The Korea Fair Trade Commission said on the 26th it will impose a 2.185 billion won penalty surcharge on Coupang on suspicion it pressured suppliers for three years to lower supply prices. The Korea Fair Trade Commission (FTC) investigation found that Coupang demanded suppliers cut unit prices to meet its target profit and notified them it would halt orders if they did not comply.
◇ "Management risk and operating expense also shifted to suppliers"
According to the Korea Fair Trade Commission (FTC) that day, from Jan. 2020 to Oct. 2022, Coupang set a net product sales profit margin (PPM · [(sales − cost of sales)/sales] × 100%) that each supplier had to guarantee to Coupang. Specific figures varied by supplier but were in the high 20% to low 30% range. Coupang checked PPM from time to time and demanded that suppliers who fell short of the target lower their supply prices.
In the process, it warned uncooperative suppliers that product orders would be halted or reduced. It set its own target profit margin and demanded that suppliers make up for losses stemming from lowest-price competition. The Korea Fair Trade Commission (FTC) therefore applied a violation of Article 17, Item 10 of the Act on Fairness in Large Retail Business, which prohibits, without justifiable reason, receiving supplies at low prices.
During the same period, Coupang also set target values by supplier for gross margin (GM · [(sales − cost of sales) + advertising expense, etc.]/sales × 100%). If the GM target was not met, it demanded that suppliers bear advertising expenses. In doing so, Coupang again pressured suppliers by halting or reducing product orders. For this conduct, it applied a violation of Article 15, Paragraph 1 of the same law. The Korea Fair Trade Commission (FTC) said, "(Advertising expenses, etc.) were not based on the supplier's managerial needs but solely for achieving Coupang's profit margin targets."
◇ "2.8 trillion won in product payments paid late… even when goods remained from events, they were not returned"
From Oct. 2021 to Jun. 2024, Coupang paid 280.9 billion won in product payments owed to suppliers after the statutory payment deadline. By law, the payment deadline is 60 days from the date of receipt, but Coupang exceeded this by up to 233 days. The number of suppliers who received late payments in this way was 25,715. When payments are made after the statutory deadline, late interest must also be paid, but Coupang reportedly did not pay 853.28 million won in late interest.
Also, from Sep. 2020 to Jun. 2024, 24,986 leftover items from the Coupang Experience Group were not returned to suppliers. The Coupang Experience Group is a service in which customers try products for free on the condition that they write reviews. In this case, the supplier bears a 1 million won usage fee and the price of products provided to customers. Unsold items from the Coupang Experience Group due to reasons such as contract expiration became Coupang's property. The value of products thus obtained by Coupang was 536.79 million won.
The two acts are suspected of violating Article 8, Paragraph 2, and Article 17, Paragraph 10 of the Act on Fairness in Large Retail Business, respectively. The Korea Fair Trade Commission (FTC) said it "will closely monitor unfair practices in which a large retailer uses its superior transactional position to shift risk and expense to suppliers and infringes on suppliers' legitimate interests to maintain its own profits."