Coupang’s American investors have labeled the South Korean government’s investigation as retaliatory and are urging the U.S. government to intervene. This has drawn attention to the Fair Trade Commission’s (FTC) review of regulations, including the potential designation of Coupang Inc. Chairman Kim Beom Seok as the company’s controlling shareholder.
While the FTC emphasizes its commitment to enforcing laws and principles, some analysts warn that if this issue escalates into a trade dispute between South Korea and the U.S., it could weaken overall regulatory efforts for Korean platforms.
As of January 23, according to relevant departments, the FTC plans to complete its ongoing investigations related to Coupang, regardless of petitions from American investors Greenoaks and Altimeter.
An official from the Federal Trade Commission said that while the agency could not confirm details of ongoing investigations, it would conduct its administrative activities in accordance with the law and principles.
The FTC is currently examining whether Coupang violated e-commerce laws in connection with a data breach and is also investigating complex membership cancellation procedures.
Additionally, the FTC is reconsidering whether to designate Chairman Kim as the company’s controlling shareholder.
Previously, the FTC designated Coupang as the controlling entity due to Chairman Kim’s foreign national status. This designation is possible when there are no significant differences in the corporate group’s scope and when management participation, investments, and financial transactions with related parties, such as family members, are severed.
However, recent revelations that Kim’s younger brother, Coupang Vice President Kim Yoo Seok, received substantial compensation as a related party have raised questions about effective management participation. If it’s determined that a related party has participated in management, the controlling shareholder designation could shift to Chairman Kim personally.
Jo Byeong Ki, chairman of the Fair Trade Commission, said last December that the commission had previously determined there was no management participation and that the conditions for an exception in the designation had therefore been met, adding that the matter would be investigated again.
If this incident escalates into a trade dispute between South Korea and the U.S., the repercussions could be significant.
On Thursday, Greenoaks and Altimeter requested that the U.S. Trade Representative (USTR) investigate the South Korean government’s actions regarding Coupang and seek appropriate trade remedies, including tariffs and other sanctions.
They also submitted a letter of intent for international investment dispute (ISDS) arbitration to the South Korean government under the Korea-U.S. Free Trade Agreement (FTA).
The key variable now lies with the USTR’s judgment. Section 301 of the U.S. Trade Act allows retaliatory measures, including tariffs, if a foreign government’s actions are deemed unreasonable or discriminatory and restrict U.S. trade.
Following the petition, the USTR must decide within 45 days whether to initiate an investigation. This situation provides grounds for U.S. administration intervention, as per the investors’ petition.
There have been instances where U.S. objections have stalled South Korean legislative and policy initiatives.
Previously, the FTC sought to amend the Monopoly Regulation and Fair Trade Act to strengthen penalties against large platform companies with over 60% market share and annual sales exceeding 4 trillion KRW (approximately 3 billion USD) for unfair practices.
Additionally, the ruling party pursued the enactment of the Online Platform Act to regulate the abuse of market dominance by platforms.
However, the U.S. expressed concerns that its big tech companies, such as Google, Apple, and Meta, could fall under these regulations. This, coupled with ongoing tariff negotiations, has led to a temporary halt in platform regulatory legislation.
Given these precedents, some FTC policies, including the annual May announcement of controlling shareholder designations, could be indirectly affected.
Meanwhile, Yeo Han Koo, head of the Office of International Trade and Legal Affairs at the Ministry of Trade, Industry and Energy, conveyed to U.S. officials during his January 11 to 14 visit that interpreting the Coupang investigation as an expansion of South Korea-U.S. trade conflict is inappropriate.
Han cautioned against the United States viewing the issue as an act of oppression against American companies, emphasizing that it was not appropriate to expand the matter into a diplomatic or trade issue between South Korea and the U.S.