Final decision on designating Kim Bomseok as the same person to come in three months
The Korea Fair Trade Commission (KFTC) has completed its on-site investigation into the three main allegations related to the designation of Coupang Inc. Chairman Bomseok Kim as the same person (controlling shareholder) and is currently reviewing whether the collected materials constitute legal violations. The authority has also left open the possibility of further investigations, such as taking statements from reference witnesses and employees of Coupang’s headquarters, if necessary. The KFTC plans to begin by reaching a decision on the same-person designation issue, where the key questions of illegality are relatively straightforward, and to swiftly conclude the investigation and expedite the drawing of final conclusions.
KFTC leaves room for additional investigations, including witness statements, if necessary
According to industry sources on the 5th, the KFTC completed its on-site investigation of Coupang’s headquarters in Songpa-gu, Seoul, on the 30th of last month and is examining whether there have been any violations of the law based on the materials collected. This surprise and simultaneous on-site investigation, which involved three bureaus - the Market Surveillance Bureau, the Corporate Mergers and Acquisitions Division, and the Business Group Bureau - and more than 30 investigators, continued for about two weeks starting from the 13th of last month.
A government official said, "My understanding is that they are going through procedures to report to the case examiners the digital forensic data and other related documents and future plans collected during the on-site investigation." Additional investigations, such as taking statements from reference witnesses and interviewing executives and employees, may be conducted at a later stage. Depending on the final results of the investigation, corrective orders and fines under the relevant laws may be imposed, and in some cases even business suspension is possible.
This investigation simultaneously targets three major allegations: whether Chairman Kim should be designated as the same person (controlling shareholder), unfair internal transactions and private interest appropriation, and unfair practices on the platform. The KFTC is currently focusing on allegations that Coupang effectively hijacked popular products from partner vendors by forcing them to release those products as its own private brand (PB) items or to switch them to a direct-purchase model.
The key question for determining illegality is whether Coupang used the business data of marketplace sellers in the process of launching PB products based on well-selling small and medium-sized enterprise items, and whether it exerted unfair pressure on those sellers to change the sales method to direct-purchase products with higher margins. In 2024, Coupang was fined around 160 billion won after the KFTC concluded that the company, in an attempt to promote its own products and improve profitability, mobilized employees to post purchase reviews and manipulated the search ranking algorithm. The likelihood has now increased that Coupang will once again face sanctions over its PB products.
The KFTC is also watching closely the suspicions of unfair internal transactions. The proportion of internal transactions among Coupang’s affiliates is 25.8%, up 3.6 percentage points from the previous year. This is the second highest among all business groups subject to public disclosure, and the KFTC believes that, in the course of internal transactions, Coupang may have conferred benefits on certain affiliates by setting prices significantly higher or lower than normal market prices.
Rogers Harold, interim CEO of Coupang Korea, is appearing at the Seoul Metropolitan Police Agency on the 30th.
Decision on same-person designation expected in May
In this on-site investigation, the KFTC also collected materials to determine whether Chairman Kim should be designated as the same person (controlling shareholder) of Coupang. The key issues are whether his younger brother, Executive Vice President Yuseok Kim, and other relatives have been substantially involved in the management of Coupang in Korea, and whether holding executive positions and receiving high remuneration meet the criteria for relatives’ participation in management.
Coupang first entered the large business group category in 2021, but it has avoided the designation of Chairman Kim as the same person on grounds such as the fact that he holds U.S. citizenship and that his relatives do not participate in Coupang’s management. According to Article 38-2 of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, if certain exceptional conditions are all met - including non-participation in management by relatives and the absence of specific types of funding or debt guarantee relationships - a corporation can be designated as the same person instead of an individual.
However, it was belatedly revealed through a disclosure to the U.S. Securities and Exchange Commission (SEC) that Executive Vice President Kim, the chairman’s younger brother, has overseen Coupang’s logistics operations and received 14 billion won in remuneration over the past four years. This has raised suspicions that Coupang submitted false information to the KFTC.
If relatives’ participation in management is confirmed, the exception that allowed the Coupang corporation to be designated as the same person will be invalidated, and Chairman Kim as an individual could be designated as the same person. This is the core of the current investigation. If Chairman Kim is designated as the same person, various legal obligations will be imposed on him, including the prohibition of private interest appropriation and the submission of information on relatives.
Previously, when the KFTC was about to designate Chairman Kim as the same person, Coupang was sanctioned for omitting 15 of his relatives from the list of family members submitted to the authority. The KFTC determined, after a subcommittee review, that there were no justifiable reasons for omitting 7 of the 15 individuals and issued a warning. At that time, the KFTC regarded the omission of information as a minor violation and did not refer Coupang or Chairman Kim for prosecution.
It is reported that in this on-site investigation, the KFTC secured related documents, such as emails, proving that Executive Vice President Kim and other relatives were involved in decision-making. Based on this, the KFTC plans to analyze whether Chairman Kim and his family have participated in management and, on that basis, to make a final decision on whether to designate him as the same person of Coupang. The decision on the same-person designation will be announced in May. A government official said, "If the facts are proven, criminal penalties could also be imposed on Chairman Kim and the Coupang corporation for submitting false information."
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