South Korea's Fair Trade Commission imposed a fine of 2.2 billion won on Coupang and issued corrective orders over allegations it abused its power by demanding suppliers cut supply prices and shoulder advertising costs.

The FTC said on Feb. 26 it decided to issue corrective orders and a 2.2 billion won fine after finding Coupang violated the Act on Fair Transactions in Large Franchise and Retail Business Transactions.

The FTC classified Coupang's violations into four broad categories. It judged that, in direct-purchase transactions, Coupang undermined the nature of such deals by shifting to suppliers the risk of reduced margins caused by measures such as lowest-price matching, either by cutting supply prices or making suppliers bear advertising costs.

First, the FTC investigated that from January 2020 to October 2022, Coupang set target levels for the pure product sales profit margin ratio, or PPM, that suppliers were required to guarantee. If results fell short, it either discussed cutting supply prices or demanded cuts. The FTC said that even if PPM was set through consultations with suppliers, the targets were in practice run like binding indicators.

The FTC also judged that over the same period, Coupang violated the law by setting a gross margin, or GM, target and, when it fell short, demanding suppliers bear costs such as advertising fees, Coupang trial group programme fees and premium data fees. It said it also confirmed signs that Coupang pressured suppliers by hinting at or warning of a halt or reduction in product orders during supply-price cut talks or cost-burden demands.

It also found delayed payments for goods. The FTC investigated that from Oct. 21, 2021 to June 30, 2024, Coupang paid 280.9 billion won in product payments past the legal deadline across 508,752 direct-purchase transactions with 25,715 suppliers. It said payments were made at least 1 day and as many as 233 days later than the legal deadline of 60 days from the date of receiving the goods. It also said Coupang did not pay about 850 million won in late interest at an annual rate of 15.5 percent.

The FTC also included as a sanctionable act Coupang's failure to reimburse the cost of unused items among goods received from suppliers during its trial group events.

According to the FTC, Coupang ran 34,514 trial group events with 6,743 suppliers from September 2020 to June 2024. It did not return to suppliers costs of about 537 million won for 24,986 items that were not used up because customers did not actually participate.

The FTC said it could not specify the violation amounts tied to demands for supply-price cuts and advertising-cost burdens. It said it was difficult to distinguish the portion of suppliers' profit declines or advertising fees received by Coupang that resulted from coercion, and that individual contacts were made by phone, text and messaging services, making it hard to comprehensively verify the overall scale. As a result, the FTC applied fixed-amount penalties to the two acts and imposed 500 million won each, the legal ceiling. The total fine therefore came to 2.2 billion won.

Coupang rejected the FTC's findings and signalled legal action.

Coupang said it bears losses directly from changes in selling prices and that it did not force suppliers into advertising or take unfair steps such as improper order stoppages to make up for losses. It said such conduct is strictly prohibited under company policy.

Coupang issued a statement and said, "We plan to faithfully explain the company's position through future court procedures."