Suspension of Corrective Order Enforcement Against Fair Trade Commission
Algorithm Changes Inevitable if Dismissed
Maintained Until Main Litigation if Upheld
The first trial regarding Coupang being fined approximately 160 billion won by the Fair Trade Commission (FTC) for manipulating search rankings and other actions will be held soon. As this is the court's initial hearing to determine whether Coupang's current business model will change, a fierce dispute between both sides is expected.
According to industry sources on the 16th, the Seoul High Court Administrative Division 7 (Presiding Judges Gu Hoe-geun, Bae Sang-won, Choi Da-eun) will hold a hearing on the 24th regarding Coupang's application for a suspension of the execution of corrective orders. This case involves Coupang's request to suspend the FTC's corrective orders issued on the 7th of last month for violating the Fair Trade Act until the main lawsuit is resolved. The FTC's corrective orders reportedly include demands to stop manipulating search algorithms and misleading consumers into believing that private brand (PB) products are superior through employee reviews, thereby inducing purchases.
Coupang and the FTC are expected to engage in intense arguments in court that day. Coupang argues that "all retailers prioritize recommending and displaying their own PB products," asserting that the current search display is inevitable. The FTC counters that this constitutes "misleading consumers into believing PB products are superior and inducing purchases." The court's decision is likely to be announced within a week of the hearing date at the latest.
If the court determines that the FTC's corrective orders cause "irreparable harm" to Coupang, it will temporarily suspend their effect until the main lawsuit concludes. In that case, Coupang can maintain its current business model without changing the search algorithm. Conversely, if the court rejects Coupang's application, Coupang will have to modify the algorithm that determines search rankings. For example, PB products are likely to be pushed down from the top search rankings. Currently, when searching for bottled water, toilet paper, or milk on Coupang, PB products such as Tamsa Water, Comet Toilet Paper, and Gomgom Fresh Milk appear at the top, but in the future, they may only be found lower down.
Coupang plans to engage lawyers from Kim & Chang law firm, including Yoo Hae-yong, a former senior judge (19th Judicial Research and Training Institute class), to handle the lawsuit. Yoo, who served as a judge for 25 years, is recognized for his expertise in administrative litigation as well as civil and criminal cases, having won the 11th Legal Thesis Award from the Korean Law Academy in 2007 for a paper on the Fair Trade Act during his time as a professor at the Judicial Research and Training Institute.
Notably, Yoo recently drew attention in the legal community by identifying flaws in the appellate court ruling in the divorce case between SK Group Chairman Chey Tae-won and Noh So-young, director of the Art Center Nabi. After the appellate decision, while reviewing the judgment to consider filing a further appeal, Yoo discovered that the Seoul High Court Family Division 2 (Presiding Judge Kim Si-cheol) had miscalculated the stock value of Daehan Telecom (now SK C&C) in May 1998.
Some speculate that beyond this case, the FTC, which has pressured Coupang on multiple fronts including allegations of passing on promotional costs and bundling Coupang Play subscriptions, is sharpening its approach for the lawsuit. Previously, in 2021, the FTC issued corrective orders and fines against 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 on competing online malls. Earlier this year, the court ruled in favor of Coupang regarding this matter.
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