Apple Russia found to have illegally fixed iPhone prices

The Russian anti-monopoly authority has found Apple guilty of forcing Russian resellers to sell iPhones at a predetermined price, which is illegal in Russia.

The ruling was first reported by the FT, but has also been published by the Russian Federal Antimonopoly Service (FAS). The Apple Rus subsidiary, says FAS, coerced the following resellers (according to Google Translate) to maintain the prices of a number of iPhone models at a specified level: MTS, M. Video, Beeline, Eldorado, Euroset , OZON, re: Store, Messenger, Megafon, Yulmart, Media Markt, Citylink, Holodilnik.ru, DNS, ION (know-how), Technosila.

Apple is, of course, free to charge whatever it wants when selling directly and to charge whatever wholesale prices it wants. The issue lies with trying to coordinate pricing beyond its own operations – i.e. via resellers – and the FAS riling infers that Apple used the tacit threat of removing supply of iPhones to enforce its will. It also said that Apple cooperated with the investigation and has vowed to be good from now on.

This ruling sets an interesting precedent. Price fixing among competitors is called a cartel and has been frowned upon at least since Adam Smith wrote “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices,” in 1776. Suppliers can certainly recommend pricing but third parties should ultimately be free to charge what they want to their customers.

We don’t know whether Apple operates in a similar manner in other markets but a look at Carphone Warehouse reveals it is offering a £20 discount on a SIM-free iPhone 7 (see screen grab below). We also don’t know whether this discount was pre-approved by Apple, but either way it implies some sale-price flexibility.

Apple is notorious for wielding an iron grip over its supply chain all the way to the end-user. Current CEO Tim Cook is a supply chain guru, while Steve Jobs was fanatical about brand continuity and control in general. Apple makes far more margin than any other smartphone maker and if its customers are happy to pay that premium then good luck to them. But it shouldn’t be allowed to manipulate the third party market for its products so this ruling is correct.