The Fair Trade Commission recently imposed a penalty surcharge of 114 billion won on the three mobile carriers for colluding on the number of mobile number transfers. Compared to the "5 trillion won" penalty surcharge that had stirred up discussions since last year's National Assembly inspection season, this is a pittance. Some insiders in the industry suggest this is a victory for the "communications companies' public relations" that has dulled the edge of the Fair Trade Commission.
On the 12th, the Fair Trade Commission imposed a penalty surcharge of 114 billion won (SK Telecom 42.6 billion won, KT 33 billion won, LG Uplus 38.3 billion won) on the three mobile carriers. The Fair Trade Commission explained that the three mobile carriers colluded to control the number of mobile number transfers from November 2015 to September 2022, which constitutes "the act of limiting competition by a dominant market player" under the Fair Trade Act (Article 40 of the Monopoly Regulation and Fair Trade Act).
A notable point is that the Fair Trade Commission, which had warned that it could impose a penalty surcharge of up to 5.5 trillion won, ultimately lowered the final amount significantly to 114 billion won after adjustments. What could be the reason for the sudden shift in stance from the Fair Trade Commission, which had consistently maintained a tough position?
Some in the industry suggest this points to a victory for the communications companies' public relations alliance. The public relations organizations of the three mobile carriers have reportedly united to exert influence, ensuring favorable conclusions for the mobile carriers in discussions with the National Assembly and the government. While the three mobile carriers have not disclosed the size of their public relations teams, it is known that each operates public relations teams ranging from dozens to over 100 individuals. This is usually more than 2 to 3 times the size of public relations teams at typical large corporations.
Past cases provide insight into the influence of the communications companies' public relations organizations. In 2020, the Korea Communications Commission predicted a total penalty surcharge of 93.3 billion won against the three mobile carriers for violating the Mobile Device Distribution Act by exceeding the public subsidies for devices and inducing discriminatory allowances. Ultimately, however, only 51.2 billion won was imposed. An official from the telecommunications industry noted, "At that time, the Korea Communications Commission applied a historical maximum reduction rate of 45% to the assessed penalty surcharge, leading to controversy over leniency. I consider this a reflection of the influence of the public relations organizations of the mobile carriers."
In 2015, over 38,000 cases of illegal activities were detected involving mobile carriers giving excessive gifts to consumers while selling bundled communication products, with the penalty surcharge estimated at around 10 billion won. Nevertheless, the Korea Communications Commission was criticized for not holding the mobile carriers accountable.
An incident well-known in the industry involves SK Telecom attempting to acquire CJ HelloVision in 2015, while the public relations organizations of its competitors KT and LG Uplus worked to block the merger. At the time, KT expanded its public relations team to 87 members, while LG Uplus increased its team to 83 members. In comparison, SK Telecom had a public relations team of 56 members, which was smaller than those of the two companies.
The reason mobile carriers have been aggressively expanding their public relations organizations is that, due to the nature of wired and wireless communication businesses, they are subject to various regulations from the government regarding the installation of communication base stations and the launch of rate plans. Moreover, as they must regularly receive new or reassigned frequency allocations from the government, competition among mobile carriers for better frequencies inevitably intensified.
The telecommunications industry does not yet consider the Fair Trade Commission's penalty surcharge decision a victory. The three mobile carriers issued a statement on the 12th, stating they cannot accept the Fair Trade Commission's penalty surcharge and signaling a legal dispute. They argued that they diligently complied with the Korea Communications Commission's administrative guidance (on maintaining subsidy payments within the limit of 300,000 won), making the penalty surcharge unjust. One official from a mobile carrier lamented, "In the past 10 years, the total penalty surcharge imposed by the Korea Communications Commission on the three mobile carriers for violating the Mobile Device Distribution Act was around 150 billion won, but now they're asking us to pay 114 billion won just for following the Korea Communications Commission's guidance, which doesn't make sense."
Professor Jeong Sang-an of the Graduate School of Communication at Chung-Ang University noted, "The Fair Trade Commission had announced it would impose a penalty surcharge in the range of 5 trillion won, but ultimately lowered the amount to a mere pittance. I see this decision by the Fair Trade Commission as making the three mobile carriers a scapegoat in an inter-departmental power struggle with the Korea Communications Commission. The only fault of the three mobile carriers is that they diligently followed the administrative guidance from the Korea Communications Commission."