Coupang's 'Rocket Delivery' Suspension as a Strong Measure... Legal Battle Focuses on 'Customer Inducement by Deception'

Coupang Announces Legal Battle Including Administrative Lawsuit

The Fair Trade Commission imposed a fine of 140 billion won on Coupang for manipulating search rankings to increase sales of private brand (PB) products and direct purchase products. In response, Coupang announced a strong countermeasure, stating that "it will be difficult to maintain the current Rocket Delivery service." Coupang plans to actively demonstrate the unfairness in court through administrative litigation, anticipating a fierce legal battle between the two parties.

Coupang "Suspends 25 Trillion Won Investment for 100% Free Delivery Nationwide"

According to the distribution industry on the 14th, Coupang canceled the groundbreaking ceremony for the Busan Advanced Logistics Center scheduled for the 20th and notified Busan City and related organizations. The Busan Advanced Logistics Center was part of Coupang's mid- to long-term logistics investment expansion plan. It is expected that the planned construction of logistics centers in Icheon, Gyeonggi Province, and Gimcheon, Gyeongbuk Province will inevitably face setbacks.

Earlier, immediately after the Fair Trade Commission announced the imposition of a 140 billion won fine, Coupang posted a statement on its newsroom, appealing that "if we cannot freely recommend and sell Rocket Delivery products, Coupang, which bears all inventory risks, will find it difficult to maintain the current Rocket Delivery service, ultimately leading to significant inconvenience and damage to consumers." It also added that if the Fair Trade Commission prohibits the recommendation of its products through this sanction, the 3 trillion won logistics investment and 22 trillion won investment for purchasing Rocket Delivery products, which Coupang promised for 100% free delivery nationwide, may also be suspended.

The Legal Battle Focuses on ‘Customer Inducement by Deception’

Previously, the Fair Trade Commission judged that Coupang mobilized employees to write purchase reviews to increase sales of its products, manipulated the search ranking algorithm in the process, deceived consumers, and distorted fair competition. Raising the search ranking of its own products was considered ‘customer inducement by deception,’ which is prohibited under the Monopoly Regulation and Fair Trade Act. Customer inducement by deception refers to attracting customers of competing businesses by misleading them through deceptive or fraudulent methods.

However, Coupang argues that employee-written reviews are allowed under the Fair Trade Commission’s review guidelines. It also claims that all reviews from experience groups automatically include a notice indicating that they are experience group reviews, so consumers could not have been deceived. The Fair Trade Commission, however, countered that before the investigation began in July 2021, it did not disclose that the reviews were written by employees.

In particular, Coupang maintains that e-commerce exposing certain products at the top of search results by comprehensively considering consumer benefits is the essence of distribution business. Convenience stores and large supermarkets also place PB products in the golden zone of shelves below 170 cm, increasing sales. Coupang rebutted, saying, "There is practically no difference between offline display and online search rankings, and this is a reverse discrimination compared to offline large supermarkets that promote PB products in the golden zone, where sales are more than four times higher."

Coupang also cited a Supreme Court ruling that when judging whether an act constitutes deception against consumers, it is necessary to consider whether it violates general commercial practices. Coupang criticized, "The Fair Trade Commission concluded that Coupang’s actions were illegal without properly investigating the transaction practices of the online shopping mall market." In e-commerce platforms selling PB products such as Market Kurly, Baedal Minjok, and SSG.com, when entering search keywords like ‘wet wipes’ or ‘bottled water,’ PB products are exposed at the top as the default recommendation.