The Fair Trade Commission issued a call Thursday for a correction to the common practice by telecommunications firms of selling new smartphones on four-year installment payment contracts.
The practice can be problematic in light of the anti-monopoly law, because it may reduce users’ choice and result in an inappropriate customer lock-in, the FTC said in a report.
The antitrust watchdog plans to urge the industry to correct the practice in cooperation with the Internal Affairs and Communications Ministry.
Among the country’s three major mobile carriers, KDDI Corp. and SoftBank Corp. both sell new smartphones, including Apple Inc.’s iPhone handsets, on four-year payment contracts.
Subscribers on the contracts can switch to new models after two years. They are forgiven any remaining payments for their old smartphones on condition they stay with their carriers and sign new four-year contracts.
This condition leads many subscribers to stay with the same carriers for a long time, effectively depriving consumers of choice, the report said.
Mobile phone companies sell handsets mainly on two-year installment payment contracts. The FTC also views as problematic the combination of the two-year contracts with subscriber identity module (SIM) locks that restrict the use of handsets to specific carriers.
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