Coupang, South Korea’s leading e-commerce company, has been fined 140 billion won ($100 million) by the Korea Fair Trade Commission (KFTC) for allegedly manipulating search ranking algorithms and favoring its private brand (PB) products by having employees write product reviews.
The KFTC announced on Jun. 13 that it had imposed a fine on Coupang for allegedly violating the Fair Trade Act by inducing customers through a manipulated hierarchy and decided to refer the company to prosecutors. This fine is the largest in over two and a half years, following a 224.9 billion won fine imposed on Google in December 2021 for allegedly forcing its operating system on customers. It is also the largest fine ever levied against a retailer.
The KFTC’s investigation found that when consumers searched for keywords like ‘bottled water’ or ‘running shoes’ on the Coupang app or website, the products were recommended based on Coupang’s ranking. However, the KFTC concluded that Coupang had illegally given preferential treatment to its highly profitable direct-purchase private brand products over intermediary products.
Coupang’s private brands, including Tamsaa and Comet, reportedly jumped from outside the top 100 to the number one spot in Coupang’s rankings due to artificial manipulation. Vendors listing their products on Coupang were penalized as a result.
The KFTC determined that algorithm manipulation and employee review writing were systematically conducted at the company level. It has filed a criminal complaint against Coupang with the prosecutor’s office. Depending on the outcome of the prosecution’s investigation, Coupang could face an additional fine of up to 150 million won ($108,900).
In its response, Coupang said, “PB products were ranked higher due to high consumer preference, which is not algorithmic manipulation, and employee reviews are legal as marketing to provide information to customers.”
Coupang warned that the sanctions could disrupt direct purchase services, including Rocket Delivery, which offers next-day delivery and is a significant competitive advantage. The company had previously announced plans to invest 3 trillion won in logistics and 22 trillion won in purchasing Rocket Delivery products. Following the KFTC’s decision, Coupang reportedly canceled the groundbreaking ceremony for a new fulfillment center in Busan, scheduled for Jun. 20, and notified Busan City Hall and other relevant agencies.
