On Dec. 25, Christmas Day, Coupang identified the person responsible for the personal information leak and released investigative findings saying the number of leaked accounts was 3,000, not about 33 million. It also said there was no third-party leak, sharply scaling back the scope and size of the incident's damage. The Ministry of Science and ICT, which is investigating the case, immediately expressed regret over Coupang's unilateral announcement.
This is entirely different from what Coupang had said so far at National Assembly inquiries into pending issues, namely that it was difficult to disclose details because the government was investigating, and that the relevant materials had already been handed over, making it hard to access the case further.
Inside and outside the retail industry, many view Coupang's sudden, self-initiated release of its findings as a calculation that it would be advantageous to disclose quickly, given that the damage scope and size were smaller than known. We examined the rationale behind the announcement.
1) Cannot rely solely on the government announcement
According to the retail industry on the 26th, many analyses say that as time passed, the company image deteriorated and consumers began leaving Coupang, which pushed the company to act.
First, Coupang sees as one reason the failure to contain the personal information leak early and its escalation the fact that former CEO Park Dae-jun and others who attended National Assembly inquiries did not explain the substance of the case properly. Park repeatedly said at the Assembly that he could not explain details because the matter was under investigation. Coupang said this was because police had conveyed the view that disclosing the progress of the investigation externally would prevent getting closer to the substance. However, the act of not answering properly itself was taken as deceit or evasion.
In the process, Coupang's corporate image suffered more with time. Typically, a negative issue surfaces and then subsides as time passes, but in Coupang's case, issues such as worker death from overwork and excessive fees charged to sellers were raised simultaneously.
A crisis management expert said, "I think the recent report that Bom Kim, Coupang Inc. board chair, upon receiving news of a worker's death, said in effect, 'He is paid based on hours worked, not performance, so there is no way he worked hard,' split the mood," adding, "Critical coverage of Chair Kim, who appeals to the Korean public when advantageous and, when unfavorable, puts forward that he is an American, a U.S. corporate, and a global company chief, has continued, increasing unfavorable sentiment."
Coupang had believed Korean consumers were so accustomed to its service convenience that the business would not take a major hit, but it began to detect signs of trouble. According to Rep. Cho Seung-hwan of the People Power Party, during the two weeks after the information leak (Nov. 30 to Dec. 13), approvals for Coupang payments at six card companies fell by about 1.9 million, roughly 4%, from a year earlier. An e-commerce company official said, "Year-end and the period before Christmas typically see an increase in e-commerce payments," adding, "Considering that competitors' payment counts and amounts increased during the same period, this is far from Coupang's expectation that nothing would happen. We need to watch further to see if it continues long term."
Inside Coupang, there were concerns that the self-announcement could fuel government backlash, but the judgment was that consumer anxiety needed to be eased quickly because the damage was small.
2) Shifting the hearing atmosphere focused on Chair Bom Kim and his family
Another analysis was that it aimed to avoid pressure directed at founder and Chair Bom Kim and his family. The National Assembly will hold joint hearings on the Coupang incident on the 30th–31st with six standing committees participating. The Assembly is demanding Kim's appearance as a witness. Kim has never attended a National Assembly hearing so far. Each time, he submitted a written statement explaining his absence. At one point, he said he was injured while playing basketball. Most recently, he explained he was doing business on a global stage and could not attend.
As a result, he was criticized for trying tricks to avoid the hearing every time. The prevailing view is that he is highly likely to be absent from next week's hearing as well. A business community source said, "If he attends a Korean hearing, he will inevitably face intense attacks, and from the perspective of someone who must continue running the business, there is a personal burden about being branded with that image."
In the Assembly, there is an effort to have at least Kim's younger brother and his wife attend the hearing. Kim's brother, Kim Yu-seok, and his wife are non-registered executives at U.S.-based Coupang Inc. They are known to work in Korea on dispatch from the Korean Coupang corporation. Their titles are said to be vice presidents at the Korean entity.
