The Regulation of Marketing Spending

The Korea Communications Commission and the leading telecom operators agreed to curb their marketing spending in March 6, 2010.

The agreement is to cap their marketing spending at 20 percent of their annual sales from next year, and this year to limit 22 percent in consideration of the vitalization of smartphones just recently shown in local market. If this agreement not observed, the Commission is to take strong disciplinary measures such as fine-imposing and suspension of business etc.

Choi Si-Joong, chairman of the Korea Communications Commission, heads of the telecom operators and other Internet companies had a meeting at Press Center for a purpose of the vitalization of mobile Internet, compromised the guidelines of marketing spending observance.

In general, the marketing spending mainly consists of mobile subsidies and giveway of cash or commodities. The three telecom operators have been increasing the marketing spending to 25 percent of their annual sales, which plays a virtually last promotional resort in a circumstance that consumers can hardly sense the differences of moblie phones qualities. According to the guidelines, the marketing spending statement should be publicized every quarter.

The telecom operators said the saved money from the marketing spending would be used on R&D of mobile technologies development and content creation. The three competitors also agreed to integrate each application store and immediately to operate a task force team for working out its integrating procedure.

But critics indicate whether the governmental rule of the marketing spending has validity, or not, moreover, whether the guidelines could be well observed remains questionable. Nevertheless, it is still strongly grounded that the function of government as an adjustor and regulator needs such a situation that the excessive competition of the three operators exhausts themselves and encroach their potential. (The end)