"Retaliatory dragnet investigation" Coupang refuses Korea Fair Trade Commission on-site inspection, 'second conflict' erupts

E-commerce giant Coupang has once again defied the Korea Fair Trade Commission's high-intensity on-site inspection. This marks a second clash over the method and scope of the investigation, just one month after a conflict arose over an August investigation related to the Large-Scale Distribution Business Act.

According to industry sources on the 11th, Coupang filed a lawsuit with the court on the 29th of last month seeking to cancel the Korea Fair Trade Commission's on-site inspection. It also applied for a suspension of the effect of the commission's order to submit key documents. The court is scheduled to summon both parties on the 5th of next month to conduct related hearings.

In August, Coupang had refused the Korea Fair Trade Commission's investigation into suspected violations of the Large-Scale Distribution Business Act, citing the lack of "prior notice." This was because, unlike the Fair Trade Act, investigations under the distribution business law require prior notification. The Korea Fair Trade Commission stated that prior notification posed a risk of document concealment and that the investigation procedures, which applied the Fair Trade Act by reference, were lawful.

The court ruled in favor of the Korea Fair Trade Commission regarding Coupang's August refusal of the on-site inspection. In response, the commission announced its intention to resume the related investigation and impose a fine for obstructing the investigation, while Coupang has filed an appeal with the court.

The 'second conflict' between the two sides arose during a different investigation process. On September 1, immediately after the court decided on a temporary suspension of the effect of the on-site inspection at the end of August, the Korea Fair Trade Commission deployed approximately 30 investigators to Coupang's headquarters in Gwangjin District to begin an on-site inspection. This time, it is known to be under suspicion of violating the Fair Trade Act rather than the distribution business law. During this period, the commission reportedly investigated 70 to 80 Coupang employees and extended the investigation period from the originally planned 10 days to 30 days.

Coupang is also raising issues with this current investigation, citing problems with the investigation method. It is objecting to the fact that the September on-site inspection was a broad investigation without specifying allegations. In fact, it is understood that the Korea Fair Trade Commission specified in its official document that the purpose of the investigation was to address issues of business obstruction or abuse of dominant market position regarding "product pricing, sales, exposure, and transaction conditions and operations within online shopping malls." Coupang interprets this as meaning a dragnet-style investigation of all business areas over 10 years without specific points of suspicion.

Additionally, Coupang takes the position that it is unfair for the Korea Fair Trade Commission to set the document submission deadline to more than 10 years, given that under current law, the statute of limitations for commission investigation dispositions is "7 years from the date the violating act ended."

There are also points raised that the series of investigations into Coupang runs counter to the Korea Fair Trade Commission's policy direction of strengthening the rights of investigated parties. In 2023, the commission stated that it would "strengthen the procedural rights of investigated parties by specifying the content of suspected legal violations." The announcement materials at the time included a plan to specify the purpose of the investigation, suspected legal violations, and types of conduct in investigation documents by detailing the rules of investigation procedures. Unlike compulsory investigations where warrants are issued, Korea Fair Trade Commission on-site inspections were voluntary investigations requiring the consent of the investigated company, with the intent to guarantee the right to defense.

This issue may also be raised during next week's National Audit of the Political Affairs Committee of the National Assembly. Given that the court recently issued a decision suspending document submission in the Korea Fair Trade Commission's on-site inspection of Hanwha because staff smartphones were accessed without a warrant, it is expected to become a point of contention whether the commission adhered to its own investigation principles during this process and whether Coupang's refusal to submit documents was justified.