Gov't ups pressure on AliExpress, Temu as their market dominance grows

Fair Trade Commission Chairman Han Ki-jeong speaks about the watchdog's plans to strengthen customer protection when buying products from foreign e-commerce firms, during a meeting with economy-related ministers at Government Complex Seoul, March 13. Yonhap

The government is intensifying its scrutiny on e-commerce giants like AliExpress and Temu, reflecting a growing concern over the burgeoning presence of foreign companies in the domestic online retail market in recent years.

The Fair Trade Commission (FTC) said, Monday, it will launch a specialized inspection team to conduct an in-depth study of the domestic e-commerce market. Starting on Tuesday, the team will embark on a comprehensive four-week research initiative aimed at gaining a thorough understanding of the market landscape.

According to the FTC, the team will scrutinize the business practices of a select group of influential e-commerce players, considering multiple datasets including their monthly active users (MAU) and sales. The study will include home-grown retailers such as Coupang and Naver, as well as the aforementioned Chinese platforms.

The latest regulatory push appears to be specifically aimed at emerging Chinese retailers, notably AliExpress and Temu. These platforms have been rapidly attracting Korean customers with their competitive pricing compared to local rivals, posing a significant threat to domestic businesses.

According to data from market tracker, Wiseapp Retail Goods, AliExpress’s MAU stood at 8.18 million in February, up more than 130 percent from a year ago. Temu's MAU also soared to 5.8 million during the same period, propelling it to become the fourth-largest e-commerce player in Korea. This remarkable achievement occurred just eight months after the platform began operations here.

“The scrutiny comes at a time when both customers and sellers are becoming increasingly dependent on a handful of e-commerce platforms. This trend raises concerns that customers might become vulnerable to potentially unfair transaction practices by dominant players in the market,” an FTC official said.

AliExpress Korea CEO Ray Zhang introduces the platform's plans to ensure customer protection here during a press conference in Seoul, Dec. 6, 2023. Yonhap

According to the FTC, foreign antitrust authorities, including the European Commission and the Australian Competition and Consumer Commission, are also undertaking similar market studies. This proactive approach aims to ensure they remain agile in responding to the evolving dynamics within the e-commerce industry.

The FTC inspection team will conduct in-depth interviews with industry officials and hold discussions with experts to analyze the findings of the study. Subsequently, a comprehensive report will be compiled and released around the end of 2024, detailing the outcomes of the investigation.

“The competition landscape is swiftly evolving, driven by the aggressive expansion of global e-commerce firms and the increasing trend of foreign direct purchases in our market. Consequently, there is a pressing need for comprehensive analysis of the market to better understand these dynamics,” the official said.

Industry officials have called on the government to take firmer steps against overseas platform firms, citing concerns that these entities could exploit regulatory loopholes to reduce costs and bolster their dominance through price competitiveness.

"Local e-commerce firms have strictly abided by regulations set by the government, and have had to allocate relevant costs to engage in business within legal boundaries," an official at a retail firm here said on condition of anonymity. "But some foreign firms operate under less stringent regulations, affording them a competitive advantage by incurring lower fixed operating costs in the region, which is unfair."