Business / Corporate

Apple reviews iPhone contracts with Japan’s three major carriers after FTC raises antitrust concerns

Kyodo, JIJI

Apple Inc. and its Japan arm have reviewed their iPhone delivery contracts with three major domestic carriers, the Fair Trade Commission announced Wednesday, after sources said the watchdog suspected Apple may have violated the country’s antitrust regulations.

The commission had believed Apple’s iPhone sales practice was restricting rate plans offered by NTT Docomo Inc., KDDI Corp. and SoftBank Corp., according to sources. Following the review, the FTC said those suspicions had been cleared.

Apple had directed the three companies to discount their retail prices for iPhones, making it difficult for the carriers to offer lower rate plans for long-term subscribers, according to sources. The FTC is believed to have judged that the contracts prevented the mobile phone operators from freely setting their rate plans, and could illicitly limit their business activities.

Separate from iPhone contracts, the FTC is also calling for a correction to the common practice by telecommunications firms of selling new smartphones via four-year installment payment contracts. The practice can be problematic in light of the anti-monopoly law, because it could reduce user choice and result in an inappropriate customer lock-in, the FTC said in a report last month.

KDDI and SoftBank both sell new smartphones, including the iPhone, via four-year payment contracts. Subscribers on the contracts can switch to new models after two years. There is typically an amnesty on any remaining payments for their old smartphones, but only if they remain with the carriers on new four-year contracts. This condition leads many subscribers to stay with the same carriers for extended periods of time, effectively depriving consumers of choice, the report said. The FTC also said the connection fees that major carriers charge to operators of low-cost wireless communication services in exchange for leasing network capacity are calculated vaguely and may impede competition.