Coupang has rejected a Fair Trade Commission (FTC) investigation regarding allegations that it shifted discount costs onto suppliers and has filed a lawsuit against the commission. If the legal dispute escalates to the Supreme Court, it could take three to four years for a final ruling, potentially delaying the FTC's investigation into Coupang for an extended period. The outcome of the lawsuit may also impact the FTC's overall investigation methods.
According to industry sources, the FTC attempted to conduct an on-site investigation of Coupang starting on August 19 to gather evidence related to alleged violations of the Large-Scale Distribution Act. However, Coupang did not comply, claiming it had not received prior notification of the investigation.
The FTC made four attempts to conduct the on-site investigation by August 24, but all were unsuccessful. Coupang subsequently filed a lawsuit seeking to annul the FTC's decision and requested a stay of execution. Following the lawsuit's filing, the FTC reportedly withdrew from the investigation site.
The central issue is whether there is an obligation for prior notification before an on-site investigation. Article 17 of the Administrative Investigation Basic Act stipulates that administrative agencies must notify the subject of an investigation in writing at least seven days before commencing the investigation. Coupang argues that since the Large-Scale Distribution Act is not exempt from the application of the Administrative Investigation Basic Act, the FTC should have provided prior notice.
In contrast, the FTC contends that the investigation procedures under the Fair Trade Act apply to investigations under the Large-Scale Distribution Act, negating the need for prior notification. The FTC also asserts that even if the Administrative Investigation Basic Act applies, prior notification can be waived in cases where there is a risk of evidence destruction.
The FTC emphasized that it has never provided prior notification for on-site investigations since the Large-Scale Distribution Act was enacted in 2012, and Coupang has previously undergone investigations without such notifications. In fact, Coupang did not refuse an on-site investigation earlier this year when it was fined 2.185 billion won for allegedly demanding price reductions and advertising cost burdens from suppliers.
Analysts suggest that Coupang's shift to a more aggressive response may be influenced by recent developments in U.S. politics. Last month, the U.S. House Judiciary Committee criticized the FTC's investigation methods as 'coercive tactics' in a report.
However, no direct link has been established between Coupang's refusal to cooperate with the investigation and the actions of U.S. lawmakers.
As it stands, the investigation into Coupang's alleged cost-shifting practices is likely to face significant delays. The court could rule on the stay request within one to two weeks, but if the case proceeds to the Supreme Court, it could take three to four years.
If the court accepts Coupang's arguments, the FTC may be required to notify companies of investigations under the Large-Scale Distribution Act seven days in advance. This could lead to concerns that companies might destroy or conceal relevant materials, significantly undermining the effectiveness of on-site investigations.
Current penalties for obstructing or refusing an investigation under the Large-Scale Distribution Act are limited, with fines capped at 20 million won.
On August 26, FTC Chairman Jo Byeong-gi stated during a National Assembly budget committee meeting that Coupang's refusal to cooperate was 'unprecedented' and emphasized the need for thorough responses.
Some members of the ruling party have suggested adding the Large-Scale Distribution Act to the list of laws exempt from the Administrative Investigation Basic Act. However, the FTC has stated that it is not currently considering any amendments to related laws.
An FTC official remarked, 'While it differs from written surveys, no competition authority in the world notifies subjects of investigations prior to on-site investigations.'
* This article has been translated by AI.
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