Japan's anti-trust watchdog has launched a rare compulsory inspection on cellphone distributors selling smartphones for as low as 1 yen, sources familiar with the matter said Tuesday.
The Japan Fair Trade Commission aims to find out how such sales practices are possible and determine whether there are cases of dumping or abuse of dominant bargaining position by major mobile carriers against distributors to achieve their targets, the sources said.
The FTC has ordered distributors that had sold smartphones for less than 1,000 yen ($7) to report the details of their transactions with carriers by Nov. 2, according to the sources. Those who do not agree to the inspection or who make false reports are subject to fines.
The regulator plans to draw up a report as early as this year.
Selling smartphones at extremely low prices is widely seen as being linked to carriers imposing high targets for mobile contracts on distributors.
The FTC is looking into how such a discount is financially possible, suspecting it has caused inequalities among customers.
While people who often buy a new model can benefit from a hefty discount, those who keep using the same phone for a longer period are not entitled to such benefits, the sources said. If the discounting practices are stopped, carriers could use surplus funds to lower communications charges, benefitting more subscribers.
The commission decided that a compulsory inspection was necessary as distributors are often under non-disclosure agreements with carriers over their transactions.