Daily Management Review

Action Against Apple, Carriers Mulled by Japan’s Antitrust Watchdog: Reuters


Action Against Apple, Carriers Mulled by Japan’s Antitrust Watchdog: Reuters
In a move that could hit the company's profit margins in one of its most profitable markets, the Japanese regulators are considering taking action against Apple Inc over possible antitrust violations that may have helped it dominate the nation's smartphone sales, reports Reuters quoting government sources.
Smaller competitors were hobbled as NTT Docomo, KDDI Corp and Softbank Group were refusing to sell older surplus iPhone models to third party retailers, thereby hobbling smaller competitors, said Japan's Fair Trade Commission (FTC) in a report published last month.
Regulators were also focusing on Apple's supply agreements with all three carriers even though Apple was not named in that report, two senior government sources reportedly told Reuters.
According to industry sources surplus stock of older iPhones is sent to overseas markets, such as Hong Kong and is kept out of the market under those deals.
Citing two government officials and an industry source, Reuters reported that the U.S. company gets an advantage over rivals such as Samsung Electronics Co as the carriers bulk purchase the Apple smartphones and sell them at a discount given that they are locked in a costly battle to win consumers who covet iPhones.
The cost for the iPhone drops sharply to 38,232 yen with a two-year contract, while the Galaxy falls to 54,432 yen even as both iPhone 7 and Samsung's Galaxy S7 edge model sells for 93,960 yen ($932) under Docomo's main service package without any contract.
Apple did not comment on the antitrust concerns except referring to a webpage published at the time of the Aug. 2 FTC report claiming that the company created or supports 715,000 jobs in Japan.
Japan has become one of its profitable markets by the use of this strategy and it has helped Apple sustain demand for new iPhones. The market share of U.S. company in Japan is the largest that it has in a major market and accounts for almost one in every two smartphones sold in Japan.
Apple also helped the top three carriers control more than 90 percent of the mobile phone market and kept new mobile service providers such as messaging app firm Line Corp and online retailer Rakuten Inc from selling iPhones.
"The actions of the three operators alone do not account for the state of the market. We are getting closer to taking action," said one of the officials, who confirmed that the August report was also directed at Apple reported Reuters.
The antitrust issue could include renegotiating contracts with Apple and the officials said the watchdog hoped pressing the carriers would get them to solve issue.
Any deadline or say what penalties, such as fines, it would impose if the companies did not act was not given by the FTC.
To recoup profits resulting from antitrust violations, FTC has issued cease and desist orders, and imposed a "surplus charge" in the past. Five companies were given a surplus charge of 27 billion yen ($269 million) which is the biggest to date for a case.

Fines on companies judged to be operating cartels or monopolies, however, can be higher.

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