Duopoly in shavers' market
By Kim Tae-gyu
Electric shavers of Braun and Philips are currently being checked by a state-backed consumer organization over allegations that they are charging inflated prices.
The Korea Consumer Agency (KCA) said Wednesday that the two European companies are under investigation and the results will be released in about a month.
``The two corporations have dominated the local market for electric shavers so that other small-sized firms can hardly compete with them here,’’ a KCA official said.
``We think that the duopoly might have something to do with the overly high prices of their products, which were not affected that much by the free trade agreement (FTA) between Korea and the European Union.’’
The official said that the consumer prices of the shavers appeared to be more than double their import costs, which the KCA contends would be too large a profit margin compared to other industries.
The FTA between Korea and the EU went into effect last July so that the previous tariff of 8 percent on such appliances as electric shavers was instantly scrapped.
Yet, the shavers made by Braun and Philips did not benefit because many of them were manufactured outside Germany and the Netherlands in low-cost production plants in Southeast Asia.
When contacted, Philips admitted that the company has gone through investigations by the KCA of late but flatly rebuffed claims that the Netherlands-based firm profiteered based on the oligopolistic situation.
It noted that the outfit’s margin rates are appropriate because its pricing should reflect importing and distribution expenses on top of marketing and overhead costs.
The KCA conclusion is expected to raise uproar from consumers on whether or not the price tags of Braun and Philips are proper.
That would mark back-to-back setbacks for Philips, whose electric irons were also branded as too expensive of late by the KCS based on a month-long survey.
Along with Tefal and Rowenta, Philips was found to sell electric irons at more than double the import price although the KCS claims that the companies have room to slash the amount.
The KCS checked a total of 41 electric irons of the three firms and found they were imported at 36,000 won on average to be sold at discount chains or department stores but consumers paid 92,430 won to buy one including value added taxes.
Because prices at online sites were substantially lower, the KCS said that the company should also be able to offer their products more cheaply.
Believing the high prices are caused by a lack of competition because the three predominantly rule the local market, the KCS has vowed to lodge complaints with the nation’s anti-trust watchdog in case it discovers price collusion.
Just as Philips and Braun practically control the domestic market for electric shavers, Tefal, Philips and Rowenta combine to control nearly the entire market for electric irons in Asia’s fourth-largest economy.
The KCS is an entity established on relevant laws and financed by the Seoul administration. It looks into products, which consumers complain are too expensive as inflationary pressures weigh down on the country.
Included in the items on its watch list are luxury products sold by European manufacturers, according to an insider at the KCS.