Coupang Fined Over 140 Billion KRW+α for Manipulating Search Rankings to Promote Own Products

Fair Trade Commission Ends 3-Year Sanction
Coupang and CPLB Corporations Referred to Prosecutors
Employee-Driven Review and Search Ranking Manipulation

Coupang, which has 14 million paid members, was fined at least 140 billion KRW (tentative) by the Korea Fair Trade Commission (KFTC) on the 13th for manipulating search rankings and deceiving consumers. Coupang and its subsidiary CPLB Corporation were also reported to the prosecution. The KFTC judged that Coupang deceived consumers and distorted fair competition by mobilizing employees to write purchase reviews to increase sales of its own products and manipulating the search ranking algorithm in the process.

According to the KFTC, since February 2019, Coupang has mobilized 2,297 employees to write positive purchase reviews and give high ratings (an average of 4.8 stars) for at least 7,342 private brand (PB) products, resulting in 72,614 purchase reviews.

Until the first on-site investigation by the KFTC in June 2021, Coupang did not disclose to consumers that employees wrote purchase reviews and gave high ratings. Even after the KFTC’s investigation, Coupang deliberately concealed the fact that employees wrote purchase reviews by placing them several clicks away or at the bottom of the page where they were not easily visible.

Coupang defined the act of sellers writing purchase reviews on their own intermediary products as a “serious illegal act that hinders fair competition among competing businesses within the market” and showed a contradictory behavior by preventing sellers from manipulating purchase reviews.

Furthermore, it was confirmed that Coupang used three algorithms?Product Promotion, SGP, and Cold Start Framework?to exclude sellers’ products and fix at least 64,250 of its own products (58,658 directly purchased products and 5,592 PB products) at the top of search rankings.

Coupang publicly announced that the default product search setting, “Ranking Order,” determines the exposure order of search results based on objective criteria such as sales performance and user preferences. However, in reality, the algorithm was artificially adjusted to display its own PB products at the top.

Coupang confirmed through internal experiments that such algorithm manipulation leads to increased sales. According to internal documents secured by the KFTC, when applying the 'Product Promotion' algorithm, which fixes directly purchased and PB products in the top 1 to 3 positions, the total sales of the targeted products increased by 76% (as of Q2 2019).

The KFTC pointed out, “Coupang, as a platform operator mediating products and also as a product seller, abused its dual status by recognizing the effect that the number of purchase reviews and average star ratings directly influence consumers’ product choices and search rankings. Despite being aware that such hierarchical acts could be illegal, Coupang continued to manipulate search rankings by upgrading the algorithm.”

Around 2019, Coupang set profitability improvement as a company-wide goal and actively manipulated search rankings for directly purchased products. Internal documents stated, “In line with the company’s business goals, we successfully started an algorithm to raise the search ranking of products according to business strategy to improve gross profit.” Coupang aggressively expanded its direct purchase and PB businesses, increasing the proportion of its own products from 60% of transaction volume in 2019 to 70% in 2022.

As a result, Coupang, which had been operating at a loss since its founding in 2010, achieved its first annual operating profit surplus (617.4 billion KRW) last year and recorded record-breaking sales of 31.8298 trillion KRW. Rapidly expanding its business, Coupang entered the large business group category for the first time in 2021 and its ranking in the business world soared to 27th place (as of the end of 2023).

The KFTC judged that Coupang’s preferential treatment of its own products and algorithm manipulation hindered consumers’ purchasing choices and distorted fair competition with sellers. The KFTC viewed this as a violation of Article 45, Paragraph 1, Subparagraph 4 of the Fair Trade Act, which prohibits “customer inducement acts by hierarchical means.” The imposed fine of 140 billion KRW was calculated from February 2019 to July last year, and the KFTC stated that the fine could increase if additional fines are imposed from August 2023 until the review date.

The KFTC said, “This case is significant in that it detected and sanctioned an online shopping mall operator for unfairly inducing consumers by manipulating algorithms and having employees write purchase reviews and give high ratings to exclude sellers’ intermediary products and promote only its own products at the top of search rankings. It is expected to contribute to establishing a fair competition order between giant platforms that serve as both product intermediaries and sellers and competing businesses (sellers), and to raising awareness among online shopping operators to ensure transparent and fair algorithm operations.”