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Customers wait in line for the launch of the iPhone X at the KT Square in Gwanghwamun, Seoul on the morning of Nov. 24 (Yonhap News)
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Telecoms companies are forced to bear expenses for advertising and marketing of iPhone X launch
“They show a brief telecom logo after an iPhone ad made by Apple, and then tell the telecom to pay all the advertising fees. They even pass along the costs for new product launch events.” “Apple decides the number of iPhone advertising posters, and even their locations. The costs are all borne by the telecoms and retailers, not Apple.” These are accounts of Apple’s business practices according to telecommunication company sources. With the Fair Trade Commission (FTC) recently launching an investigation into Apple Korea, attention is focusing on whether Apple’s controversial high-handed tactics toward telecoms and iPhone users can be stopped. According to accounts from telecom and electronics company sources on Nov. 26, the FTC recently conducted an on-site investigation at Apple Korea’s offices in Seoul’s Samseong neighborhood. The major focus was reportedly on allegations that the company has passed advertising and marketing costs off on telecoms and abused its advantage with iPhone supplies. “In the first half of the year, we submitted materials on Apple’s advertising and supply methods in response to an FTC request. This investigation appears to be connected to that,” said a source at one telecommunication company. Apple has recently been accused of high-handed tactics in arbitrarily foisting iPhone 8 advertising costs and expenses for iPhone X launch events on telecoms. “If you look at iPhone advertisements, the telecom logo is shown for about one to two seconds at the end, but other than that they’re identical,” complained an official at one telecom. “Anyone can see it’s an iPhone ad, but it’s the telecom that pays all the advertising costs.” The controversy has persisted since the iPhone’s first domestic launch in 2009 through KT. Apple specifications had to be followed in everything from the placement of units in telecom branches to the locations of storefront signs and the language used to describe the iPhone. “Most of the costs were paid by the telecom, like they were serving the iPhone as their ‘master,’” said a telecom source familiar with the situation at the time. “It got to the point where it was embarrassing for other smartphone makers like Samsung and LG Electronics.” iPhone users have also received unfair treatment, paying steeper device costs than overseas and ending up forced to switch to “refurb phones” according to Apple’s service policies when units malfunctioned. The price for the iPhone X was set roughly 200,000 won (US$184) higher than in the US or Japan. “Before the Apple Korea on-site investigation, the FTC visited the telecoms to talk to witnesses and collect data. Everyone seemed to be actively cooperating,” a telecom source said. In 2013, Apple was hit with the equivalent of 700 million won (US$643,500) in penalties for iPhone price controls in Taiwan. This year, it received another 64 billion won (US$58.8 million) in penalties in France for unfair practices with telecoms. Questions are also being raised over possible human rights abuses, including a recent case in which Foxconn, a company producing parts for Apple, forced high school students to illegally work overtime to offset a production delay for the iPhone X. According to a Nov. 21 report in the Financial Times, some 3,000 high school student employees working as interns at a Foxconn factory in Zhengzhou spent eleven hours a day assembling 1,200 iPhone cameras each. Students were also allegedly required to work at Foxconn for three months before they could graduate. It is illegal in China for minors to work more than 40 hours a week. Foxconn halted the overtime practice amid the growing controversy. The company has long been criticized for its working environment, with 14 of its workers taking their own lives in 2010. By Kim Jae-seop and Choi Ha-yan, staff reporters Please direct questions or comments to [english@hani.co.kr]
