Apple Asia Ltd.

Case:

The FTC initiating ex officio investigation into Apple Asia Ltd.'s violation of Fair Trade Law by restricting domestic telecom businesses' iPhone prices

Key Word(s):

Cell phone, distributor contract, price of cell phone sold with contract plan, cell phone price subsidy

Reference:

Fair Trade Commission Decision of December 25, 2013 (the 1155th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 103002

Industry:

Telephones and Cellular Phones Manufacturing (2721)

Relevant Law(s):

Article 18 of the Fair Trade Law

Summary:

1. The FTC received complaints that Apple Asia Ltd. (hereinafter referred to as AAL) demanded telecom companies to submit their Apple cell phone prices to AAL for approval before they could sell the products. Violation of Article 18 of the Fair Trade Law was suspected and the FTC therefore initiated an ex officio investigation.
2. Findings of the FTC after investigation:
   

   The telecom companies in concern and AAL turned in written explanations about their agreements and also gave their statements at the FTC. The investigation revealed that AAL was a subsidiary of US-based Apple Inc. responsible for marketing Apple's products in Taiwan. The principal sales channels for iPhones were Chunghwa Telecom, Taiwan Mobile and Far Eastone Telecom. The distributor contracts signed between AAL and these telecom companies contained stipulations on terms of purchase, payment and invoice issuance. According to the contracts, the ownership of the cell phones belonged to the telecom companies once they were paid for and the risks in guarding and storing the products also became the responsibility of the telecom companies. In other words, the domestic telecom companies bought to own the products from AAL.

3. Grounds for disposition:
   

   According to the above contracts, the said domestic telecom companies were required to submit cell phone rate plans involving iPhones for the approval of AAL. The FTC's investigation showed that the telecom companies did comply and present such rate plans (including cell phone prices) to AAL for its approval or confirmation before the rate plans could be promoted in the market. Emails between AAL and the telecom companies indicated that AAL had indeed requested the telecom companies to readjust the prices of Apple cell phones sold as part of their contract phone plans, their cell phone price subsidies, as well as the price difference between new and old cell phones. In addition, the contracts also included provisions that restricted the prices of Apple cell phones sold as part of the telecom companies' contract plans, demanded the telecom companies to keep up with each other in phone price subsidization and sales conditions, specified minimum purchased quantities, and requested them to submit special offer plans for approval from AAL in advance. The conduct deprived the telecom companies of their freedom to determine their prices according to their cost structure and market competition. It limited both intra-brand and inter-brand competition and was in violation of Article 18 of the Fair Trade Law. The FTC therefore acted according to the first section of Article 41 (1) of the Fair Trade Law and ordered AAL to immediately cease its unlawful act, and also imposed on AAL an administrative fine of NT$20 million.

Appendix:
Apple Asia Ltd.'s Uniform Invoice Number: 238265946

Summarized by Yeh,Su-Yen; Supervised by Wu, Lieh-Ling