South Korea’s Constitutional Court ruled a law imposing a cap on handset subsidies offered by the country’s mobile operators is legitimate.
A challenge filed in early October 2014 shortly after the law went into effect, argued the cap infringes on consumers’ right to pursue a fair contract and goes against the principles of a market economy, Korea JoongAng Daily reported.
In its ruling, the court said the: “ceiling helps block excessive subsidy competition and assists the industry’s healthy growth, and has established a fair and transparent mobile device retail structure”.
The ruling backs a push by the Korea Communications Commission (KCC) to reduce what it considers unhealthy competition by curbing excessive handset discounts, in turn lowering operators’ marketing expenses so they can pass on the savings to customers.
KCC chairman Choi Sung-joon said after the law was passed: “The main purpose is to eradicate irregular and guerrilla subsidy benefits that only some consumers have enjoyed.”
While the KCC insists intense subsidy competition leads to higher handset prices, which are indirectly passed on to consumers, the JoongAng Daily said phone prices have been fairly stable since the law was enacted.
Korea’s three major operators – SK Telecom, KT and LG Uplus – have been fined multiple times by the KCC for flouting the regulation, which sets the subsidy ceiling at KRW300,000 ($280).
The act is valid for three years and is due to expire on 30 September. However newly elected President Moon Jae-in, who campaigned to scrap the subsidy ceiling, could push up the law’s expiration date.
He also pledged to cut the basic mobile subscription fee of KRW11,000 ($9.80) per month to lower consumers’ household expenses, a move the three mobile operators are pushing the government to rethink, Yonhap reported.