Japan’s Fair Trade Commission (FTC) is looking at taking action against Apple over possible antitrust violations related to its iPhone supply agreements with the country’s three mobile operators, Reuters reported.
A report from the competition watchdog said NTT Docomo, KDDI and SoftBank refused to sell surplus iPhone models to third-party retailers. Although Apple was not named in the report, government sources told Reuters that the FTC was reviewing Apple’s supply agreements with the operators, which account for about 90 per cent of iPhone sales in the country.
The agreements, which reportedly have kept surplus stocks out of the market, may have helped Apple dominate the nation’s smartphone market, which is one of its most profitable. The iPhone has about a 50 per cent share of Japan’s smartphone market, which is one of the highest in the world.
In addition, the sources said the operators made bulk purchases of iPhones that allowed them to sell the devices at a discount. According to Reuters, the iPhone 7 and Samsung’s Galaxy S7 Edge sell for JPY93,960 ($932) under Docomo’s main service package without any contract, but the cost for the iPhone drops to JPY38,232 with a two-year contract, while the S7 Edge falls to just JPY54,432.
A government official told Reuters: “We are getting closer to taking action [against Apple].”
The measures, the regulator claims, not only may have boosted demand for new iPhone releases by keeping lower-priced models out, but it has also restricted others, such as messaging app firm Line and online retailer Rakuten, from selling iPhones.
If Apple is forced to renegotiate its supply contracts with the country’s mobile operators, its very healthy profit margins could suffer.
In the last quarter, Japan was the one bright spot for Apple, with overall sales rising 23 per cent to $3.5 billion. In its fiscal Q3 ending 30 June, Apple reported a second straight quarter of falling profits and revenue.
Two weeks ago Japanese authorities said they believe Apple and Google may be engaging in practices that undermine competition in the app market. The Ministry of Economy, Trade and Industry looked at how the two companies, as well as others that control app platforms, are able to control what developers can and cannot do.
The FTC reportedly will investigate further and “may choose to conduct on-site inspections if there is sufficient suspicion of regulation breach”.