Telecommunications Businesses
1215th Commissioners' Meeting (2015)
Case:
Telecommunications businesses was complained for violating the Fair Trade Law for its iPhone 6 promotional plans and 4G unlimited Internet access service plan
Keyword(s):
Telecommunications, oligopoly, subscription, Internet access
Reference:
Fair Trade Commission Decision of February 11, 2015 (the 1215th Commissioners’ Meeting), Letter Kung Fu Tzu No. 10412601644
Industry:
Telecommunications (6100)
Relevant Law(s):
Articles 7 and 14 of the Fair Trade Law (Articles 14 and 15 of the current version)
Summary:
Summarized by Fang, Yen-Hsiu; Supervised by Kuo, An-Chi
(1) Subscription rate consistency: Chunghwa Telecommunications Co., Ltd. (hereinafter referred to as Chunghwa Telecom) said it had determined the price of iPhone 6 by comparing with the promotional price of iPhone 5S for subscribers before announcing the promotional price of iPhone 6 on Sep. 12, 2014. Taiwan Mobile Corporation (hereinafter referred to as Taiwan Mobile) said it had assessed the promotional prices offered by its competitors prior to announcing the subscription plan for iPhone 6 on Sep. 19 of the same year and the price had been decided after its evaluation of the competition condition in the market, user needs and the basic earnings on plans of different monthly fees and the cost of each cell phone. Far EasTone Telecommunications Co., Ltd. (hereinafter referred to as Far EasTone Telecom) expressed that its cell phone prices and fees were all established according to those of Chunghwa Telecom except the design of tariff contents was different and its highest and lowest monthly fees for iPhone 6 sold to subscribers were not consistent with those of Chunghwa Telecom either. Taiwan Star Telecom Corporation Limited (hereinafter referred to as Taiwan Star) stated that its subscription rates for iPhone 6 purchases were determined after deducting the company’s purchasing cost and multiplying the result with the subscription compensation percentage. Its iPhone plans were announced on Sep. 18 but renewing subscribers were given a discount.
(2) The exit time of promotional plans of 4G unlimited Internet access service without connection speed decrease: According to Chunghwa Telecom, the company had notified the National Communications Commission on Aug. 27 that its promotional plans would take effect on Sep. 1. Later on, due to the fact of its users increase and the target of its 4G services was to achieve the goal of occupying over 40% of the total market share, Chunghwa Telecom decided on Oct. 30 to extend its offer of promotional plans. Taiwan Mobile said since 4G services provided faster Internet access, the company hoped that users could subscribe to such upgraded services as early as possible. As a result, starting on Jun. 16 it began to make the offer that the Internet access speed would not decrease during the contract period for renewing subscribers paying more than NT$999 of monthly fees. Far EasTone Telecom expressed that it had referred to the pricing policy of Chunghwa Telecom, the leading competitor in the market, and decided to offer its promotional plans between Sep. 1 and the end of October. However, after learning about Chunghwa Telecom’s decision to keep its old plans available after the end of October before new plans were released, it had no choice but to follow suit to prevent loss of its own customers. Meanwhile, Taiwan Star said the company had publicly announced its 4G unlimited Internet access service plans on Aug. 25 when it officially launched operation. It offered 4G unlimited Internet access without connection speed decrease for new and old subscribers paying more than NT$599 of monthly fees. .
(1) Whether nearly consistent subscription rates involved concerted action: There were only a few 4G mobile broadband service providers in the market and thus consumers could easily compare their promotional prices and service contents. To compete and maintain its market share, each business, besides considering its operating cost, had to take into account market supply and demand, competition condition and pricing strategies of competitors when setting the prices for the product or service it offers. In other words, it would determine the prices of its product or service in accordance with the prices of the leading competitor on the market in order to prevent aberration from ongoing market rates and loss of subscribers. For this reason, the promotional cell phone prices of the telecommunications businesses would eventually become consistent and the tendency was related to the structure of this oligopolistic market and the nature of the product. The result of the FTC’s investigation indicated that the telecommunications businesses had determined their promotional cell phone prices and announced their decisions at different times. During its decision-making process, each business had compared the prices of its competitors and made adjustments before finalizing its prices. Some businesses had even chosen to offer dissimilar plans and, moreover, each telecommunications business had offered different promotional cell phone prices aiming at different clienteles. In the meantime, there are many kinds of telecommunications service plans. The said businesses might have offered similar promotional cell phone prices but the contents of their mobile communications service differed even when the monthly fees were close. Such differentiated services under similar monthly fees and promotional cell phone prices were intended to attract different clienteles to compete for their shares of the 4G mobile broadband service market. Based on the decision-making process and sales of each business, the consistency of promotional cell phone prices had to be a result of price follower strategy in this oligopolistic market.
(2) Whether the exit time of 4G unlimited Internet access service plans without connection speed decrease involved concerted action: Due to poor growth in the number of 4G users, some telecommunications businesses chose to replicate the strategies of their bigger competitors in the market and released promotional plans of 4G unlimited Internet access service without connection speed decrease. However, their reasons varied and their plans were announced at different times while their decisions were made after they took into account the period and content of the special offers made by other businesses. The reasons behind the extending the offer period of promotional plans were different because they were adopted after taking into account of the decisions made by their competitors, meaning that established decisions could be altered as a consequence of competitors’ change of plans. That is, each business’ decision-making mode could easily be altered depending on market competition information they acquired. Based on such decision-making processes, the FTC concluded that there was no evidence showing the businesses in concern determined to end their offers of promotional plans as a result of any mutual understanding. Comparison of the periods in which the four telecommunications businesses had offered their promotional plans since 2013 also indicated no consistency in time and it was not uncommon that the validity period of such special offers was extended when it expired. The duration of the offer of promotional plans of 4G unlimited Internet access service without connection speed decrease was determined as same as the duration of other promotional plans was determined. There was no difference between the approaches of establishment and announcement of such promotional plans and those in the past. Above all, each telecommunications business continued to offer promotional plans of 4G unlimited Internet access service without connection speed decrease and no such offers had been ended at the same time.
(3) The telecommunications businesses had launched their promotional plans of unlimited Internet access service without connection speed decrease, announced their promotional cell phone prices at different points of time, and their plan contents were also dissimilar from one another. Meanwhile, comparison of the internal decision-making information of the businesses revealed that their promotional plans and cell phone prices were decided in accordance with the condition of market competition. Based on existing evidence, the FTC found it difficult to conclude that the businesses had had any mutual understanding or meeting of the minds to engage in any concerted practices in violation of regulations against concerted actions.