Overwhelmed by Chinese Attacks... Coupang Faces 'Triple Hardship' Including Tax Investigation

National Tax Service Launches Tax Investigation Against Coupang
Performance Decline and Competition Authority Probe Compound Challenges

Coupang is facing a 'triple crisis.' While engaging in a cutthroat competition against Chinese e-commerce platforms such as AliExpress and Temu that are aggressively entering the domestic market, Coupang's first-quarter performance this year has been sluggish. On top of this, competition authorities are reviewing whether Coupang has violated the Fair Trade Act, and a special tax investigation has also been launched.

According to industry sources on the 13th, the International Transaction Investigation Bureau of the Seoul Regional Tax Office sent investigators to Coupang's headquarters in Songpa-gu, Seoul last month to conduct a tax audit. The International Transaction Investigation Bureau typically conducts irregular tax audits targeting foreign companies or companies with a high proportion of overseas transactions. Given that the National Tax Service has recently strengthened investigations into offshore tax evasion by domestic corporations, it is speculated that Coupang is also subject to related investigations.

Coupang Inc. holds 100% of the shares of Coupang Korea. Coupang acknowledged that it is undergoing a tax audit but stated that it is not an irregular tax audit. A Coupang representative emphasized that it is a "routine tax audit."

Coupang Headquarters, Songpa-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Coupang is also under multiple investigations by the Fair Trade Commission for suspected violations of the Fair Trade Act and the Subcontracting Act. On the 7th, the Fair Trade Commission conducted an on-site investigation at Coupang's headquarters regarding allegations that Coupang did not properly inform customers about the 'early termination' option, which allows partial refunds of membership fees. Additionally, allegations that Coupang favored its private brand (PB) products by manipulating algorithms on the sales screen are scheduled for review at a plenary meeting.

Coupang maintains that these Fair Trade Commission investigations are unfounded. Regarding the suspected violation of the Subcontracting Act, Coupang stated, "There is no fact of passing promotional costs onto suppliers," and "PB product promotions are conducted after sufficient prior consultation with suppliers." Concerning the 'unfair preferential treatment of Coupang PB products,' Coupang said, "Various factors reflecting customer convenience and satisfaction are involved," and "It is merely a display method to recommend better products."

Coupang's performance has also been impacted due to fierce competition from Chinese e-commerce platforms such as Ali and Temu. Coupang's operating profit in the first quarter of this year was $40 million, down compared to the same period last year, and net income turned to a loss of $24 million. Notably, the net income loss reversal ended a seven-quarter streak of profits that lasted from the third quarter of 2022 through the fourth quarter of last year.

Coupang plans to continue investing aggressively to compete with these Chinese e-commerce platforms. Through logistics investments, it aims to provide free delivery even to remote areas including islands and mountainous regions, expand Korean-made products, and increase consumer benefits, planning to invest about 10 trillion won more in the future. If additional fines from the Fair Trade Commission are imposed, the burden on performance is expected to increase further.