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Taiwan to probe Apple's handset business practices

Fair trade agency to investigate terms of carrier deals and whether iPhone maker illegally influenced pricing


Published: 14 June, 2013

READ MORE: Taiwan | Apple | Regulator | iPhone

A string of disappointingly non-dramatic product launches has damaged Apple's reputation as a constant innovator, but its strength is being eroded in other areas too, including its famous agreements with mobile operators.

The terms of these are likely to be the subject of a European Commission probe, and now Taiwan has launched an investigation into how Apple may influence the pricing set by its cellco partners. Combined with the US enquiry into alleged ebook price fixing, these initiatives suggest that the iPhone maker can no longer be complacent about its ability to set the rules for product pricing and carrier relationships - and that will be another dent in its mobile armor.

The Taiwanese FTC (Free Trade Commission) will focus on whether evidence of price influence can be found in contractual agreements between Apple and four of the island state's operators - Chunghwa Telecom, Far EasTone, Vibo and Asia Pacific Telecom. Handset inventory is purchased and owned by the carriers, so Apple is prohibited by law from influencing how they price the devices.

According to sources who spoke to the China Post, the alleged pricing practices are not unique to Apple, while carriers expressed concern over the investigation, saying they expect to suffer any consequences, rather than Apple.

In Europe, according to the UK's Financial Times newspaper, the EC is sending a questionnaire to carriers, asking them about Apple's terms and conditions, and particularly its restrictions on which networks are allowed to activate the 4G iPhone.

In March, some cellcos complained to the European Union about various channel policies at Apple, including allegations that it sets excessively high sales quotas to ensure the iPhone gets the lion's share of a carrier's marketing budget.

The issue has not yet reached the stage of formal complaints or investigations but the EC is clearly seeking information. According to the FT, its questionnaire asks whether operators are forced to buy a specified quota of iPhones; whether Apple dictates how marketing resources should be allocated; and whether it demands subsidies and sales terms that are "at least as favorable" as those which other vendors receive.

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