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Samsung, LG, and others: $40 million fine for price fixing

March 17, 2012
Samsung Fined

Although the combined $40 million is more like a slap on the wrist than a serious punishment, the fine that South Korea’s Fair Trade Commission (FTC) has applied to Samsung, LG, and Pantech (the three biggest mobile technology makers in SK) is newsworthy.

First things first – what happened? An inquiry ran by the FTC, South Korea’s corporate watchdog, found that Samsung, LG, and Pantech, along with the country’s top carriers, SK Telecom, KT Corp., and LG Uplus Corp., colluded to fix prices for smartphones and tablets. According to the investigators, the companies agreed to launch products at huge prices, so they would be able to offer them at heavy discounts later. Consumers were led to believe that they were getting bargain prices, when in fact, they were paying the “normal” price. In other words, the oldest trick in the book of crooked merchants…

In total, the biggest tech names in South Korea (and some of the biggest in the world) fixed the prices of no less than 209 models. Our beloved Samsung received the second heaviest punishment – a cool $12.6 million. SK Telecom, the country’s largest carrier got the biggest ticket – $17.9 million.

Why did we say that a combined $40 million fine is a slap on the wrist? Well, for instance, the $17.9 million ticket that Samsung received is insignificant when you consider the company’s revenues, or even the mountains of cash that Sammy and its buddies did with their little customer defrauding scheme. I’d venture to say that the interdiction to offer incentives (which the FTC enforced on Samsung et al) will do a bigger damage to their business than a few million dollars.

Could price fixing be happening elsewhere?

Samsung and LG are among the biggest phone sellers in the US and the world, occupying the second and fourth position respectively. Would it be possible that the close (slightly too close) relationship between the two Korean giants extends at a world level?

That would be impossible to tell. Investigations like the one that concluded in Korea take years to conduct and huge resources. But I find it unlikely for Samsung and LG to form cartels in other parts of the world. The two effectively own the South Korea market, but in the West and other markets, they face much too stiff competition to be able to fix prices. So, in a way, thanks Apple!

But never say never. You can’t tell what the regulatory cats of the worlds will drag in next year. For us as consumers and tech fanatics, it’s certainly a disappointing, even if not surprising revelation that tech companies will do just about anything to take our money.

What do you think?