"Online Distribution Market 'Gap' is Coupang"… Fair Trade Commission Recognizes Coupang's 'Superior Position' Over Large Corporations Like LG Saenggeon

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has decided to sanction Coupang for unfair practices, including using its 'superior bargaining position' over suppliers to raise prices on competing online malls and forcing the purchase of its own advertisements. Coupang has argued that it is the 'weaker party' in dealings with large corporations such as LG Household & Health Care and Yuhan-Kimberly, but the FTC judged that Coupang holds the 'dominant party' position even over large corporations and manufacturers with popular products. This is the first case in which the FTC recognized that online retailers have bargaining power similar to offline retailers like department stores and supermarkets.

On the 19th, the FTC announced that Coupang interfered in management by demanding suppliers to raise prices on competing online malls to maintain its lowest price policy, forced the purchase of its own advertisements, and made suppliers bear the full cost of product discounts during various promotional events. The FTC decided to impose corrective orders (including notification orders) and a total fine of 3.297 billion KRW.

Cho Hong-seon, Director of Distribution Policy at the FTC, explained, "This action uncovered and sanctioned multiple legal violations, including new forms of unfair trade practices in the online distribution market such as demands for price increases and forced advertisement purchases by online retailers with superior bargaining power. Notably, it is significant that online retailers were recognized to have superior bargaining positions over large corporations or manufacturers with popular products, just like offline retailers such as department stores and supermarkets."

The FTC began investigating Coupang's unfair practices in February 2018. The case accelerated in June 2019 when LG Household & Health Care reported to the FTC that it had suffered unfair practices by Coupang.

The key issue was whether Coupang's superior bargaining position, i.e., being the 'dominant party,' was recognized even in transactions with large manufacturing companies. If Coupang's superior bargaining position was not recognized, it would not be subject to sanctions.

The FTC judged Coupang to be the dominant party. Director Cho said, "In the past, manufacturers might have been considered dominant, but recently the power has shifted to distributors. Nowadays, online retailers have secured a stronger position than offline retailers, so the Commission recognized that even large corporate suppliers are subject to the superior bargaining power of online retailers."

Coupang maintains that it does not hold a superior bargaining position at least with large corporations such as LG Household & Health Care, Yuhan-Kimberly, Korea P&G, Maeil Dairies, Namyang Dairy Products, Cuchen, SK Magic, and Lego Korea. Coupang stated, "LG Household & Health Care, the nation's top household goods company, has long supplied key products to Coupang at prices higher than those sold to other distributors by exploiting its monopolistic supplier position. The incident originated from our request for price reductions. Despite the fact that the essence of the case was the price discrimination by some large conglomerate manufacturers, it is regrettable that Coupang was judged to have superior bargaining power over these large manufacturers." It added, "We will seek a court ruling through administrative litigation regarding this decision."

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