SKT, KT, LG Uplus to face FSS investigation

Korea’s three largest telecom operators ― SK Telecom, KT and LG Uplus ― could possibly to be hit with more disciplinary measures as the country’s financial regulator plans to launch an investigation into alleged malpractice concerning credit card transaction fees.

The Financial Supervisory Service is expected to begin an investigation into the so-called “big three” telecom companies this week as they may have unfairly demanded that card issuers lower transactions fees below the standard market rate, sources told the media.

They have reportedly pressured credit card firms to reduced the fees charged to the three companies’ retail stores to 1.5 percent, much lower than 1.85 to 1.89 percent sought by the card industry.

The appropriate rate should be around 1.8 percent in accordance to their annual sales, according to a report by the Korea Development Institute, which has been evaluating the credit card transactions system for overhaul recommendations. The incoming administration of President-elect Park Geun-hye seeks to apply fees based on sales rather than fixed rates.

Regulators said the telecom operators may have “abused their dominant market positions” to maintain a low rate, which is clearly a violation, and punishment could include fines or prison terms.

The FSS could report its findings to the Fair Trade Commission and take legal action against the big three should evidence lead to business malpractice, it said.

The telecom industry had been given transaction fees as low as a 1.1 percent, having argued that a higher rate would ultimately burden consumers as they would have to raise communication fees to fill the gap.

SK Telecom could face additional costs of some 38 billion won, KT 32 billion won and LG Uplus 14 billion won, should card issuers raise the rates on their retail stores.

The big three had been slapped with fines and business suspension by the Korea Communications Commission late last month for excessive subsidies offered to consumers seeking to purchase LTE smartphones.

By Park Hyong-ki (hkp@heraldcorp.com)