Coupang, a South Korean e-commerce giant accused of manipulating search algorithms and using fake employee reviews to boost its private brand products, has filed an appeal against Korea’s Fair Trade Commission (FTC) to challenge the 160 billion won fine the antitrust regulator imposed.
Coupang and its subsidiary in charge of private brand products, CPLB, filed an administrative litigation with the Seoul High Court on Sept. 5. to overturn the FTC’s corrective order and fine, according to sources familiar with the matter on Sept. 11. Coupang also requested the suspension of the antitrust regulator’s corrective measures until the court reaches a decision.
Last month, the FTC fined Coupang 162.8 billion won ($121 million) for fair trade violations, the largest fine ever imposed on a retailer in Korea. The antitrust regulator also ordered the company to take corrective measures, including ceasing manipulating search algorithms and mobilizing employees to write favorable reviews to boost sales.
The fine imposed by the FTC is nearly equal to Coupang Inc.’s operating profit for the second quarter of last year, which stood at 194 billion won. In its second-quarter earnings report this year, Coupang Inc. disclosed that while sales increased by 30% year-on-year, the company posted an operating loss of 34.2 billion won after factoring in the FTC fine estimate of 163 billion won.
The FTC claimed that Coupang manipulated its algorithm to make PB and direct-purchase products more visible in search results, giving its products an unfair advantage over those of suppliers. The commission added that Coupang encouraged employees to leave positive reviews of PB products, misleading consumers into buying Coupang’s PB products.
Coupang refuted such claims, asserting that its competitiveness lies in product recommendations, which are fundamental to the retail business. The company argues that highlighting PB products is similar to supermarkets, making private label products more visible by displaying them in favorable spots. As for employee reviews, the company explained that they were clearly marked and had lower ratings than those left by the general public.
“We will present our case to the court and seek a fair judgment,” said a Coupang representative.
Administrative litigations against the FTC typically favor the commission. In the first half of this year, the FTC won 36 cases out of 42 administrative litigations.
However, Coupang won a case against the FTC before. In 2022, Coupang was fined 3.3 billion won for allegedly forcing suppliers to offer the lowest prices. When Coupang challenged the FTC’s decision with a lawsuit, the court ruled in Coupang’s favor last February, stating that Coupang did not hold a dominant position in the market and canceled both the corrective order and fine.
The current case is expected to take two to three years to conclude. “The information provided by both sides is limited, so it’s difficult to identify the key issues involved in this case,” said a lawyer from a domestic law firm. “If the court grants Coupang’s request to suspend the FTC’s corrective order, it will give the company a significant advantage, but considering the case’s complexity, it will take some time to resolve.”
