The unexpected preliminary decision by South Korea’s Fair Trade Commission (FTC) to bar SK Telecom Co.’s acquisition of top cable TV network CJ HelloVision Co. stems from concerns over consumer rights and fair competition from the practice of bundled products or services by a dominant player.

The country’s mobile communications market as well as cable TV market has reached a saturated point, leaving just a few majors in the field.

On one perspective, the merger between SK Broadband Co., a wholly-owned subsidiary of SK Telecom, and CJ HelloVision, would strengthen SK Telecom presence in both wireless media and cable TV platform. But on the other hand, an entirely new media and market could be created through birth of a prepaid platform interactive both on TV screen and mobile device.

The antitrust agency therefore cannot easily conclude the deal unfair and damaging to the industry entirely on the grounds of dominant market presence. It would have better argument if it raises concern about service bundling by a predominant player that could potentially limit the choices of consumers.

A combined product refers to more than two products and services being sold as a single product. In the case of SK Telecom and CJ HelloVision, it would be selling cable TV content together with communications service - for example, high-speed Internet with cable TV service. SK Telecom, the country’s top mobile communications service provider, would gain more dominance in not only the communications sector but also cable TV sector by introducing bundled products based on the merger with CJ HelloVision.

According to industry sources, the FTC is expected to further look into whether product and service demand decreases when a dominant player in the combined product market raises product price. The anti-trust agency is expected to come up with a final decision later this month.

The ultimate question would be who benefits more - the seller or the buyer - when products or services are offered in package or a la carte.

The problem would be of less damaging to consumer choice if the packaged service is offered at higher rate.

In March, the Korea Information Society Development Institute released a report demand could fall as much as 45 percent if price gains by 10 percent as a packaged bundle.

Critics say that is too extreme. They claim 10-percent gain in price won’t scare consumers off more than 20 percent and argue consumers on the mid-range pricing plans cannot act proactively against packaging policy.

By Kim Myung-hwan, Na Hyun-joon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]