The shares of Apple Inc. (NASDAQ:AAPL) declined 2.21% to $115.62 per share due to the report that regulators in South Korea are investigating the iPhone maker in connection with its repair policy and relationship with local phone repair companies.
The Fair Trade Commission (FTC) of South Korea will evaluate the contracts between Apple’s unit in the country and local service center, and it will determine whether the parties violate the rights of consumers.
In a statement, FTC Chief Jeong Jae-chan said, “The probe was launched by the Commission based on suspicions, with investigators processing all the information gathered.” He said the Commission will release the results of the investigation as soon as possible.
The FTC’s investigation came after six phone repair companies in the country followed that order of the Commission to change provisions in their repair contracts that were unfair to iPhone users.
Some of the unfair provisions were asking advance payment from consumers and not allowing them to cancel repair orders. The advance payment was $320, the maximum amount for refurbished iPhone.
FTC received complaints regarding Apple’s repair services
According to FTC Director Min Hye Young, they started reviewing repair practices earlier this year after receiving complaints regarding Apple’s repair services.
There were six local phone service center involved in the previous investigation. One phone repair shop is operated by SK Telekom and another one is run by KT Corp.
The previous investigation on phone repair companies was focused on business to consumer arrangement. The current investigation is focused on business to business contracts between Apple and its vendors. The Commission seeks to determine whether Apple’s vendors were compelled to include the unfair provisions in their repair contracts.
Apple gains market share over Samsung
The FTC investigation comes unexpectedly at a time when Apple is gaining market share globally over Samsung Electronics, its strongest competitor in the smartphone industry.
Last month, Samsung Electronics appointed Dongjin Koh as head of its smartphone business as the company struggles to reverse a decline in market shares. He replaced J.K. Shin, who remained as overall head of the company’s mobile division.