E-commerce sector on alert after $102 mn Coupang fine

[Photo by Yonhap]

The Korea Fair Trade Commission (KFTC) imposed a hefty fine of 140 billion won ($101.75 million) on Coupang Inc., South Korea‘s largest online retail platform company, on Thursday, causing tension throughout the retail industry. While there are concerns that the commission’s action could negatively impact the Korean private brand (PB) market, others see it as an opportunity to scrutinize product search systems across the e-commerce sector.

Industry observers believe that even if the KFTC’s regulations are extended to the entire e-commerce sector, no company is expected to be hit as hard as Coupang, as a significant number of Korean e-commerce companies focus on ‘open market’ business models that bring in external sellers, rather than purchasing and selling products directly. The KFTC move could thus potentially alter the landscape of the Korean e-commerce market, which has been dominated by Coupang.

Those concerned about the contraction of the PB market fear that the sanction could mislead consumers.

“PB products, which were viewed as lower quality for a long time, are now starting to gain traction. We are concerned that the KFTC move could reignite negative perceptions about PB products,” an official from a major supermarket chain said.

The retail industry is watching closely to see if the latest sanction will lead to further allegations related to algorithms in other e-commerce companies selling PB products.

E-commerce platforms such as Kurly and Baedal Minjok (Baemin), which sell PB products, often display their products at the top of search results for keywords like ‘bottled water,’ ‘tissue,’ ‘dumplings,’ and ‘eggs.’

“We have never manipulated product exposure rankings arbitrarily, which the KTFC has pointed out for Coupang,” an online shopping mall official said. “However, since the criteria for what constitutes ‘arbitrary manipulation’ in the commission’s announcement seem to be somewhat ambiguous, we are reviewing whether there might be any issues on our end.”