Coupang Shifts Stance Amid U.S. Backing; FTC Caught Off Guard as Probe Could Take Years

Attention is focusing on the background behind Coupang, suspected of passing on discount costs to suppliers, after it refused an on-site investigation by the Fair Trade Commission (FTC) and even filed a lawsuit to cancel the agency's unannounced probe.

Having previously complied with FTC on-site inspections for the same legal violations, Coupang's shifted stance has sparked speculation that it may have gained confidence after U.S. political circles voiced criticism regarding the FTC's investigations and sanctions.

While refusals of on-site investigations are not expected to immediately spread to other companies, the FTC appears flustered as Coupang has set a precedent of rejecting an on-site probe.

According to the industry today (the 27th), the FTC had planned to conduct an on-site investigation of Coupang from the 19th to the 28th to secure materials related to suspected violations of the Large Scale Retail Business Act.

However, Coupang reportedly did not comply with the investigation on the grounds that it had not received advance notice of the probe.

The FTC attempted on-site investigations a total of four times from the 19th to the 24th, but they fell through.

In addition, Coupang filed a lawsuit with the court asking to cancel the FTC's decision and disposition on the on-site investigation, while also applying for a suspension of execution.

The FTC reportedly became aware of Coupang's lawsuit on the 24th and withdrew from the on-site investigation.

The law cited by Coupang is Article 17 of the Framework Act on Administrative Investigations, which stipulates that the head of an agency intending to conduct an administrative investigation must notify the subject in writing up to 7 days in advance.

Furthermore, Article 3, Paragraph 2 of the Framework Act on Administrative Investigations explicitly states that this does not apply to eight laws among those under the jurisdiction of the FTC, such as the Fair Trade Act, the Fair Labeling and Advertising Act, the Subcontracting Act, and the Franchise Business Act.

Coupang's position is that advance notice must be given because the Large Scale Retail Business Act, which the FTC is targeting over suspicions, does not fall under the exceptions of the Framework Act on Administrative Investigations.

In fact, the Framework Act on Administrative Investigations was enacted in 2007.

The Large Scale Retail Business Act was enacted later in 2011 and thus was not included in the exceptions.

Not only the Large Scale Retail Business Act, but also the Agency Act under the FTC's jurisdiction was enacted in 2015 and was not specified as an exception.

On the other hand, the FTC's position is that the Large Scale Retail Business Act does fall under the exceptions of the Framework Act on Administrative Investigations.

Article 3, Paragraph 1 of the Framework Act on Administrative Investigations defines that administrative investigations shall follow the Framework Act on Administrative Investigations "except as otherwise provided in other Acts regarding administrative investigations," and the Large Scale Retail Business Act falls under the case where there are special provisions.

Article 38 of the Large Scale Retail Business Act stipulates that the Act mutatis mutandis applies the Fair Trade Act.

Paragraph 3 of Article 38 states that FTC investigations and hearing of opinions necessary for the Large Scale Retail Business Act also mutatis mutandis apply the Fair Trade Act.

Therefore, the FTC's logic is that the Large Scale Retail Business Act, like the Fair Trade Act, is not subject to the Framework Act on Administrative Investigations.

Based on this, the FTC has actually conducted on-site investigations to verify suspected violations of the Large Scale Retail Business Act targeting other companies as well as Coupang.

Previously, Coupang was slapped with a fine of 2.185 billion won in February this year for violating the Large Scale Retail Business Act by demanding lower unit prices for delivered goods or advertising expenses to achieve target margins.

Prior to the sanctions, Coupang underwent FTC on-site investigations without refusal.

Analysis suggests that behind Coupang's changed response lies claims from U.S. political circles that sanctions against Coupang by the FTC and the Personal Information Protection Commission (PIPC) amount to "discrimination against U.S. companies."

The U.S. House Judiciary Committee claimed in a report on the 1st of last month (local time) that "South Korea has targeted American-owned companies for decades, but discriminatory treatment has become significantly worse in recent years," citing "coercive investigative tactics" as one form of discriminatory treatment.

The interpretation is that Coupang has directly challenged South Korean public authority amid such backing from the United States.

While the atmosphere suggests it is premature to view this as spreading to on-site investigation refusals by other companies, the FTC appears embarrassed as Coupang has created a "precedent" of defying on-site probes.

FTC Chairperson Ju Byung-ki mentioned at the National Assembly Special Committee on Budget and Accounts the previous day regarding Coupang's refusal of the on-site investigation, stating that "an unprecedented thing has happened," and announced that the agency will respond thoroughly.

However, the maximum sanction the FTC can impose regarding Coupang's refusal of the on-site investigation is a mere 200 million won in fines.

While preparing legal responses, the FTC maintains its stance to continue on-site investigations regarding suspicions involving other entities under the Large Scale Retail Business Act.

However, investigations related to Coupang under the Large Scale Retail Business Act are inevitably expected to face delays.

Even if a conclusion on the suspension of execution is reached within 1 to 2 weeks, the merits lawsuit is highly likely to drag on all the way to the Supreme Court, taking 3 to 4 years, whichever side appeals.

If Coupang's arguments are accepted by the court, the FTC may be required to give advance notice 7 days prior to on-site investigations.

However, companies could destroy sensitive or unfavorable information, making proper investigations difficult to achieve.

Because of this, moves are reportedly emerging among some members of the ruling party to add the Large Scale Retail Business Act to the exception clauses of the Framework Act on Administrative Investigations.

However, the FTC's position is that it is not reviewing law amendments.

An FTC official said, "In the case of written fact-finding surveys, it is different, but there is no competition authority anywhere in the world that announces on-site investigations in advance."
※ Please note: This article was translated by AI and may contain errors.