The Korea Fair Trade Commission said on the 23rd it would accept the consent decree proposed by Coupang and its subsidiary CLB, which were investigated on suspicion of violating the Fair Transactions in Subcontracting Act. A consent decree is a system in which corporations accused of legal violations voluntarily submit corrective measures to the Korea Fair Trade Commission (FTC) to fix the problem, and if these are deemed reasonable, the Korea Fair Trade Commission (FTC) closes the case without determining whether a law was violated. Because the legality is not ruled on, no penalty surcharge is imposed.
According to the Korea Fair Trade Commission (FTC) investigation, there are broadly two suspected violations by Coupang and CLB. From October 2022 to January 2025, while producing their private brand (PB) products, Coupang and CLB issued documents to 314 subcontractors that did not include legally required items. This is suspected to violate Article 3 of the Fair Transactions in Subcontracting Act, which requires the prime contractor to provide a document containing the contract details when entrusting manufacturing to a subcontractor.
In addition, from November 2019 to September 2022, Coupang and CLB cut supply unit prices while conducting unagreed PB product promotions for 94 subcontractors. This is also suspected to violate Article 4 of the Fair Transactions in Subcontracting Act, which prohibits a prime contractor from setting subcontract payments at a level lower than the generally payable consideration.
Under the consent decree plan, Coupang and CLB will improve their systems so subcontractors can confirm order details and affix names and seals on order forms. Before launching PB products, they will also consult with subcontractors to decide the "minimum requested production quantity" and specify it in a product-specific supplemental agreement. The minimum requested production quantity refers to the minimum volume needed for a subcontractor to recoup the expense of installing production facilities and developing the product and to leave an appropriate profit.
The supplemental agreement will also include the "lead time," the period from the order request to the start of product sales. Furthermore, when conducting PB promotions, they will set in advance the ratio for sharing promotion expense with subcontractors. In that case, subcontractors will bear up to 50% of the promotion expense.
Coupang and CLB also said they would provide 3 billion won to promote subcontractors' rights and interests. This is about three to five times the penalty surcharge (600 million to 1.1 billion won) expected if a Korea Fair Trade Commission (FTC) sanction proceeded. Specifically: ▲ 1.05 billion won to support product development and delivery-related expense ▲ 1 billion won for online advertising promotions ▲ 450 million won for offline publicity support ▲ 100 million won in prize money for selected excellent subcontractors ▲ 400 million won to provide consulting services to subcontractors and to develop overseas market channels.
The Korea Fair Trade Commission (FTC) said it judged that the corrective measures proposed by Coupang and CLB are appropriate to improve the order of subcontracting transactions, considering factors such as improving transaction order and balancing with the expected level of sanctions.