Apple Inc. (NASDAQ:AAPL) faced a big blow in Taiwan this Christmas. The Federal Trade Commission of Taiwan slapped a NT$20 million ($666,700) on Wednesday. The regulators found Apple Inc. (NASDAQ:AAPL) guilty of violating the article 18 of Taiwan’s Fair Trade Act. FTC found that Apple Inc. (NASDAQ:AAPL) required the three Taiwanese telecom operators Taiwan Mobile Co. Ltd. (TPE:3045), Chunghwa Telecom Co. Ltd. (NYSE:CHT) (TPE:2412) and Far EasTone Telecommunications Co. Ltd. (TPE:4904) to seek its permission before they can set the prices of iPhones on contracts.
What did Apple do wrong?
In fact, Apple Inc. (NASDAQ:AAPL) pushed them to change service contract prices and subsidy prices, according to Jenny W. Hsu of the Wall Street Journal. While signing their contracts with Apple Inc. (NASDAQ:AAPL), the local carriers had also paid for distribution rights. So, according to Taiwanese law, the carriers are free to set their own price based on their cost structure and competitive situation. After selling distribution rights, Apple has no right to interfere with the pricing of its smartphones.
FTC said that the Cupertino-based company violated the law by prohibiting telecom operators from setting their own prices. Apple Inc. (NASDAQ:AAPL) may appeal. But if it fails to comply with regulations, the tech giant may have to pay up to NT$50 million in penalty. Also, regulators have asked Apple to not interfere with telecom operators’ pricing again. The rules will apply only to iPhone pricing. There is no investigation over iPad pricing interference.
This penalty a lesson for Apple?
Apple Inc. (NASDAQ:AAPL) usually uses its might to force telecom companies and resellers to give in to its demands. In France, the company has been accused of discrimination against outside resellers. When a telecom company signs a deal with Apple Inc. (NASDAQ:AAPL), the tech giant asks them to prefer iPhones over other devices and buy the iPhones in bulk.
But the company had a hard time negotiating a deal with China Mobile Ltd (NYSE:CHL) (HKG:0941). Because the world’s largest carrier reportedly didn’t give in to Apple Inc. (NASDAQ:AAPL)’s demand. The Cupertino-based company reached the deal by agreeing that it will produce iPhones that support China Mobile Ltd (NYSE:CHL) (HKG:0941)’s proprietary 3G network.
Apple Inc. (NASDAQ:AAPL) shares were little changed at $568.10 in pre-market trading Thursday.