Coupang Faces Record-Breaking Fine 'Bomb'... Will It Be Overturned in Administrative Lawsuit?

140 Billion KRW, Highest Fine in the Distribution Industry
Fifth Largest Fine Ever Imposed on an Individual Company

E-commerce company Coupang has been fined 140 billion KRW by the Fair Trade Commission (FTC) for deceptive consumer practices such as manipulating search rankings. This is the first time a distribution company has been fined as much as 140 billion KRW by the FTC. Compared to the amounts of fines imposed on individual companies in the past, this ranks among the top five.

On the 13th, the FTC judged that Coupang engaged in "customer inducement by deception," prohibited under the Fair Trade Act, by mobilizing employees to manipulate search rankings to increase sales of PB (private brand) products and directly purchased products. The fine of 140 billion KRW was calculated based on sales from February 2019 to July last year, so additional fines may be imposed for sales after that period. Considering that Coupang recorded an operating profit in the 50 billion KRW range in the first quarter of this year, the fine is about three times that amount.

FTC's Largest Fine Ever is Qualcomm's 1 Trillion KRW... Coupang's 140 Billion KRW is Fifth Largest

This scale of fine is the fifth largest for an individual company case excluding cartel cases. Among companies fined for customer inducement by deception, it is the largest amount.

The company that received the largest fine from the FTC historically is Qualcomm. In 2016, the FTC imposed a fine of 1.3014 trillion KRW on Qualcomm for abusing its dominant market position by monopolizing patent rights without granting licenses to competing chipset manufacturers for seven years starting in 2009. Qualcomm filed a cancellation lawsuit in response, taking the case through the Seoul High Court and up to the Supreme Court. After about nine years, in April this year, the Supreme Court recognized Qualcomm's interference with other businesses and ruled that the FTC's fine was justified.

The company with the second largest fine is Google. In September 2021, Google was fined 207.4 billion KRW for abusing its dominant market position by forcing smartphone manufacturers to pre-install its operating system (OS). The fine increased to 224.9 billion KRW as the period of violation extended. Google immediately filed a lawsuit to cancel the fine, but lost at the Seoul High Court earlier this year.

Four Samsung affiliates, including Samsung Electronics and Samsung Display, were fined 234.9 billion KRW in 2021 for unfair support by channeling all in-house meal supply volumes to Samsung Welstory. This amount is the largest ever for unfair support sanctions. The fourth largest fine was Qualcomm's 224.5 billion KRW imposed in 2009 for abusing its dominant market position against major domestic mobile phone manufacturers.

Largest Fine in the Distribution Industry... Coupang to File Administrative Lawsuit

This is the first time the FTC has imposed a fine in the 100 billion KRW range on a distribution company. Earlier this year, there was speculation that CJ Olive Young could face a fine in the 600 billion KRW range for abusing its dominant market position, but the actual fine imposed by the FTC was 1.9 billion KRW. Cho Hong-seon, Vice Chairman of the FTC, stated at a briefing held at the government Sejong office that "Coupang's fine is the largest for an individual distribution company."

For this reason, Coupang plans to actively prove its case in court through an administrative lawsuit.

In fact, earlier this year, Coupang won a court ruling to cancel a fine in the 3 billion KRW range imposed by the FTC for alleged unfair treatment of suppliers. In 2021, the FTC ordered corrective measures and imposed fines on Coupang, alleging that from 2017 to September 2020, Coupang demanded 101 suppliers, including LG Household & Health Care, to raise prices that had dropped due to temporary discount sales by competing online malls. However, the Seoul High Court Administrative Division 7 (Presiding Judges Kim Dae-woong, Kim Sang-cheol, Bae Sang-won) ruled in February to cancel both the corrective order and the fine payment order, ruling in favor of Coupang.

SPC was also fined 64.7 billion KRW by the FTC in 2020 for unfair support through affiliated company toll transactions and appealed to the High Court, where it won a partial victory. Both parties have now appealed to the Supreme Court and are awaiting a ruling.

On the other hand, Lotte Mart, accused in 2019 of abusing its superior bargaining position over suppliers, took the case to the Supreme Court, where a fine of 41.1 billion KRW was confirmed.