[Inside Chodong] The Nationality of the "Black-Haired Foreigner" Owner

Korea is the only country in the world that enforces regulations specifically targeting chaebols, or large conglomerates, through the designation of a “same person (owner)” under the Fair Trade Act. Every May, the Korea Fair Trade Commission announces business groups with assets exceeding 5 trillion won, and at that time, it also designates the owner by considering shareholding ratios and actual controlling power. Once designated as an owner, not only the individual but also their spouse and relatives must submit details on their holdings and transactions with affiliated companies. Even minor omissions are subject to sanctions, and submitting false information can result in criminal penalties. This is a regulation that no Korean-born chaebol owner can avoid. However, Bom Kim, Chairman of Coupang, is an exception. In 2021, when Coupang was designated as a large business group, Chairman Kim was exempted from owner designation for five consecutive years on the grounds that he is a so-called “black-haired foreigner”-a foreign national of Korean descent.

Chairman Kim owns a 10.2% stake in Coupang Inc., the U.S.-based parent company of Coupang Korea, but holds 76% of the total voting rights thanks to dual-class shares. He is the de facto controlling figure wielding full management authority over Coupang. Although the parent company is headquartered in the United States and listed on the New York Stock Exchange, the vast majority of its annual revenue of over 41 trillion won comes from Korea. This peculiar structure, in which Coupang earns money from Korean consumers and enjoys number one dominance in the domestic e-commerce market, while key decisions are made by an American, lies at the heart of the owner designation controversy.

One of the main reasons Coupang has avoided owner designation so far is the claim that “relatives do not participate in management.” However, it was belatedly revealed through a U.S. Securities and Exchange Commission (SEC) filing that Kim’s younger brother, Kim Yuseok, has overseen Coupang’s logistics operations and received 14 billion won in compensation over the past four years. The Fair Trade Commission is currently conducting an on-site investigation at Coupang’s headquarters in Songpa-gu, Seoul, and is securing evidence such as recordings, messages, and emails that could prove relatives’ involvement in major decision-making. If these facts are substantiated, it would become possible to change Coupang’s designated owner from the corporation to Chairman Kim personally. Authorities are also considering criminal penalties for Chairman Kim and the Coupang corporation for submitting false information.

During the previous administration, the Fair Trade Commission felt considerable pressure regarding the designation of a foreign owner. This is because, in the 40 years since the system’s introduction, there has never been a precedent of a foreigner being designated as an owner. A senior official at the Fair Trade Commission explained that the previous government even amended enforcement ordinances to grant an exemption to Chairman Kim and his family, stating that “the burden of treading an uncharted path-designating a foreign owner-played a role.” Whether it was a result of policy judgment or due to Coupang’s formidable influence-having used trade friction as leverage to mount all-out pressure-criticism persists that the previous administration turned a blind eye to enforcing the law against Coupang and Chairman Kim.

However, there are clear limitations and problems inherent to the same person designation system itself. The system was designed in the 1980s to prevent the negative effects of inheritance loopholes and concentration of economic power in owner-centered governance structures. Since it was originally premised on domestic companies, there are practical difficulties in designating and regulating a foreigner as an owner. The Fair Trade Commission cannot simply fly to Coupang’s headquarters in Wilmington, Delaware, and conduct an on-site investigation as it does in Korea. If sanctions are imposed on overseas affiliates based on domestic law that does not exist abroad, it could lead to trade issues or diplomatic friction. Especially with the Trump administration pressuring Korea’s U.S. investment by wielding tariffs, it is difficult to predict how trade conflicts surrounding Coupang might unfold. Given the system’s inherent limitations, the low practical benefit of regulation, and the difficulty of enforcement, the Fair Trade Commission faces a dilemma over how to address both the issue of re-designating a foreign owner and the fundamental problems of the same person designation system itself.