Russian Regulators Scoop Apple Into Price-Fixing Probe

A Russian regulatory authority earlier this week named Apple, along with more than a dozen Russian retailers, as a target for an investigation into price-fixing activities.

The Federal Antimonopoly Service, or FAS, has seen signs of price-setting coordination among iPhone resellers in Russia, according to a notice published on the agency’s website.

A preliminary investigation revealed that since last fall, when Apple introduced the iPhone 6s and 6s Plus in Russia, a majority of resellers have maintained the same prices for the phones for “a certain period of time,” the notice says.

FAS observed similar pricing practices for other iPhone models.

“The FAS Russia suggests that such a coincidence might be a result of the Russian resellers’ price-setting coordination by the group Apple, which has led to fixing prices in the Russian market and setting the so-called ‘recommended’ prices as obligatory,” the notice says.

Apple did not respond to our request to comment for this story.

Pricing Hardliner

Wherever Apple does business, it tries to hold the line on the pricing of its phones, said Rob Enderle, principal analyst at the Enderle Group.

“Apple has historically been very rigid with regard to pricing. When they set suggested retail prices, they expect retailers to sell at those prices. If they don’t, they’ve cut retailers off or cut their volumes,” he told TechNewsWorld.

“They don’t want people using Apple products as loss leaders or in ways that are inconsistent with Apple’s brand. They want everyone to price their things the same. So there could be fire under this smoke, because it’s consistent with Apple’s past practices,” Enderle said.

Russia’s decision on whether to take action will turn on what investigators discover.

“The question will be if the Russian agency can find hard evidence of collusion or if this is just a pressure tactic,” said Kevin Krewell, principal analyst at Tirias Research.

“Apple doesn’t like direct discounting of its products,” he told TechNewsWorld, “but distributors have ways of getting around those with other promotions.”

Messy Relations

The situation is muddied by the fact that relations between the U.S. and Russia have been strained.

The U.S. led the charge for economic sanctions against Russia after its land grab in the Crimea. As a result, Russia has taken what appears to be retaliation against U.S. companies doing business in the country.

Russia temporarily shutdown 12 MacDonald’s restaurants and inspected 100 more under the pretense of sanitary violations in 2014. Around the same time, it passed a national law to require Internet companies, including Google, to store the personal information of Russian citizens within the country.

The Russian courts got into the act earlier this year, when they upheld a FAS action against Google for requiring its apps and services to be preloaded on Android phones sold in Russia.

“Google is deeply connected to the Obama administration, so taking a shot at Google could be seen as taking a shot at a proxy for the U.S. government,” Enderle suggested.

From Russia’s perspective, an investigation into price-fixing could be reasonable, observed Pund-IT Principle Analyst Charles King.

On the other hand, “it could also simply be that the Russian government is trying to show that it can push around any company it likes, even Apple,” he told TechNewsWorld.

“Since business regulators in Russia have increasingly targeted U.S. companies as relations between their country and the West have deteriorated, that latter scenario seems entirely plausible,” King said.

Politicized Regulators

There’s a history of Russian harassment of American companies, according to Eugene Huskey, a professor of political science at Stetson University.

“At times of political tension, agencies in the executive branch have pressure placed on them to find something inappropriate with foreign products,” he told TechNewsWorld. “It’s been going on for years.”

Price-fixing can be a selective process in Russia, Huskey noted.

“There’s all sorts of price fixing in Russia, but cases aren’t usually brought against domestic companies unless one company can get the power of the state on its side against another company,” he explained.

“Regulation in Russia is corrupt and highly politicized. The political leadership of the country will literally reach down to regulators and encourage them to take measures against certain companies,” Huskey maintained. Proving that kind of collusion, though, is nearly impossible.

“Where do you get the evidence?” he asked. “No one is going to admit that they got a call from above.”

If Apple is found to be price-fixing in Russia, the damage to the brand will be minimal, said Pund-IT’s King.

“If evidence turns up showing that the company colluded with its distributors, it would probably result in fines and other penalties. That would be embarrassing for Apple, and such a ruling could also spark investigations in other regions, which would be troubling for the company,” he acknowledged.

“Those points aside,” King said, “it’s hard to imagine how the company would be seriously damaged.”