MNCs in the News-2014-02-14

Mobile Phone China Alliance, an industry group in China, submitted a report to the National Development and Reform Commission (NDRC) accusing Qualcomm Inc., a major American mobile phone chipmaker that depends heavily on the China smartphone market, of charging excessive patent fees from which it derived excessive licensing revenues. Furthermore, the Alliance alleged Qualcomm, which already is facing an antitrust investigation, was forcing customers to buy bundled services. The Chinese investigation seems to be motivated in part by concerns about Qualcomm’s ability to produce chips that have a superior ability to work on both China’s 3G and new 4G networks (He Wei and Zhao Yinan, “Industry Group Enters Fray in Qualcomm Probe,” China Daily, Feb. 11, 2014, http://www.chinadaily.com.cn/business/2014-02/11/content_17275800.htm)

InterDigital, a US patent licensing company, has been under pressure from Chinese authorities for monopolistic practices. On top of being fined US $3.3 million by a Chinese court, it is subject to an ongoing NDRC antitrust probe. Among other things, China argues InterDigital charges Chinese companies like Huawei higher rates than it charges non-Chinese firms. It also has alleged InterDigital has been using illegal practices to pressure Chinese firms to accept its fees. The situation was so heated that InterDigital refused to send representatives to China for fear they might be arrested. Now, InterDigital is working to address NDRC’s concerns (“InterDigital Vows Cooperation in China’s Anti-Trust Probe,” Xinhua, Feb. 11, 2014, http://www.chinadaily.com.cn/business/2014-02/11/content_17276641.htm).

Nippon Jogesuido Sekkei (NJS), Ltd., a Japanese firm that does water supply and sewer system consulting, has worked on Japanese Overseas Development Assistance (ODA) projects in over 90 countries. It now has about 70 on-going projects in over 30, primarily developing, countries. In 2009, the city of Basra (Iraq) awarded the company a US $41.7 million contract to consult on a water filtration plant and water supply system. Work on the project is expected to start shortly. NJS is well placed to benefit from the Japanese government’s plan to increase infrastructure goods and service exports (NJS homepage, “What’s news,” https://www.njs.co.jp/cgi-bin/topics/wn.cgi?c=1345538427023479; “Abe’s export push lifting Japan’s smaller infrastructure firms,” Nikkei Asian Review, Feb. 9, 2014, http://asia.nikkei.com/Business/Trends/Abe-s-export-push-lifting-Japan-s...)

After a barrage of criticism, the Korean government retracted its ban on telemarketing activities. This ban followed the leak of huge amounts of consumer data, which resulted from the hacking of several major financial firms. After Seoul implemented the ban, there was a firestorm of criticism from foreign insurance firms in South Korea such as FSC and AIA Life. These companies argued the government’s decision violated Korea’s free trade agreements. The removal of the ban saves the jobs of 50,000 telemarketers, but does not eliminate the need for financial regulators to improve consumer data protection (“Financial Firms to restart telemarketing from late this month,” MK Business News, Feb. 13, 2014, http://news.mk.co.kr/english/newsRead.php?sc=30800016&cm=Finance&year=20... and Na Jeong-ju, “Telemarketing ban to be lifted,” The Korea Times, Feb. 13, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/02/488_150984.html).

The Korean National Tax Service is currently investigating the Seoul branch of UBS AG, the largest Swiss bank, for alleged tax evasion. It suspects the UBS Seoul branch of hiding 51 billion won of unreported profit from its investments in derivatives products. This investigation comes amidst a Korean government initiative to collect taxes from big companies and wealthy individuals to fund its welfare policies. Since last year, it has investigated a number of foreign financial companies such as Credit Suisse and Merrill Lynch and imposed large fines for tax violations (Bae Ji-sook, “UBS probed for alleged tax evasion,” The Korea Herald, Feb. 5, 2014, http://www.koreaherald.com/view.php?ud=20140205001331; and Choi Kyong-ae, “UBS probed for tax evasion,” The Korea Times, Feb. 10, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/02/123_151071.html)

According to a survey conducted by the Korean International Trade Association, the current depreciation of the Japanese yen, part of Tokyo’s strategy for reinvigorating the Japanese economy, is weighing heavily on Korean exports. Specifically, 95% of Korean companies claim that the declining yen is adversely affecting their overseas business operation. South Korean conglomerates Samsung Electronics and Hyundai Motor are among the businesses hardest hit by the weak Japanese currency. Experts estimate that for every 10-won appreciation against the dollar these two companies suffer about a 1% decline in operating profits (In-Soo Nam and Takashi Nakamichi, “Exchanging joy and sorrow between Korea and Japan due to the exchange rate,” The Wall Street Journal, Feb. 4, 2014; “Weak yen hurting South Korea export to Japan: Poll,” The Korea Herald, Jan. 26, 2014, http://www.koreaherald.com/view.php?ud=20140126000140; and Choi Kyong-ae, “Weak yen hit Seoul money changers,” The Korea Times, Feb. 10, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/02/488_151183.html)