March 6, 2020 Guidance to KDDI Corporation and 26 Dealers for KDDI Corporation concerning Improper Sales Price Discount of Mobile Terminals and Pertaining Conditions

Those commissioned by KDDI Corporation (Makoto Takahashi, President, Representative Director) to provide brokerage and other services were found to have made improper terminal discounts and offered additional benefits to customers. Their acts violated the Telecommunications Business Act (Law No. 86 of 1984). Therefore, the Ministry of Internal Affairs and Communications (MIC) today instructed 26 companies commissioned by KDDI Corporation to outsource operations such as an intermediary to ensure thorough compliance with the provisions of the Act and to implement measures to prevent recurrence steadily. Furthermore, MIC instructed KDDI Corporation to take thoroughgoing steps for its contractors, such as contract brokers.
Also, MIC today instructed UQ Communications Inc. (Takashi Suga, President and Representative Director) to thoroughly provide guidance and other necessary measures to contractors, such as contract brokers.

Outline of the Case and Contents of Administrative Guidance

The Act of Partially Revising the Telecommunications Business Act for Complete Separation of Communication Charges and Terminal Charges and Correction of Excessive Customer Capturing (Act No. 5 of 2019) and related ministerial ordinances came into effect on October 1, 2019.
Article 27-3, Paragraph 2 of the Telecommunications Business Act (hereinafter referred to as “the Act”) after the amendment specifies: If a telecommunications carrier designated by the Minister of Internal Affairs and Communications pursuant to paragraph 1 of the same Article concludes a contract of the sale of mobile terminal equipment as telecommunications equipment necessary for receiving mobile telecommunications services, the Act prohibits the telecommunications carrier or a third party from providing the user of the mobile telecommunications services pertaining to the contract with benefits that may impair the appropriate competitive relationship between telecommunications carriers to the extent specified by an Ordinance of the Ministry of Internal Affairs and Communications. Article 73-3 specifies that the above provision shall apply mutatis mutandis to contract brokers who are involved in such matters as mediating the conclusion of contracts for the provision of mobile telecommunications services provided by telecommunications carriers specified pursuant to Article 27-3, Paragraph 1 of the Act. Article 27-4 of the Act requires that telecommunications carriers shall take necessary measures to ensure the proper and reliable execution of guidance and other tasks related to outsourcing.

Recently, 364 cases of profit offers were found in those who have been commissioned by KDDI Corporation for intermediary services. These profits exceeded the maximum amount prescribed in Article 22-2-16, Paragraph 1 of the Regulations for Enforcement of the Telecommunications Business Act (MPT Ordinance No. 25 of 1985) for contracting the provision of mobile telecommunications services and mobile terminal equipment to be purchased. These cases violate the provisions of Article 27-3, Paragraph 2, Item 1 of the Act, which is applied mutatis mutandis pursuant to Article 73-3 of the Act. They are considered to impair the appropriate competitive relationship between telecommunications carriers. MIC today instructed 26 companies commissioned by KDDI Corporation to outsource operations, such as ensuring thorough compliance with the laws and steadily implementing measures to prevent recurrences, and provide guidance to the contractors, such as contract brokers, and other necessary steps.
MIC today instructed 26 companies commissioned by KDDI Corporation to outsource operations such as ensuring thorough compliance with the laws and steadily implementing measures to prevent recurrence and provide guidance to contractors, such as contract brokerage, and other necessary steps.

MIC will continue striving to enforce the law to secure an appropriate competitive environment in the mobile market.

MIC has an information contact window for efforts to optimize terminal sales at each Regional Bureau of Telecommunications to ensure compliance with the law. If the provision of profits contrary to the law or the restriction of the period is permitted based on the information provided, MIC will check the status of telecommunications carriers and their contractors, including contract brokers’ efforts and provide guidance for improvements as necessary. For details on the information provision method, refer to the information contact window related to initiatives, such as the optimization of terminal sales.