Nokia’s dispute with distributors grows

Several Nokia distributors protest heavy fines levied against them for selling products beyond their assigned boundaries. The protest was outside a Nokia customer service center in Jinan. The sign says the company is not following national regulations on after sales services. Photo: CFP

By Li Qiaoyi

The controversy between Nokia and distributors intensified yesterday after some distributors gathered in Beijing to condemn the Finnish phone giant.

Representatives of more than 200 Nokia distributors in China held a press conference in Beijing yesterday to accuse Nokia of monopolizing prices and evading taxes.

They’re angry at the company for penalizing them over a distribution rule that prohibits them from selling handsets outside of their assigned boundaries.

Distributors in different areas are allowed to buy and sell phones for different prices. Some sell phones outside of their territories to boost sales numbers in order to earn higher sales commissions.

Nokia apparently has strict limits on the price of handsets it delivers to distributors, which violate relevant provisions of the country’s Anti-trust Law that took effect August 1, 2008.

The Beijing News reported yesterday that Nokia China stated that the distributors in question have no contracts with Nokia, and Nokia had communicated with relevant government departments about the problem.

Distributors also alleged that the heavy fines Nokia levied on them for transfer sales of handsets were not reported to tax officials since they received no invoices.

A distributor said Nokia fines are about 50 million yuan ($7.32 million) a month against the distributors.

However, Deng Yuanjun, vice president of Nokia Greater China, told the 21st Century Business Herald in June that the so-called fines are deductions from commissions Nokia awards distributors, and they have nothing to do with taxes.

Deng of Nokia said that distribution channels give Nokia a competitive edge.

Deng promised that Nokia will improve its channel management, further foster mutual understanding, and create win-win relationships with distributors, in an effort to push the healthy development of the whole industry.

Not every distributor is against Nokia.

Pan Zhirong, a distributor from Zhangzhou, Fujian Province, said distributors who violate Nokia’s rules hurt his business profits.

Distributors are assigned sales goals for their regions. If they are discovered selling phones to other sellers outside their areas, they are punished.

Representatives sent a letter Monday to the State Administration of Taxation, the State Administration for Industry and Commerce, and the National Development and Reform Commission respectively, offering evidence for their allegations.

After the meeting, the participants said they wanted an investigation of the conflict.

It’s the latest action by discontent distributors ever since the crisis surfaced in other areas of China.

As early as May, 112 distributors met in Changsha, Hunan Province, and tried to protest the fines.

On June 10, dozens of distributors in Jinan, Shandong Province, united to boycott Nokia’s products. Later, other distributors joined in the protest.

On July 24, the representatives gathered in Zhengzhou, Henan Province, where they decided to take legal action.

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