Government Ramps Up Pressure... Concerns Grow Over Coupang Dispute Sparking Korea-US Trade Friction

U.S. Officials Voice Concerns Over Alleged Discriminatory Treatment of Coupang

Concerns about a potential trade dispute between South Korea and the United States are rising as government authorities continue their investigation into Coupang's large-scale data breach into the new year. The Fair Trade Commission, along with other government bodies and the political sector, has launched all-out pressure on Coupang, prompting criticism from American political and business circles that the company is being subjected to "discriminatory treatment."

According to industry sources on January 26, Coupang was fined by the Ministry of Food and Drug Safety on January 20 for violating Article 20, Paragraph 2 (Import Declaration, etc.) of the Special Act on Imported Food Safety Control. The penalty was imposed for falsely reporting the location of overseas manufacturing facilities when importing food products between April 2 and July 4, 2024. The violation was detected on January 12, and unlike previous cases where it typically took several months for administrative action to be taken after a violation was confirmed, Coupang was sanctioned in just eight days.

As the government ramps up its all-out pressure on Coupang, the issue became a key topic during Prime Minister Kim Minseok's recent visit to the United States. After his meeting with U.S. Vice President J.D. Vance, Prime Minister Kim told local correspondents that "Vice President Vance expressed his understanding of the unique circumstances facing Coupang, an American company operating in Korea, and specifically asked what the issues were." He added, "I made it clear that there has been no discriminatory treatment of American companies regarding the Coupang issue, and Vice President Vance responded that he assumed there must have been some legal issue under the Korean system and expressed his understanding." Kim continued, "Vice President Vance requested that both governments manage the situation carefully to prevent any misunderstandings or escalation between the two countries."

Previously, Coupang's investors, Greenoaks and Altimeter, requested that the U.S. Trade Representative (USTR) investigate the Korean government's actions regarding Coupang and take appropriate trade remedy measures. These investors claimed that after Coupang's data breach, the Korean government launched a targeted investigation against Coupang, causing significant losses for investors. They also submitted a notice of intent to arbitrate under the investor-state dispute settlement (ISDS) mechanism, as provided by the Korea-U.S. Free Trade Agreement (FTA), to the Korean government. ISDS is a legal recourse that allows foreign investors to seek compensation from a host government if its actions result in investment losses.

Earlier, Yeo Han-koo, head of trade negotiations at the Ministry of Trade, Industry and Energy, met with USTR representative Jamieson Greer at the World Economic Forum (WEF) in Davos, Switzerland, from January 19 to 22 (local time), and conveyed the position that the domestic investigation into Coupang is not discriminatory against American companies and should not escalate into a trade dispute.

Some in the U.S. investment community have voiced frustration that the Korean government is unfairly targeting Coupang, an American company. A notable example is Joe Lonsdale, co-founder of the U.S. artificial intelligence software company Palantir, who posted on his social media that "the Korean government's pressure on American companies is a serious mistake" and that "discrimination and harassment cannot be tolerated."

This response appears to be triggered by the perception that the actions of Korean political circles and government authorities in handling Coupang's data breach are unusual and excessive. Currently, more than ten government agencies-including the Ministry of Science and ICT, the Personal Information Protection Commission, a joint public-private investigation team, the police, the Financial Supervisory Service, the National Tax Service, the Fair Trade Commission, and the Seoul Main Customs Office-are conducting comprehensive investigations into Coupang. These investigations cover not only the data breach but also allegations of industrial accident cover-ups, tax evasion, corporate governance issues, and lobbying activities both domestically and abroad. In the political sphere, six standing committees held a joint hearing on Coupang at the end of last year, and both the ruling and opposition parties have sequentially submitted requests for a parliamentary investigation into the company.

The prevailing view is that this is a form of 'punishment for insolence' against Coupang founder and Coupang Inc. board chairman Bom Kim, who has repeatedly refused to appear before the National Assembly, and against Coupang's perceived lukewarm response in the early stages of the incident. There have been no similar cases where the political or government sectors have launched such all-encompassing investigations into other companies, such as domestic telecom operators or Chinese e-commerce platforms, following data breaches. Additionally, Coupang was fined by the Ministry of Food and Drug Safety on January 20 for violating Article 20, Paragraph 2 (Import Declaration, etc.) of the Special Act on Imported Food Safety Control, for falsely reporting the location of overseas manufacturing facilities when importing food products between April 2 and July 4, 2024. The violation was detected on January 12, and, compared to previous cases where administrative action typically took several months after confirmation of a violation, Coupang was penalized in just eight days.

Within Coupang, there have also been calls for a "reasonable and fair investigation" by the government. The Coupang Labor Union, composed of directly employed delivery drivers known as "Coupang Friends," stated, "We have no intention of shielding the company or downplaying its responsibility for the data breach," but emphasized, "Excessive sanctions that go beyond the scope of personal data protection responsibilities could seriously damage the company's operations, resulting in the loss of jobs for delivery and logistics center workers, blocking sales channels for countless small business owners, and ultimately threatening the livelihoods of tens of thousands of families, which must be avoided at all costs." The union added, "Since a single decision can directly affect not only the company but also the lives of numerous frontline workers, we earnestly hope for careful and balanced judgment from multiple perspectives."