Samsung (SSNLF.PK) is reportedly under investigation by a Taiwanese regulator on suspicion that it broke fair trade laws. Apparently, the South Korean technology company had been paying for people to post positive reviews of its products online, while at the same time posting negative reviews of products made by competitors such as Taiwan-based HTC Corp.
The campaign is both morally and legally suspect. Paying for biased reviews violates the principle of honest communication with customers that is a cornerstone of any sophisticated market. In a statement released on Tuesday, Samsung said that the situation “occurred due to insufficient understanding of these fundamental principles” and that it has “ceased all marketing activities that involve the posting of anonymous comments.”
Commissioners are investigating whether the campaign violates any of the articles of fair trade regulations that relate to false advertising. If this is the case, penalties could reach as high as 25 million new Taiwanese dollars ($83,000) per violation. More seriously, if the campaign is found to violate a separate article of defamation, the company could face criminal charges. In this case, the victim would have to file a formal complaint. For its part, HTC has said that it is still considering its options…
The ordeal comes at a particularly interesting time given the market tensions between Taiwan and South Korea. Samsung has become the largest player in the $294 billion global smartphone market. Meanwhile, HTC’s share of the ever-competitive smartphone market has declined, heaping pressure on the company’s flagship HTC One phone to perform well.
And HTC isn’t the only Taiwanese tech company fighting to stay ahead on the tech market. In particular, it’s not the only company competing directly with Samsung. HTC and other domestic tech giants like Taiwan Semiconductor Manufacturing Company (NYSE:TSM) have been forging alliances with U.S.-based companies like Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB). TSMC is slated to take a larger share of chip production for Apples iPads and iPhones, a position currently dominated by Samsung. Meanwhile, HTC First just went on sale sporting Facebook Home.
The development of the false-review campaign seems to have stoked competitive flames. Reports indicate that local Taiwanese news slammed Samsung’s tactics as “evil,” suggesting that a loose but broad industry alliance against the Korean tech maker could develop. What’s more, Apple — Samsung’s largest chip client — has been itching to get away from the company for a while now. With a fire lit at both ends, Samsung has found itself in the middle of a highly undesirable situation.
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