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Apple fine upheld for violating Taiwan law on iPhone pricing

The Taiwanese government wins a suit in which the company was accused of illegally assigning prices to the iPhone.

Apple's iPhone 5S is one of a handful of devices included in the lawsuit. CNET

Apple has been slapped with a fine in a case that could create a unfavorable precedent for the company.

A Taiwan court has ruled against Apple in a lawsuit in which it was accused of engaging in anti-competitive practices by forcing wireless carriers in the country to assign pricing on its iPhones. The decision, which came down on Wednesday, according to Reuters, means Apple must pay 20 million in Taiwan dollars (about $647,000) in fines.

The lawsuit, which covers the iPhone 4, 4S, 5, and 5S models, was tied to a 2103 decision by the Taiwan Fair Trade Commission (FTC), which oversees competition. The commission said at the time that Apple was acting unfairly by forcing all three of Taiwan's major carriers to comply with the company's own pricing on devices and associated plans. The fine was levied at that time. The court's decision on Wednesday affirmed the FTC's findings and ordered Apple to pay the original sum.

Although Apple will have no trouble paying the fine -- the company generates billions of dollars in profit each quarter -- the iPhone maker fought the charge to maintain control over how its smartphones are sold in Taiwan. This is the first time that Apple has lost a bid to control pricing and could set a precedent that other countries may follow.

As in other countries, Apple has set pricing on its iPhones in Taiwan and has provided its own advertising. The company's iPhones are also typically offered on service plans that offer similar terms, regardless of the carrier. That provides Apple more control over how its product is sold and -- with its advertising -- ensures that the company controls how its smartphones are pitched to the public.

The trouble for Apple is that Taiwan's FTC claims such practices are in violation of Taiwanese law. In 2013, the FTC said in a statement to the Wall Street Journal that Apple was in communication with all three major Taiwanese carriers -- Chunghwa Telecom, Ear EasTone Telecommunications, and Taiwan Mobile -- and required them to submit their proposed plans on iPhones. Apple would then approve those plans, allowing them to sell its devices.

Under Taiwanese law, the FTC has argued, Apple should have no such control. Once a company provides its devices to a third-party carrier, that carrier has the right to handle all elements of pricing and sales, according to the commission. Apple bristled at this, desiring instead to control all aspects of the marketing and sales of its smartphone.

It's unclear what the loss will mean for Apple's relations with Taiwan. The company is one of Taiwan's most popular smartphone makers. It's unlikely that Apple would leave Taiwan, given its success there. Apple does have the right to appeal the case.

Apple did not immediately respond to a request for comment.