Coupang Faces Challenge to Improve 'Penalty Reduction Criteria' Following 'Head Designation System'

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) is set to improve the "criteria for reducing fines" following its sanction against Coupang for violations of the Fair Trade Act and the Large-scale Distribution Act.

On the 19th, the FTC imposed a corrective order and a fine of 3.297 billion KRW on Coupang for unfair practices, including demanding suppliers to raise prices on competing online malls to maintain its own minimum price policy.

The scale of the fine was reduced from initial expectations. This was because the FTC took into account Coupang's capital impairment status and reduced the fine accordingly. An FTC official explained, "According to the 'Notice on Detailed Criteria for Imposing Fines,' fines can be reduced by considering the violator's actual ability to bear the burden," adding, "Based on this criterion, the fine for Coupang, which is in a capital impairment state, was mitigated."

The current fine notice stipulates that "if the violator is in a capital impairment state as per the business report of the fiscal year immediately preceding the resolution date, the fine can be reduced within 50% of the second adjusted calculation standard." This means that if a company is in a capital impairment state, it is considered to have insufficient actual burden capacity, and the fine is reduced accordingly.

The key issue is whether Coupang truly lacks the actual ability to bear the burden. The FTC Secretariat (equivalent to the prosecution) argued that Coupang's sales have grown at an average annual rate of over 60%, from 1.9 trillion KRW in 2016 to 4.3 trillion KRW in 2018 and 13.9 trillion KRW in 2020, and that its deficits are due to business strategies rather than operational downturns, thus asserting that Coupang has the actual ability to bear the fine. However, the FTC reduced the fine from 7 billion KRW to 3.297 billion KRW based on the reduction reasons stipulated in the current fine notice.

An FTC official stated, "The commission does not believe that Coupang lacks the ability to bear the fine, but reduced the fine because it meets the reduction criteria under current regulations," adding, "We will revise the criteria for reducing fines based on this case." The revision aims to exclude business operators who pursue planned deficit strategies, like Coupang, from the grounds for reduction.

This is the second time the FTC has initiated institutional improvements following the Coupang case. Earlier in April this year, the FTC designated Coupang as a "publicly disclosed business group of 2021" and Coupang Inc. as the same person. The FTC explained that it did not designate Coupang's chairman and founder, Kim Beom-seok, as the head of the group because there is no precedent for designating a foreign head, and there are institutional limitations in regulating foreign individuals. Under the current system and legal framework, there is no basis or effectiveness in designating Chairman Kim as the head. Accordingly, the FTC is working on establishing clear criteria for defining and qualifying the same person through related research projects.

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