"No Abuse of Power"... Coupang Receives Court's 'Exoneration'

Court: "Cannot be seen as having superior position"
Reference materials submitted to the court last month were decisive
Breaking away from power abuse controversy... "Will strengthen collaboration"

Coupang has been cleared of the 'gapjil controversy' surrounding its supply prices.

According to the distribution and legal industries on the 1st, the Seoul High Court Administrative Division 7 (Chief Judge Kim Dae-yong) ruled in favor of Coupang in the lawsuit filed against the Fair Trade Commission (FTC) seeking cancellation of corrective orders. The court ordered the cancellation of the entire fine of approximately 3.3 billion KRW and the corrective orders imposed on Coupang by the FTC.

This case began when LG Household & Health Care reported Coupang to the FTC in June 2019 for violations of the Fair Trade Act and the Large-scale Distribution Business Act. At the time, LG Household & Health Care claimed, "Coupang repeatedly violated the Large-scale Distribution Business Act by prohibiting product returns, forbidding demands for economic benefits, and forcing exclusive transactions," and "also violated the Fair Trade Act by canceling orders and terminating transactions using its superior position."

After investigation, the FTC recognized Coupang's 'gapjil' against suppliers in August 2021 and imposed corrective orders along with a fine of 3.297 billion KRW. The FTC announced, "From 2017 to September 2020, Coupang engaged in acts such as demanding LG Household & Health Care and 101 other suppliers to raise prices of the same products sold on other online malls and purchase advertisements, as well as passing on discount costs, in order to reduce losses under its 'lowest price guarantee' policy." In response, Coupang filed an administrative lawsuit in February 2022 seeking cancellation of the FTC's corrective orders and decisions.

The Seoul High Court initially planned to deliver its verdict on the 18th of last month. However, a week before the ruling, Coupang announced the resumption of transactions with LG Household & Health Care and submitted related reference materials to the court. The reference materials reportedly stated that the disputes between Coupang and LG Household & Health Care over supply prices stemmed from misunderstandings, that no gapjil existed, and that direct transactions had resumed through mutual improvements.

Much of this content was reflected in the court's ruling on the day. The court first judged that Coupang could not be considered to have a superior bargaining position over LG Household & Health Care and other suppliers. The court stated, "It is difficult to conclude that Coupang's business capability is superior to that of LG Household & Health Care and the eight monopolistic suppliers," and "Even if Coupang's business capability is superior, the gap is not sufficient to exploit the eight monopolistic manufacturers."

The court also ruled that Coupang's demands for price increases revealed in the FTC's investigation could not be considered coercive beyond simple proposals. The court rejected the FTC's claims regarding Coupang's forced advertisement placement demands and passing on of sales promotion costs due to lack of evidence. Regarding the receipt of sales incentives, the court concluded that it could not be considered a violation of the Large-scale Distribution Business Act as applied by the FTC.

With this court ruling, Coupang has effectively been exonerated from the 'gapjil controversy.' Coupang had long faced conflicts with manufacturers over sales commissions and forced advertisements, to the extent that an 'Anti-Coupang Coalition' emerged in the distribution industry. A Coupang representative said, "We believe this court ruling reflects a judgment considering the rapidly changing distribution market and expect it to greatly contribute to the development of the distribution industry."

Coupang plans to strengthen its collaboration with LG Household & Health Care following this court ruling. At the time of resuming transactions, Coupang stated, "We will create synergy by combining nationwide Rocket Delivery logistics infrastructure with LG Household & Health Care's vast product selection," and "We plan to actively communicate and collaborate with partners so that customers can purchase more diverse and high-quality products."

The FTC may appeal to the Supreme Court within 14 days of this court ruling. However, since the atmosphere between Coupang and LG Household & Health Care has shifted from reconciliation to collaboration, and all claims were rejected by the court, it is expected to be difficult to overturn the result.