FTC wags finger at SK Telecom over Melon fees

The Fair Trade Commission (FTC) Wednesday said SK Telecom gave "unfair" treatment to music streaming service Melon in 2010 and 2011, but didn't fine the company. In January 2009, SK Telecom spun off its online music service Melon to ..

The Fair Trade Commission (FTC) Wednesday said SK Telecom gave "unfair" treatment to music streaming service Melon in 2010 and 2011, but didn't fine the company.

In January 2009, SK Telecom spun off its online music service Melon to its subsidiary Loen, which had been going through “managerial difficulties” according to the FTC. After splitting from SK Telecom, Melon had to pay it fees for collecting in-app payments on its behalf.

Like other streaming services, Melon paid 5.5 percent fees to SK Telecom in 2009. But in 2010 and 2011, SK Telecom reduced the fees to 1.1 percent without just cause, according to the FTC. Melon saved 5.2 billion won ($45.2 billion) as a result. The fees were brought back up to 5.5 percent in 2012.

FTC determined that SK Telecom’s discount “provided excessive economic benefit” to help Loen consolidate its online music service.

“This allowed Loen to compete with an advantage over its rivals” and “secure its position as the No. 1 company in the music service market,” the FTC said. It did not order a fine or other measures because Melon had taken the lead in the market and SK Telecom’s favors “did not have a big effect.”

SK Telecom said on Wednesday that the discounted fees had been reviewed by an accounting firm and it “regretted” the FTC’s decision to call them unfair.

“We will consider taking legal measures when the resolution from the FTC arrives,” the company said.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]