FTC to probe e-commerce industry amid tightening Chinese squeeze

Korea's antitrust regulator will assess the state of the e-commerce industry as Chinese platforms stifle competition with low prices.

Korea Fair Trade Commission Chairperson Han Ki-jeong speaks in a press conference held at the government complex in Sejong last April. [YONHAP]

Korea's antitrust regulator will look into the country's cutthroat e-commerce industry to examine the market structure and competition as Chinese rivals undercut domestic companies.

The Fair Trade Commission (FTC) will create a team dedicated to the market study and investigation, which will be conducted through surveys and interviews with experts and people engaged in the industry.

“E-commerce is a field that requires in-depth analysis as it is closely related to people's livelihoods and its business environment is changing rapidly,” said the FTC on Monday.

"The e-commerce market is continuously growing amid a changing competitive structure along with the growing direct purchase of goods from overseas, the entrance of global e-commerce operators and strengthened connections with related industries, like simple payment transactions.”

The first generation of the online retail industry largely connected sellers and buyers in the form of an open market and social commerce. The structure has evolved with the expanded online reach of traditional manufacturers and retailers to consumers through fulfillment services.

The FTC announcement follows aggressive strides by Chinese e-commerce operators like AliExpress, Temu and Shein in Korea to lure mass number of shoppers with competitive prices despite complaints about their product quality management.

Electronic displays at a subway station in Korea promote AliExpress [ALIEXPRESS]

AliExpress became the second most-used online shopping app among Korean consumers with 8.18 million monthly active users in the country as of February, up 130 percent on year, according to WiseApp. It trailed only Coupang, which remained unrivaled with 30.1 million monthly users.

Last year logged an estimated 227.3 trillion won ($169.5 billion) in online shopping transactions, up from 209.9 trillion won in 2022 and 190.2 trillion won a year earlier, according to Statistics Korea data.

"The overall efficiency of the e-commerce market and consumer convenience have risen along with the advancement of IT technology and an expansion of delivery services based on large logistics infrastructure,” said the FTC. "But concerns about the fairness of its customs and consumer damage have risen, centered on a few e-commerce operators.”

Food giant CJ CheilJedang, a seller of hetbahn (instant rice) and its bibigo mandu (dumplings), partnered with AliExpress after ceasing business dealings with Coupang in 2022 due to quarrels over supply and pricing.

The FTC study will be conducted in three stages, which will include a market analysis of overseas e-commerce policy and the market followed by a document review on competition status, revenue by distribution sources and partners of platform operators.

The study will be released by the end of the year.

Similar market studies and investigations were conducted in Britain and Australia.

The FTC recently conducted an on-site inspection on AliKorea in central Seoul, which handles the company's marketing in Korea, in response to a surge of customer complaints.

BY JIN MIN-JI [jin.minji@joongang.co.kr]