The Korea Herald

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Philips fined for not cutting prices despite EU FTA

By Kim Yon-se

Published : June 24, 2012 - 21:14

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Philips Electronics became the first foreign company to be subject to the nation’s antitrust regulatory sanctions for pressuring stores not to cut prices despite the Korea-EU Free Trade Agreement.

The Fair Trade Commission said Sunday that it reprimanded the Netherlands-based company with fines of 1.5 billion won ($1.3 million) for not reflecting the reduced tariff on its prices of products in the local market.

The company, which sells a variety of home appliances as a unit of Royal Philips Electronics, had pressured major local Internet shopping malls not to lower prices, according to the antitrust regulator.

“Though the tariffs on its products were lifted or lowered sharply under the Korea-EU FTA, which took effect on July 1, 2011, Philips Electronics tried to obstruct the shopping malls from cutting consumer prices in reflection of the trade deal effects,” an FTC official said.

He said the company, which had set a minimum ceiling on consumer prices, also gave disadvantages to several shopping malls failing to abide by its guidelines.

The FTC stressed the regulator decided on the sanction as it believed that Philips infringed on consumer rights through irregular practices hampering price competition among retailers.

In addition, according to the authorities, the company held dozens of task force meetings since August 2010 in an alleged bid to hinder cyber malls from engaging in price competition.

Philips holds 61.5 percent of Korea’s electric razor market, 45.2 percent of the electric iron market, and 31.3 percent of the coffee machine market.

Meanwhile, the distribution margin of European-brand electric irons, including those of Philips, amounted to 129.6 percent of the import prices, according to a local consumer advocacy group and the FTC.

Philips Electronics Korea is exclusively responsible for distributing and marketing the products of the Netherlands-based Philips.

By Kim Yon-se (kys@heraldcorp.com)