Watchdog's probe into Coupang stalls after inspection refusal
Coupang's headquarters in Seoul's Gwangjin District, Aug. 5 / Yonhap
The fair trade watchdog's probe into the Korean arm of U.S.-listed Coupang Inc. appears to have hit a setback after the e-commerce giant refused investigators' recent attempts to conduct on-site inspections, citing procedural issues, industry sources said Thursday.
According to sources, the Fair Trade Commission (FTC) had planned to conduct on-site inspections of Coupang's Korean unit from last week through this week over allegations that the company violated the Act on Fair Transactions in Large Retail Business.
The allegations center on suspicions that Coupang shifted the costs of discounts onto its suppliers.
Sources said Coupang declined to cooperate with the investigation, claiming that the company had not been notified of the inspections as stipulated under the Framework Act on Administrative Investigations.
"The requirement to provide seven days' advance notice of an on-site inspection is a legal procedure designed to protect the rights and interests of those subject to an investigation," Coupang said in a statement earlier this week.
"Coupang plans to seek a court ruling over the FTC's failure to comply with such procedures," it added.
Sources said the FTC attempted to conduct the inspections four times, while Coupang filed a lawsuit seeking to overturn the watchdog's decision to conduct the on-site inspections. The FTC withdrew from the site on Monday after learning of the lawsuit.
While the framework act stipulates that the seven-day advance notice requirement does not apply to investigations into violations of eight laws under the FTC's jurisdiction, Coupang argued that the Act on Fair Transactions in Large Retail Business does not fall under the exemption.
The dispute stems partly from the timing of the legislation, as the framework act was enacted in 2007, while the Act on Fair Transactions in Large Retail Business was enacted in 2011.
Industry watchers said the FTC maintains that the case falls under an exception provided for in the framework act.
Pundits, meanwhile, suggest Coupang's aggressive response came amid strong backing from Washington, where some officials have characterized Korean investigations into the company as discriminatory.
In early July, a U.S. House committee released a report accusing Korea of "discriminatory attacks" on e-commerce giant Coupang and other American companies, claiming the Asian country's treatment of them violates last year's bilateral trade deal.
The House Judiciary Committee issued the 35-page interim staff report, titled "Closed for Competition: Korea's Discriminatory Attacks on American-owned Businesses," as Coupang has faced public criticism and investigations over a massive data leak in Korea.
During a separate case in which Coupang pressured suppliers to lower prices and received a 2.19 billion-won ($1.58 million) fine in February, Coupang cooperated with the FTC's on-site inspection without objection.
Meanwhile, Ju Biung-ghi, chairperson of the FTC, said during a parliamentary session on the previous day that Coupang's refusal to cooperate with the investigation was "unprecedented," vowing to take stern measures.
Experts, however, say the FTC could nevertheless face delays in its investigation, as lawsuits can take three to four years to resolve if a case is taken all the way to the Supreme Court.
Others say that if the court upholds Coupang's argument, the FTC may be required to provide seven days' advance notice before conducting on-site inspections, possibly providing some time for Coupang to destroy sensitive information.
Sources said the ruling party is also reviewing steps to revise the framework act to include the large retail business act, while the FTC said it is not considering such steps at the current stage.
The court plans to hold a hearing next Wednesday to hear arguments from both sides before deciding whether to formally suspend the inspection.