710 billion won to 5 trillion won... Coupang's 'most favored nation' related sales surge; was it a setup for 'punitive fines'?

Coupang pushed back after the Korea Fair Trade Commission (hereinafter KFTC) imposed an unexpectedly massive fine in the 300 billion won range, far exceeding expectations, over allegations that its delivery service, Coupang Eats, demanded most-favored-nation treatment. In particular, Coupang's internal assessment is that the substantial increase in the relevant sales figure used as the basis for the fine, from 710 billion won to 5 trillion 14.9 billion won, indicates an intent to impose the statutory maximum fine limit, deviating from the essence of the case to inflict economic damage.

In an official statement on the 9th, Coupang stated regarding the KFTC's imposition of a 300.8 billion won fine for its most-favored-nation demand conduct with Coupang Eats that it is "an amount more than 600 times larger compared to past cases sanctioned for similar charges," and that it "violates the principle of fairness."

In the review report sent to Coupang in June, the KFTC estimated the sales related to most-favored-nation demands at approximately 710 billion won. The expected fine based on this was in the range of 25 billion to 42 billion won, yet the commission decided on a fine exceeding ten times that amount.

The June review report had only extracted the sales (transaction value) of franchise stores and business locations that received 'most-favored-nation' request contacts, based on documents submitted by Coupang Eats. However, during the subsequent plenary session deliberation, it aggregated the sales of all Coupang Eats registered stores, including those that did not receive separate contacts. The KFTC determined that Coupang Eats made direct or indirect most-favored-nation demands to virtually all franchisees during the period of alleged violations (July 2023 to January 2026).

In addition, the KFTC explained that it aggravated the fine by 20% because Coupang had a history of past legal violation strategies. This effectively emphasized the nature of the measure as a 'punitive sanction.'

Coupang stated that it cannot accept this decision by the KFTC. Coupang countered, "The essence of this case is that efforts to provide better service were instead judged illegal," and noted, "Since implementing free delivery for Wow members as a late entrant in the delivery app market, the average sales of merchants registered on Coupang Eats increased by 98% over one year, while the store burden per order decreased by 5%."

Coupang also viewed the KFTC's fine calculation criteria as opaque. It argued that it is unfair to apply the same 'up to 6% of sales' fine rule to Coupang Eats, which had a market share of less than 10% in 2023 when the incident occurred, as to the market-leading business operator. Furthermore, it stated that it is difficult to accept the substantial increase in relevant sales from 710 billion won to the 5th trillion won range within just five months.

Coupang claimed that it "expanded the scope to 'total delivery sales,' which is unrelated to the charges stated in the review report, increasing the fine by up to ten times or more," and argued that "if the fine calculation criteria are changed entirely and fines are stretched like a rubber band, corporate defense rights will inevitably be severely infringed."

As a result of this decision, Coupang is projected to record an unprecedented deficit exceeding 2 trillion won this year alone. Coupang recorded cumulative losses of 1 trillion 831.8 billion won in the first three quarters of this year, surpassing the loss amount (1 trillion 708.8 billion won) from 2021, when it recorded its previous maximum annual operating deficit. In addition, factoring in the current 300.8 billion won fine and an additional fine expected to be in the 200 billion won range for 'tying' allegations, a deficit of at least 2 trillion 200 billion won is anticipated.

Coupang's large-scale losses this year are different in nature from the past. Since launching Rocket Delivery in 2014, Coupang has continued to invest in logistics networks nationwide for over a decade, maintaining a 'planned deficit' strategy. However, this year is close to a 'regulatory deficit.' This is because the amount of fines imposed by government regulatory institutional investors far exceeds losses due to business deterioration. Since the beginning of this year, the scale of fines and taxes imposed by government regulatory institutional investors such as the Personal Information Protection Commission, the Korea Fair Trade Commission, and the National Tax Service has exceeded 1 trillion 200 billion won.

Concerns have been raised that Coupang's financial capacity will deteriorate due to the imposition of massive fines, causing disruptions in domestic and international logistics network investment, new hiring, and the promotion of new businesses. An industry official said, "I understand that even the Personal Information Protection Commission fine is so large that it will be paid in six installments rather than a lump sum," and added, "Given that the fine risk is so enormous, it will not be easy for Coupang to maintain its aggressive investment posture as it does now, even if sales recover."