Korea's Fair Trade Commission Fines Coupang a Huge Amount
TapTechNews June 16 - The Korea Fair Trade Commission recently imposed a total fine of 140 billion Korean won (TapTechNews note: currently about 736 million RMB) on Coupang, South Korea's largest e-commerce platform, and one of its subsidiaries, setting a new record for the highest fine amount against a distribution company in South Korea. The reasons for the Korea Fair Trade Commission's penalty against Coupang mainly include two points: One is manipulating the shopping search rankings, and the other is that the product shopping evaluations may also be fabricated by Coupang.
The Korea Fair Trade Commission also issued a corrective order regarding this accusation, stating that Coupang and its subsidiary CPLB responsible for the management of its private brands will be transferred to the prosecution for further investigation.
Coupang, in turn, promptly filed a lawsuit against this penalty, claiming that the decision goes against the digital trend and the spirit of innovation. The company argued that globally, being subject to such a huge fine just for product display problems (this fine amount is equivalent to more than half of the cumulative fine against the top 500 enterprises in South Korea in 2023) is unprecedented.
The Korea Fair Trade Commission alleges that Coupang, from February 2019 to July 2023, by manipulating the search algorithm and adjusting the search rankings, made at least 64,250 of its private brands and direct-sale goods always rank at the top of the search results.
The Korea Fair Trade Commission added that as the search rankings have a significant impact on consumers' purchase decisions, Coupang's behavior is suspected of hindering fair competition, limiting consumers' rational choices, and distorting the allocation of resources.
Coupang is both a sales platform and a seller of its own goods, and this dual role may lead to conflicts of interest, the Korea Fair Trade Commission said in a statement.
By the end of 2022, the sales of Coupang's private brands and direct-sale goods accounted for about 70% of its total sales, higher than about 60% at the end of 2019. At the same time, about 210,000 merchants sell brand goods on the Coupang platform.
Coupang is listed on the New York Stock Exchange and has about one-third of the domestic e-commerce market share in South Korea, with approximately 31.11 million monthly active users as of May this year.
The government agency in South Korea also discovered that Coupang's employees, between February 2019 and July 2023, wrote favorable reviews and gave high scores for Coupang's private brands and directly purchased goods.
The Korea Fair Trade Commission stated that a total of 2297 executives and employees of Coupang wrote 72,614 reviews for at least 7342 goods on the platform. The sales of the goods that received favorable reviews and high scores from Coupang employees increased during this period, while the sales of other goods decreased.
Due to the decision of the antitrust investigation, Coupang cancelled the groundbreaking ceremony for the new logistics center in Busan, South Korea's second-largest city, which was originally scheduled for June 20. This project is part of Coupang's 3 trillion Korean won logistics investment plan announced in March this year, aiming to expand its national-wide Rocket Delivery service.