EU regulators examining Apple's contracts with European carriers

EU regulators examining Apple's contracts with European carriers
A number of European carriers have sent copies of their contract with Apple to the EU after complaining that the deals hurt competition. The contracts allow these mobile operators to sell the Apple iPhone and EU regulators are investigating them for possible antitrust violations. While the EU regulators admitted that they are looking into the matter, a formal investigation cannot start until the carriers file formal charges. The fact that the EU is already examining the contracts without such a complaint could mean that they are taking the matter extremely seriously.

Apple does not allow public comments about its deals with carriers, but those who anonymously spoke to the New York Times said that the contracts that Apple demands that mobile operators sign in order to sell its iconic smartphone are "unusually strict" which makes it hard for other handset makers to compete with the Apple iPhone. The issues involved with this situation are believed to not affect U.S. carriers who are asked to sign a contract that one insider deemed as being more reasonable, although still aggressive. European carriers aren't really complaining because the popularity of the device means that they would be at a major disadvantage if they didn't carry the phone. According to Strategy Analytics, the Apple iPhone 5 was the best selling smartphone in the world in the fourth quarter.

Each carrier selling the Apple iPhone is said to have a different contract. Carrier sales of the iPhone accounted for 56% of the $55 billion in revenue that Apple earned last quarter. Most carriers have a quota that they must hit over a three year period to continue receiving the device. Unsold units must be paid for, which is is part of the problem that U.S. carrier Leap Wireless is having with its deal with Apple. But those with knowledge of the situation say that the problem is with French carriers. This comes despite a recent comment from Stéphane Richard, Chairman of French Telecom-Orange, who said that Apple is "probably a little less arrogant" under CEO Tim Cook.

There is a lot at stake for Apple. The maximum fine for being found guilty of using anti-competitive contracts to block competition is 10% of annual global sales. The highest fine on record is the 1.1 billion EUR ($1.42 billion USD) that Intel was hit with in 2009 for abusing its position in the computer chip market. That case is being appealed by Intel.

Discussing its European contracts with carriers, Apple spokeswoman Natalie Kerris, said, "Our contracts fully comply with local laws wherever we do business, including the E.U."

source: NYTimes
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