[Exclusive] 'Coupang Owner Designation'... Fair Trade Commission's Unusual Full Committee Meeting Discussion

Chairman of the Board Kim Beom-seok Contemplates Designation as Head
Sensitive Issues Including 'Foreigners' Privilege' Controversy... Careful Review by Top Decision-Making Body

[Sejong=Asia Economy Reporters Haeyoung Kwon, Sangdon Joo] It has been confirmed that the Fair Trade Commission (FTC) urgently placed the issue of whether to designate Kim Beom-seok, Chairman of Coupang's Board of Directors, as the head of the conglomerate on the agenda at the plenary meeting convened on the 21st. Generally, the designation of a head of a conglomerate is decided by the chairman after internal review within the FTC, but in the case of Coupang, it is interpreted as an intention to carefully discuss the matter through the highest decision-making body, the plenary meeting. Inside and outside the FTC, it is considered unusual for commissioners to gather and even hold discussions on whether to designate a head of a conglomerate.

According to related government departments on that day, FTC commissioners exchanged opinions on the issue of designating Coupang's same person (head of the conglomerate) at the plenary meeting chaired by Chairman Cho Sung-wook. Industry insiders and multiple government officials said, "As the controversy over Coupang's head designation spread, the FTC suddenly placed it on the plenary meeting agenda," and "It is understood that the FTC reviewed legal aspects related to Chairman Kim's designation as head based on internal documents submitted by Coupang at the plenary meeting."

The FTC plenary meeting includes a total of nine high-ranking officials, including the chairman, vice-chairman, standing and non-standing commissioners. It is unusual for the FTC to place the issue of designating the head of a large business group of a specific company on the plenary meeting agenda, which involves high-ranking officials. Unlike review and resolution agendas that are fully disclosed, plenary meeting agendas related to discussions are conducted entirely in private, and the mere placement on the agenda is rare. Previously, before demanding Samsung SDI to dispose of an additional 4.04 million shares of Samsung C&T in 2018, the FTC discussed the matter as an agenda item at the plenary meeting in December 2017.

The fact that Chairman Kim's designation as Coupang's head is such a socially sensitive issue is acknowledged by insiders and government officials.

Coupang's designation as a large business group on the 30th is inevitable. According to the Fair Trade Act, companies with assets exceeding 5 trillion won are designated as publicly disclosed business groups to prevent economic concentration by large corporations. Coupang met this requirement with assets of $5.06733 billion (approximately 5.56 trillion won) last year.

The key issue is whether to designate the same person. If designated as the head, the spouse, relatives within six degrees of blood relation, and relatives within four degrees of affinity are subject to disclosure obligations. Initially, the FTC leaned toward designating the Coupang corporation itself as the head instead of Chairman Kim, who holds U.S. citizenship, but as controversy over "foreign preferential treatment" heated up, mainly led by civic groups and labor unions, the FTC is deliberating carefully.

Those advocating for designating Chairman Kim as the head argue that foreign preferential treatment should not be given. Although Chairman Kim's stake in Coupang is 10.2%, his voting rights account for 76.7%, giving him substantial control, and there is no regulation prohibiting a foreigner from being designated as the same person. They also cite concerns about unfair discrimination compared to other IT companies. The FTC designated Lee Hae-jin, Chief Investment Officer (CIO) of Naver, as the head in 2017 due to his substantial control.

On the other hand, Coupang is pushing back. The FTC has never before designated a foreigner as the same person. Foreign-invested companies such as S-Oil (majority shareholder Aramco) and Korea GM (majority shareholder General Motors) are designated as large business groups without heads. Coupang is already listed on the U.S. stock market with transparent disclosure of management information, and treating a U.S. company unfavorably could violate the Most Favored Nation treatment under the Korea-U.S. Free Trade Agreement (FTA). Some also express concerns that if a head is designated solely because the asset size exceeds 5 trillion won, the "5 trillion won" threshold could become a guideline for attracting foreign investment funds.