[Exclusive] "Raise Prices on Other Online Malls"... Fair Trade Commission Halts New Type of Abuse by Large Retailers

Fair Trade Commission Begins Revision of Distribution Act

Since 2016, Coupang has implemented a 'lowest price strategy' where it immediately matches the lowest price if its competing online malls such as Emart and 11st lower their selling prices. To minimize margin losses caused by this, Coupang demanded suppliers to raise the selling prices on other channels. When the selling prices of competing online malls temporarily dropped due to discounts, suppliers were required to increase those prices to prevent Coupang's selling prices from rising.

According to the Fair Trade Commission (FTC), Coupang has continuously managed 360 products from a total of 101 suppliers in this manner. In 2021, the FTC detected such actions by Coupang and imposed a fine of 3.3 billion KRW for violating the Fair Trade Act. Coupang has appealed this decision and is currently engaged in administrative litigation with the FTC.

To respond swiftly to such 'new types of unfair practices' by large retailers, the FTC has initiated amendments to the Large-scale Distribution Business Act. An FTC official stated on the 21st, "By amending the Large-scale Distribution Business Act, we plan to regulate large retailers' demands for suppliers to raise prices on other distribution channels as 'management interference'." The official explained, "As the online platform distribution market rapidly grows, it has been identified that large-scale distribution companies increasingly demand suppliers to raise prices on other distribution channels." It is also because it is difficult to regulate such actions under the Fair Trade Act unless the business is a market-dominant (monopoly or oligopoly) entity.

The FTC has regulated such types of unfair practices by applying provisions on unfair trade practices under the Fair Trade Act. However, to improve the speed and accuracy of regulation, it has started amending the Large-scale Distribution Business Act. An FTC official explained, "Since the current Large-scale Distribution Business Act does not cover these issues, sanctions had to be imposed through the Fair Trade Act, which somewhat reduced regulatory accuracy."

Regulating new types of unfair practices under the current Fair Trade Act requires proving the existence of a superior bargaining position, which is a somewhat complex process that takes considerable time. In contrast, the Large-scale Distribution Business Act predefines the regulated large-scale distributors (those with sales of 100 billion KRW or more in the previous fiscal year and stores using retail space of 3,000㎡ or more), and only requires determining whether prohibited acts were committed, which can increase regulatory speed.

An FTC official said, "Our investigations found that new types of unfair practices are increasing, where companies not only demand exclusive favorable trading conditions but also interfere with transaction prices with third-party companies." The official added, "In cases like Coupang, there are difficulties in strictly applying the Large-scale Distribution Business Act, so we saw the need for change."