Chairman Kim Beom-seok of Coupang Avoids Being Designated as Owner... Fair Trade Commission Says "No Precedent or Effectiveness for Foreign Designation"

Fair Trade Commission Announces Designation Results of '2021 Publicly Disclosed Business Groups'

Coupang Newly Designated as a Large Business Group…The Same Person is Coupang Co., Ltd.
Fair Trade Commission: "No precedent for designating foreigners as the head, difficult to regulate foreigners under current law…Will improve the system"

(Photo) [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] The reason Kim Beom-seok, chairman of Coupang's board, avoided being designated as the head (the same person) is because he is a 'black-haired foreigner.' There is no precedent for designating a foreigner as the head, and even if designated, it is practically difficult to regulate. The Fair Trade Commission (FTC) decided to prepare improvement measures for the entire system of designating the same person based on this Coupang case.

On the 29th, the FTC announced the results of the designation of the '2021 Publicly Disclosed Business Groups' containing this information.

Accordingly, from the 1st of next month, Coupang will be newly designated as a publicly disclosed business group. This is because its total assets amount to 5.775 trillion KRW, exceeding the designation criterion of 5 trillion KRW. Companies belonging to publicly disclosed business groups are subject to disclosure and reporting obligations on large-scale internal transactions, important matters of unlisted companies, and business group status, as well as regulations on private interests of the head family under the Monopoly Regulation and Fair Trade Act. However, in Coupang's case, since Coupang Co., Ltd. was designated as the same person instead of Chairman Kim, the private interest regulation was avoided. According to the materials submitted by Coupang and the FTC's review, at this point, Chairman Kim personally or his relatives do not own any domestic companies.

Kim Jae-shin, vice chairman of the FTC, said, "There is no doubt that the business group Coupang, established under Korean law and operating in Korea, is effectively controlled by Chairman Kim," adding, "However, the issue of who to designate as the same person, who will be subject to new obligations and penalties under domestic law, is a different matter." He continued, "Considering the precedent of foreign-affiliated business groups where the top domestic company was designated as the same person, the current economic power concentration suppression measures are designed based on domestic premises, making it insufficient to regulate foreign same persons, and whether Kim Beom-seok or Coupang Co., Ltd. is designated as the same person, there is currently no change in the scope of affiliated companies."

Coupang's designation as a large business group was anticipated. According to a filing submitted by Coupang LLC (now Coupang INC) to the U.S. Securities and Exchange Commission (SEC), Coupang LLC's total assets as of 2020 were 5.06733 billion USD (approximately 5.61 trillion KRW). The key issue was whether Chairman Kim, who controls Coupang, would be designated as the head. The controversy began when it became known that the FTC's secretariat planned to designate Coupang as a large business group but designate Coupang Co., Ltd. as the same person, meaning a business group without a head. There were claims that not designating Chairman Kim as the head because he is a U.S. national was preferential treatment, and opposing claims that there has been no precedent for designating foreigners as heads and that foreigners are not subject to domestic law, reducing regulatory effectiveness. Ultimately, the FTC exceptionally placed the issue of designating Chairman Kim as the head on the agenda for an emergency plenary meeting held on the 21st for discussion. This means the FTC has been deliberating carefully through its highest decision-making body until recently.

By designating Coupang Co., Ltd. as the same person, the FTC is likely to spark controversy over the system of designating the same person itself. The FTC recently changed the same person of Hyundai Motor from Honorary Chairman Chung Mong-koo to Chairman Chung Eui-sun, and of Hyosung from Honorary Chairman Cho Seok-rae to Chairman Cho Hyun-joon. The reason for the change was explained by the FTC as "the need to align authority and responsibility by designating the second generation who effectively control the business groups as the same person." Another reason cited was the need to update the same person designation to prevent regulatory blind spots such as private interest regulations and to enhance regulatory effectiveness. However, this logic was not applied to Coupang. Although it is clear that Chairman Kim controls domestic Coupang affiliates, Coupang Co., Ltd. was designated as the same person due to "past cases and deficiencies in the current system." As a result, Chairman Kim has authority but does not bear responsibility.

The FTC is aware of the problem that the system lacks clear regulations on the definition and requirements of the same person, reducing transparency and predictability. Therefore, it plans to prepare improvement measures for the entire designation system. Vice Chairman Kim said, "Although cases where foreigners can be considered the same person have emerged due to changes in the policy environment, current regulations are designed based on domestic premises, so there are some issues regarding enforceability and effectiveness in immediately designating foreigners as the same person and regulating them," adding, "We will promote concrete institutional work on the same person, including definition, requirements, confirmation, and change procedures through research projects."

This content was produced with the assistance of AI translation services.