[Invest&Law] Coupang's 162.8 Billion Won Lawsuit Battle... Distribution Industry on High Alert

Coupang has filed an administrative lawsuit at the Seoul High Court on the 5th, seeking to cancel the corrective order and the fine payment order after being fined 162.8 billion KRW by the Fair Trade Commission (FTC), leading to an intense legal battle. This lawsuit, which will be recorded as the largest fine-related lawsuit in the distribution industry, is expected to determine the future regulatory direction for distribution companies.

Imposition of Fine and Coupang's Opposition

The case began with allegations that Coupang prioritized its private brand (PB) products at the top of search results and mobilized employees to leave positive reviews, causing consumers to mistakenly believe that the products were superior. The FTC imposed a fine of 162.8 billion KRW on Coupang and issued a corrective order to stop the manipulation of the algorithm.

Coupang is strongly opposing the decision. Coupang stated, "It is common practice for distribution companies such as large supermarkets or convenience stores to display private brand (PB) products in prominent locations in stores," arguing that the fine is excessive. Coupang also claimed that since PB products account for only 5% of total sales, the impact on market disruption is minimal. Coupang has submitted a request for suspension of execution regarding the FTC's corrective order.

The FTC's resolution holds the same effect as a first-instance court ruling, so the appeal lawsuit will proceed at the second-instance Seoul High Court.

FTC's Response and Recent Litigation Records

Over the past five years (2020 to June 2024), the FTC has won 357 out of 393 finalized lawsuits (including partial wins), achieving a 90.8% win rate. In terms of fines, the FTC has been recognized for the legality of its disposition for 94.9% (1.8844 trillion KRW) of the 1.986 trillion KRW in fines confirmed by court rulings during the same period.

However, the FTC has recently experienced consecutive losses in several large-scale fine imposition cases, suggesting that fierce legal battles are expected in this lawsuit as well.

In June, the Supreme Court ruled to fully cancel the FTC's 64.7 billion KRW fine imposed on SPC Group for unfairly supporting its affiliates. In January, the Seoul High Court canceled a 1.6 billion KRW fine imposed on SK Group Chairman Chey Tae-won. A 3.2 billion KRW fine imposed on Coupang for abusing its superior bargaining position was also canceled by the Seoul High Court in February. These cases are currently pending before the Supreme Court.

As courts have recently been putting brakes on the FTC's administrative actions, there is an analysis that a similar ruling may come out in the lawsuit with Coupang.

Future Outlook and Legal Response

This lawsuit is expected to be an important ruling that will determine regulations and fine imposition standards for the entire distribution industry, beyond just a legal dispute between Coupang and the FTC. If the court sides with Coupang, it could lead to deregulation of the display methods for PB products by distribution companies; however, if the FTC wins, regulations on large distribution companies are likely to be further strengthened.

Professor Hong Dae-sik of Sogang University Law School stated, "Since it is difficult to find precedents overseas for regulating the display order of PB products, it seems necessary to receive the court's final judgment."

Reporter Lee Soon-gyu, Legal Newspaper