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Mobile Device Distribution Improvement Act

  • Mobile Device Distribution Improvement Act
    • The law related to improvement on distribution structure of the mobile communication device (hereafter referred to as the 'Mobile Device Distribution Improvement Act ') was introduced (enforced on October 1st, 2014) to reform deception on continuous and systematic users that are frequently occurred due to ① corrupt distribution structure of the communication market caused by discriminatory payment ② limited choice of users caused by uncertain payment structure and ③ complex contract structure of the mobile device support fund (=subsidies).
 

Current status of Republic of Korea mobile device distribution market

Payment of excessive and discriminatory support fund Payment of support fund mainly to expensive smartphones Intensified competition mainly for support fund
- Two or three times (100 times at maximum) price difference based on where and when to buy
- Formation of abnormal mobile device distribution structure (such as illegal or expedient selling on online)
- Occurrence of extreme users discrimination that never happened anywhere in the world
- Inducement of unnecessary mobile device replacement
- Inducement of joining high price mobile device plan and purchasing expense mobile device with payment of support fund as a lure
- Increase of burden on household mobile communication costs
- Distribution of mostly expensive premium phones in the market
- Continuous damages to the users
- Impossible to perform normal devices and services competition in the market
- Budget phones and low and middle priced mobile devices which are affordable due to low support fund compare to high price smartphones
- Disturb formation of healthy services/mobile devices competition in the market
 

Regulatory framework comparison before and after enforcement of Mobile Device Distribution Improvement Act related to the support fund

 

 
Division Before enforcement (Telecommunication Business Act) After enforcement (Mobile Device Distribution Improvement Act)
Maximum support fund 270,000 won
(there is no guideline and legal basis)
Limit the support fund between 250,000 won and 350,000 won. Decide maximum support fund by considering competitive situation of the market and impact on users’ convenience.
Disclosure of support fund None Disclose per mobile device within maximum level
Discrimination of support fund Discrimination is possible within
270,000 won
Discrimination is possible within 15% range of disclosed amount
  Payment with discrimination based on condition of high price mobile device plans, mandatory subscription of additional services, and limit on selection Autonomous selection is possible for necessary mobile device plans and additional services
Exemption from regulation on maximum support fund For mobile devices over 20 months old from release For mobile devices over 15 months old from release
Manufacturer Development and distribution by focusing on high price premium phones Development and distribution of mobile devices for various users
Store There is no regulatory basis Direct investigation and restriction is possible
 

Definition of terms for Mobile Device Distribution Improvement Act (Article 2)

 
  • Store : a party who processes conclusion of a contract between mobile communication companies and the users (including change of agreement that has been signed) in accordance with agreement with the agent as a sub-agency or reconsignment
  • Agency: a party who processes conclusion of a contract between mobile communication companies and the users (including change of agreement that has been signed) in accordance with agreement with the mobile communication companies as an agency or consignment
 

Major details of Mobile Device Distribution Improvement Act

Distribution structure of mobile communication services and devices 

 

Legislation relating to the improvement on distribution structure of the mobile communication devices

 
Subject Details
Regulation on terminal support fund - Public announcement of payment requirements and details of support fund shall be made and support fund shall not be paid if there is any difference in details
- However, additional support fund may be paid by agencies and stores within the range of 15/100 of the support fund which was officially announced by mobile communication companies
Prohibition on discrimination of support fund payment and disclosure system - Payment of the support fund with unfairness and discrimination based on subscription type, mobile device plan, and location of living shall be banned
Limit on conclusion of individual contract in connection with the support fund - The conclusion of individual contracts that limit selection of the users by imposing obligations to use special mobile device plans and additional services for certain period of time with a condition of paying support fund shall be limited and such contract shall be invalid.
Benefit for the users who did not receive the support fund - The benefit such as discount on fees equivalent to the support fund for the users who joined the services without receiving the support fund shall be provided.
Notice with separation of terminal purchasing cost - The purchasing costs for mobile devices shall be clearly separated from services charges and notified or claimed.
- The discounted amount on fees which is applied at the time of entering service contract shall not be explained or indicated or advertised as the support fund.
Acceptance of appointing stores - When the agencies appoint the stores, the appointment shall not be allowed without prior consent of the mobile communication companies.
- The stores shall indicate the fact that prior consent of he mobile communication companies was received and post it at business site.
Establishment of fair distribution environment - The manufacturers shall not unreasonably reject conclusion of the contract relating to the terminal distribution with the mobile communication companies.
- The condition with irrationality or discrimination or limitation shall not be imposed regarding the support fund.
Prevention of exporting lost or stolen terminals - The export of lost or stolen terminals to the overseas shall be prohibited.
- When used terminals are exported, the confirmation whether the applicable terminals are lost or stolen terminals or not shall be made.
Emergency order to stop - Korea Communications Commission shall have authority to order temporary stop on acts of mobile communication companies, agencies, and stores if there is a concern of hindering users’ benefit due to excessive and discriminatory payment of the support fund
Submission of materials and investigation of fact - The manufacturers, mobile communication companies, agencies, and stores shall submit data related to distribution of mobile communication terminals to the minister of Science, ICT and Future Planning and Korea Communications Commission
 

Benefit of introducing Mobile Device Distribution Improvement Act

  • 1) The vitalization of healthy competition in mobile communication industry and quality of service-oriented competition due to transparent payment of the support fund and decrease in unnecessary and excessive competition for the support fund.
  • 2) The expansion of various mobile device distribution channels and decrease in mobile device price through competition in mobile device price by providing benefits equivalent to the support fund in case of joining mobile communication service only.
  • 3) The contribution to lighten the burden of household communication fees by allowing rational choice of the users such as for mobile device plans, additional services, and self-supplying mobile device.