[Coupang AI Dominance] ④ The Eye of the Storm: 'Onple Law' Puts 'Rocket' at a Crossroads

Coupang's User Big Data Opens Up the B2B Market
Will Seller Influence Grow... Onple Law Enactment Imminent
President Lee Jae Myung's Pledge... Priority Likely on Banning Platform Power Imbalances

1.6245 trillion won. This is the operating profit that Coupang, the leading e-commerce platform in South Korea, earned in Korea last year. While the total operating profit reported by Coupang Inc., the US-based parent company that controls Coupang, was about 600 billion won for the period, the profit from Korea alone?excluding global operations?increased by more than 600 billion won year-on-year. This result was driven by logistics innovation based on artificial intelligence (AI) and highly effective product recommendations leveraging vast user purchase data. Industry experts predict that Coupang will further strengthen its hyper-personalized recommendation technologies using AI to target the B2B (business-to-business) market. However, the possibility that the new government, which has achieved a change in administration, will introduce regulations to prevent platform operators from monopolizing the market is seen as a potential obstacle.

According to industry sources on June 12, Coupang provides advertisers with advertising strategies that enable 'full-funnel marketing' based on its massive user data. Full-funnel marketing follows the entire customer shopping journey, from product search to purchase decision. Coupang utilizes AI technology that continuously learns and analyzes accumulated big data on user purchase behavior to predict outcomes.

Coupang's User Big Data Opens Up the B2B Market

Coupang's AI learns the step-by-step behavior of its 23.4 million active customers and shares these results with advertisers. It analyzes in real time, through Coupang's machine learning (ML), which stage of the shopping journey an ad is exposed at and how likely it is to lead to a purchase, predicting ad performance by product and enabling automatic ad management according to priorities.

This technology not only increases product sales for Coupang's marketplace sellers but is also likely to grow into a new market due to rising demand from manufacturing companies. Seo Yonggu, professor of business administration at Sookmyung Women's University, said, "In the end, the competition in AI-driven distribution is about who can sell more products that solve customers' problems through one-to-one engagement," adding, "The fact that Coupang directly handles last-mile delivery based on its vast shopping history (consumer behavior data) and logistics competitiveness will be a significant advantage."

However, the fact that the Democratic Party of Korea, which became the ruling party with the inauguration of President Lee Jae Myung, is strongly pushing for the enactment of the 'Online Platform Fairness Act' (Onple Law) could be a stumbling block. The Onple Law was introduced to prevent monopolies by online platforms and protect small businesses, addressing criticism that online platforms have been relatively unregulated compared to offline distribution channels. It targets major domestic and foreign platforms such as Coupang, Naver, Kakao, and Google. Since President Lee emphasized fair competition during the last presidential election, many expect related legislation to be enacted.

President Lee Jae Myung delivers the inauguration speech for the 21st president at the National Assembly in Yeouido, Seoul, on the 4th. Photo by Kim Hyun Min

Will Seller Influence Grow... Onple Law Enactment Imminent

According to the National Assembly's legislative information system, there are a total of 17 bills related to the Onple Law pending in the 22nd National Assembly. After the incident where Tmon and Wemakeprice (Tmaprice) delayed payments to sellers and the Korea Fair Trade Commission imposed a fine of about 160 billion won on Coupang for algorithm manipulation, a flood of related bills was proposed.

The most likely bills to pass are the 'Act on the Fairness of Online Platform Brokerage Transactions' and the 'Act on the Regulation of Online Platform Monopolies,' both spearheaded by Democratic Party lawmaker Kim Namgeun last year. Each bill was co-sponsored by 58 and 44 Democratic Party lawmakers, respectively, and was referred directly to the National Assembly's Political Affairs Committee subcommittee in December last year under Article 58, Paragraph 4 of the National Assembly Act. This provision allows for expedited review if agreed upon by the committee chair and secretary.

The core of the Online Platform Brokerage Act is to guarantee the right of online platform business users (sellers) to form organizations and to establish a system for negotiating transaction terms. The main point is to grant sellers collective bargaining rights similar to those of labor unions to strengthen their interests. Sellers can form organizations, register with the Fair Trade Commission or local governors, and request negotiations on transaction terms with online platform companies. President Lee also included strengthening the bargaining power of not only online platform sellers but also franchisees, agency owners, and consignees as one of his top ten campaign pledges.

The bills also stipulate that intermediary commission rates paid by sellers must be set fairly and reasonably within a maximum limit set by presidential decree to ease the fee burden on small and medium-sized businesses. This means that the commission rates for marketplace sellers, which have boosted Coupang's profitability, could be lowered.

Additionally, there is a provision requiring that seller settlements be paid within 10 days of the consumer's purchase confirmation or payment date. Previously, platform operators such as Tmaprice typically delayed settlements to sellers for 45 to 60 days, forcing them to take out advance payment loans at interest rates of 4 to 6 percent, leading to unfair practices and the need for regulation. There is also a clause requiring a certain amount of sales proceeds, as specified by presidential decree, to be held in trust or deposited, or for sellers to obtain guarantee insurance.

President Lee Jae Myung's Pledge... Priority Likely on Banning Platform Power Imbalances

The Online Platform Monopoly Regulation Act, proposed in July last year, focuses on preventing large online platform operators from abusing their dominant market positions. The criteria for a dominant market operator are companies with a market value of at least 15 trillion won, average annual sales of at least 3 trillion won, more than 10 million monthly users, and more than 50,000 monthly platform business users. The Fair Trade Commission will pre-designate and manage platform operators who meet these requirements.

Pre-designated dominant operators are prohibited from so-called 'power imbalance' practices, including: ▲self-preferencing (giving priority exposure to their own products/services in search results), ▲tying (bundling products), ▲demanding most-favored-nation treatment (requiring better terms than other platforms from sellers), and ▲restricting multi-homing (limiting sellers from listing on multiple platforms simultaneously).

Big tech companies at home and abroad that meet the criteria set by the bill include Naver, Kakao, Coupang, Google, and Apple. Among these, Coupang was ordered by the Fair Trade Commission last year to take corrective action and fined 162.8 billion won for manipulating algorithms to unfairly boost the rankings of its own private label (PB) and direct purchase products, as well as for mobilizing employees to increase PB product reviews. If the bill passes, such sanctions could become routine.

Cheongnyangni Agricultural and Marine Products Market, Dongdaemun-gu, Seoul. Photo by Jinhyung Kang

While President Lee's campaign pledges include both the pre-designation of dominant platforms and the regulation of power imbalances, industry insiders believe that if implemented, the regulation of power imbalances will likely be prioritized. This is because the inclusion of US big tech companies as pre-designation targets has prompted the US government and Congress to push back, demanding a review of such regulatory discussions. As a result, there are concerns that this could lead to reverse discrimination, regulating only domestic companies.

An industry official commented, "If laws are hastily enacted with only the most visible issues in mind, it could hinder the growth of tech companies and negatively impact national competitiveness," adding, "If the Onple Law is deemed truly necessary, detailed provisions should be drafted after gathering opinions from various industries."