Philips fined W1.5 bil. for price fixing

By Kim Tae-jong

The nation’s anti-trust watchdog has imposed a 1.5 billion won fine on Philips for banning domestic online shopping malls from offering discount prices, which it believes has prevented the Korea-Europe free trade agreement (FTA) effect from translating into consumer price reductions.

The move was the first penalty of its kind against a European company which has delayed the reduction of tariffs in their products sold here after the free trade pact.

The Free Trade Commission (FTC) said Sunday the Dutch multinational electronics company set up a price floor that disallows stores to sell its products online more cheaply than fixed rates.

“The company’s price policy does not allow consumers to buy products at cheaper prices and retailers to compete in a fair manner,” said Noh Sang-sup, FTC official.

The FTA between Korea and the European Union went into effect in July to prompt a set of importers to cut down on the values of made-in-Europe products sold here in tandem with the reduction of tariffs, but consumers here have not yet gotten the full benefits as many companies are still reluctant to cut down prices, he said.

To improve the situation, the FTC has repeatedly revealed the list of companies which violate the country’s fair trade law and requested them to cut down prices, arguing many items still have room for additional price reduction.

But it was the first time for the regulator to impose a fine against a violator, which may lead to more similar decisions against other importers and retailers, as the regulator has pledged that it would crack down on violators seeking to maximize profits from the pacts.

According to the FTC, the Dutch company is the top small appliance maker in terms of market share. The market share of its electronic shaver, toothbrush, iron and coffer-maker stood at 61.5 percent, 57.1 percent, 45.2 percent and 31.3 percent, respectively.

The company has systematically maintained a strong pricing policy to restrict price competition at online shopping malls in which stores should sell products at prices at least over 50 percent of the offline retail price, the FTC said.

“They have even imposed penalties against stores which violated their price policy such as suspension of delivering goods or increasing supply prices,” the FTC official said. “They have also banned stores from selling certain products online.”

The FTC will keep monitoring prices of the imported products from Europe and publish the results.

The FTC is scheduled to disclose in August the prices of 40 European and U.S. cosmetic brands in each of the different distribution channels and stages, and the comparisons with prices in other countries.