- Corrective Orders and Fines for Coordinating Number Portability Net Gains and Losses
The Korea Fair Trade Commission (KFTC, Chairman Han Ki-jeong) has decided to impose corrective orders and a total fine of 114 billion KRW (tentative) on the three major mobile carriers—SK Telecom Co., Ltd., KT Corporation, and LG Uplus Corporation—for colluding to adjust the net increase and decrease in number portability subscribers from November 2015 to September 2022 to prevent subscriber concentration on any specific carrier.
Background and Implementation of the Collusion
After receiving sanctions from the Korea Communications Commission (KCC) in December 2014 for violating the Act on the Improvement of Mobile Device Distribution (hereinafter referred to as the "Handset Distribution Act") by excessively offering sales incentives, the three mobile carriers, as part of self-regulation efforts for legal compliance, jointly operated a Market Situation Response Team (hereinafter referred to as the "Response Team") with the Korea Association for ICT Promotion (KAIT). However, during this process, they formed and executed a collusive agreement.
Sales incentives refer to the monetary benefits mobile carriers provide to dealers or sales outlets as compensation for acquiring subscribers. Increasing these incentives can lead to a rise in the number of new subscribers via number portability.
The Response Team convened daily with employees from all three mobile carriers and KAIT in the same location. Whenever an excessive sales incentive case was identified through reports from carrier employees or KAIT’s market monitoring, immediate corrective measures were taken.
During these meetings, the three mobile carriers continuously shared information on number portability status and sales incentive levels. Around November 2015, they agreed to adjust the net increase and decrease in number portability subscribers to prevent any specific carrier from gaining a disproportionate number of new subscribers.
This agreement was actively executed until the Response Team's operations ended in September 2022. Whenever a specific carrier experienced a significant net increase or decrease in number portability subscribers, the carriers adjusted their sales incentives accordingly—either increasing or decreasing them—to maintain balance.
Details of the Collusive Practices
If one carrier’s net increase in number portability subscribers continued to grow, it would voluntarily lower its sales incentives, while the other two carriers would raise theirs. Conversely, if a carrier experienced a significant net decrease in subscribers, the other carriers would agree to lower their sales incentives or allow the struggling carrier to increase theirs.
Furthermore, the marketing executives of carriers that saw large net gains would directly contact their counterparts at the carriers experiencing net losses to apologize. If the struggling carrier faced internal difficulties in responding, the other carriers would jointly lower their sales incentives to maintain the collusion. These practices were confirmed through work records from KAIT employees who participated in the Response Team.
Impact on Market Competition and Consumer Costs
As a result of this collusion, competition for acquiring subscribers in the mobile market was restricted. The average daily net increase and decrease in number portability subscribers, which was around 3,000 in 2014, dropped to below 200 by 2016 after the collusion began. The total daily number portability transactions also decreased from 28,872 in 2014 to 15,664 in 2016, a 45.7% decline, and continued to drop to 7,210 by 2022.
This case marks the detection of a collusive scheme among the three major mobile carriers that lasted for over seven years. The KFTC expects that imposing these sanctions will help revitalize competition in the mobile market and ultimately reduce household telecommunication costs.