South Korea's Fair Trade Commission (FTC) has fined Samsung, LG and Korea's carriers $40.2 million for price rigging and consumer fraud.
The FTC found the companies guilty of working together to fix prices and defraud consumers. The companies had apparently inflated the prices of phones and then advertised them as improved special offers.
According to Yonhap News, customers were led to believe that they were getting a bargain, when in reality the price was no different.
The $40.2 million fine was divided among Samsung, LG and Pantech, as well as Korean carriers SK Telecom, KT Corp and LG Uplus corp. The majority of the fine was issued to SK Telecom at $17.9 million, and Samsung at $12.6 million.
Alongside these hefty fines, the companies have been ordered by the FTC to release details to the public of exactly how much they provided in incentives.
The FTC has also taken administrative steps to ban the companies from offering any further sales incentives.
The commission found that a total of 209 phone models had been marked up by the three companies before they were sold on to the operators.
The carriers then falsely advertised the products as discounted or with special incentives to consumers. This tricked them into thinking they were getting a bargain, even though the products "should not have been so expensive in the first place."
"Companies took advantage of the complicated price setting practice in the mobile telecommunications sector to trick consumers," said an official from the FTC.
A spokesperson for SK Telecom, however, told the Korea Herald that such a campaign is not uncommon as a marketing tool. "They did not consider that a subsidy accelerates competition in the market and benefits consumers," the spokesperson explained.
This is not the first time that Samsung and LG have faced fines from the FTC in Korea. Last year the two companies and four others were fined a collective $172.7 million over price fixing on their TFT-LCD's.
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