPhone, leaving little money to promote competing devices, said an executive at one of Apple's rivals, who declined to be named to avoid jeopardizing carrier relationships. Geez, I wonder which competitor that would be (think Samsung).


What's concerning in the bigger picture, is that Apple's competitors seem to be coordinating an attack on their dealings with telecom operators/carriers. Besides the two cases presented in this report, we noted in December that the Korea Communications Commission (KCC), the nation's top telecom regulator, stated back then that they would punish SK Telecom and KT if they offered illegal subsidies to attract more iPhone 5 customers. In January we reported that Lenovo urged telecoms to drastically cut iPhone subsidies and that T-Mobile announced it would end subsidies with AT&T applauding the move.


As the mainstream press continues to hammer Apple's image each and every day, Apple's competitors are trying to break Apple's contracts with the top carriers as a means of taking Apple down. When this kind of coordinated effort is into high gear by pushing government agencies to investigate Apple, you know that eventually the tide will turn against Apple. This is how industry players brought down Microsoft in the nineties in respect to the PC market and now this tactic is being used against Apple in the mobile sector. It's sad to say that the piranhas are likely to win over time.


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