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"It's a Factory Unlocked Phone," but it's a Carrier Phone... 'Deceptive Sales' Controversy at Coupang

[비즈한국] As the usage rate of factory unlocked (sim-free) phones has grown to cover one-third of the total market, "deceptive sales" tactics have become prevalent on major online channels, prompting calls for consumer caution. The scheme involves listing carrier-locked phones as factory unlocked, then sending customers a follow-up text message to persuade them to sign up for a carrier plan. Loose product management by online platforms is being pointed out as a factor exacerbating consumer harm.

"If you don't reply, we'll send a carrier phone": The suspicious factory unlocked phone

Lee, a 20-something office worker living in Yongin, Gyeonggi Province, recently purchased a gray 'Galaxy A16' on Coupang for 280,900 KRW, listed as a factory unlocked device. Needing a standalone handset, Lee found the price attractive and proceeded with the purchase, only to receive a text message from the seller shortly after asking to "confirm the purchase or refusal." Lee said, "I was baffled to receive a message implying that if I didn't cancel, they would send me a carrier-locked phone instead. I bought a factory unlocked phone because I only needed the device, but after payment, they informed me via text of completely different contract terms."

The product Lee purchased is presumed to be a 'full cash payment' (paying the full factory price upfront) handset issued by a mobile carrier agency, rather than the factory unlocked device specified in the product name. In the text message, the seller highlights the disadvantages of factory unlocked phones compared to carrier phones paid in full, claiming, "Factory unlocked phones must be purchased at the list price, while carrier phones paid in full are significantly cheaper due to subsidies." Regarding the popular combination of factory unlocked phones and budget carrier plans, the seller asserted, "Budget phones don't offer bundle or welfare discounts."

The seller further stated, "If you want to proceed with the purchase after confirming this information, please reply 'purchase'; if you want to cancel, please do so through Coupang." The practice of informing customers of major contract terms, such as "carrier activation," only after payment cannot be considered a normal sales procedure. Lee Eun-hee, a professor of Consumer Science at Inha University, pointed out, "This is a sales practice that does not accurately convey product information, such as hiding certain details. It is an inappropriate sales behavior that amounts to unfair labeling and advertising."

This is evaluated as highly likely to distort contract conditions, as the transaction could be concluded as a carrier-locked device regardless of the consumer's original intent. In fact, online and offline mobile phone sellers often cause consumer confusion by mixing terms like "unactivated/unopened lowest-price phones," "full cash payment," and "factory unlocked," even when the activation history or contract terms are unclear. However, this specific method is being criticized as a deceptive bait-and-switch tactic because it lures customers by explicitly labeling the product as factory unlocked.

A telecommunications industry official expressed concern, stating, "While device distribution methods have become diverse, basic explanations and conditions must be clearly communicated before payment. Sales practices that mislead customers into thinking a carrier-locked device is a factory unlocked one are detrimental to market trust."

Profits even if only some agree: "Carrier and platform management must improve"

Some sellers use these loopholes for the sake of margins. Factory unlocked phones are sold at list price without carrier subsidies, but if they induce a customer to activate the device through a carrier's distribution network, they can receive additional commissions. Even with a full cash payment, the seller can earn a profit because a sale is generated between the customer and the carrier, such as through a SIM-only plan.

Conversely, consumers may suffer inconveniences. A factory unlocked phone is meant to be a completely independent device where a user can insert any SIM card of their choice without being tied to a carrier. However, if it is a carrier-issued handset, it may come with pre-installed carrier firmware or apps, or face technical restrictions like incompatibility with certain rate plans. Even with a full cash payment, the process of inducing carrier activation may lead to unwanted costs, such as being forced into a specific rate plan or SIM card subscription.

There is also the possibility that consumer rights, such as refunds, could be limited by using a "text reply" to finalize the purchase. Han Seok-hyun, head of the Citizen's Mediation Office at the Seoul YMCA, noted, "While every case is different, it is generally important whether the consumer received a contract via email or an online link. This tactic is not eradicated because sellers can still make a profit even if only some buyers give up on cancellation or contract withdrawal and decide to proceed with the actual purchase."

The platform's responsibility is also being discussed, as loopholes in sales channel operation, product inspection, and post-management have been exposed. As demand for factory unlocked phones has risen, online channels like Coupang have become major distribution hubs. Domestic usage of factory unlocked phones has maintained around 30%, reaching 33.3% as of March last year. However, critics point out that despite their rapidly increased influence, weaknesses in product registration and transaction management systems continue to appear.

The aforementioned product was displayed at the top of search results for related keywords on Coupang. Similar sales cases explicitly using only the "factory unlocked" keyword are not easily found on platforms like Naver Shopping where the same products are listed. Coupang operates on the principle of not allowing illegal, unsuitable, or false sales. It has been confirmed that when a seller is found to have listed an illegal or unsuitable product, the sale is immediately suspended. The product in question was confirmed to be suspended on the 30th.

Experts emphasized that given the nature of factory unlocked phones, consumers should be wary that products significantly cheaper than the list price might have different sales conditions. Han Seok-hyun stressed, "Mobile phone contracts are complex, with intertwined device and service agreements. Consumers should carefully check contract terms beyond just the price. With the abolition of the Mobile Device Distribution Improvement Act approaching, such opportunistic behavior is likely to become more rampant. Platforms and carriers must also reinforce their safety measures."