Inside Coupang, there is an expectation that if the smaller-than-first-reported damage is actively communicated at the hearing and used as a starting point to craft a compensation plan, the Assembly's discussion could shift. The focus could move from whether the founder showed a responsible attitude to whether releasing the investigation findings was appropriate, who decided it, whether the findings are accurate, and whether a compensation plan based on them is suitable. In effect, it would throw out a new topic.
As for the background of devising this approach, it is said that U.S. company Coupang Inc. does not understand why the founder and his family must attend the hearing. Since personal information was leaked, the working-level officials and responsible managers who know the matter well should attend, and Kim is merely the chair of Coupang Inc., which is different from Coupang Korea, they say. A Coupang official said, "We understand that even when this is explained as a matter of Korean particularity, they do not understand." However, it is hard to interpret this solely as a Korean particularity. Looking at the global company Facebook (Meta), in its 2018 personal information leak case, it attended Congress, acknowledged mistakes, and apologized.
3) Expecting public sentiment that 'only Coupang is being treated harshly'
The fact that the damage was smaller than initially known is also cited as a reason for rushing the release. If there was no third-party leak at all, it could quell consumers' fears of identity theft. It is also said they factored in the effect of reversing public opinion. Other major domestic corporations such as SKT, KT, Shinhan Card, and Lotte Card also suffered personal information leaks, and some had actual monetary damage, so there could be public sentiment that only Coupang is being treated harshly.
A business community source said, "In fact, the reason there is little that can be done to Coupang is that there were large legal gaps to begin with, and, whenever problems erupted, the National Assembly had companies craft voluntary, moral-level compensation plans through shaming-style hearings rather than building a sophisticated system," adding, "Consumers are not unaware of this. Public sentiment defending Coupang could emerge."
In fact, Coupang has experience settling various issues by rallying consumer support. A prime example was when the Fair Trade Commission imposed a penalty surcharge of about 160 billion won over allegations that Coupang manipulated search rankings to favor its private-label brands (PB). In June last year, Coupang even released a statement titled, "If the Korea Fair Trade Commission (FTC) bans recommendations of Rocket Delivery products, the current Rocket Delivery service will no longer be possible."
4) Judgment that it would be disadvantageous if the issue spills over into a Korea-U.S. relations problem
It also appears to have been influenced by the fact that the issue surrounding Coupang is spilling over from a data leak to a Korea-U.S. relations matter. Coupang released its findings just before the presidential office held a minister-level meeting of relevant ministries. The meeting was chaired by Presidential Chief of Staff for Policy Kim Yong-bum. In addition to minister-level officials from relevant ministries such as the Minister of Science and ICT, the chair of the Personal Information Protection Commission, the chair of the Korea Communications Commission, and the chair of the Fair Trade Commission, it was reported that officials from investigative agencies such as the Korean National Police Agency, as well as the Minister of Foreign Affairs and personnel from the Office of National Security and other diplomatic-line officials, also attended.
Already, some have raised the possibility that the Coupang incident could escalate into a diplomatic and trade dispute between Korea and the United States. On the 23rd, Robert O'Brien, who served as national security adviser in the first Donald Trump administration, posted on social media that "the Korean National Assembly's attacks on Coupang will serve as a springboard for additional discriminatory actions by the Fair Trade Commission and broader regulatory barriers against American corporations."
One background for such voices is Coupang's lobbying activity. According to lobbying reports disclosed by the U.S. Senate, Coupang Inc. spent $2.51 million on lobbying through the third quarter of this year. As of the third-quarter report, its lobbying agenda included ways to utilize Coupang's digital, distribution, and logistics services for U.S. corporations and agricultural producers. This is an issue that could influence Korea-U.S. trade negotiations.
A business community source said, "For U.S. corporation Coupang, which runs a global business, focusing on lobbying the U.S. government is in one sense natural. But there is criticism that it is using the U.S. Congress as a kind of 'bulletproof vest' to solve problems arising in Korea," adding, "Lobbying is effective when you gain support behind the scenes, but now that Coupang is coming to the forefront, the negative effect may be greater." Coupang Inc. generates 90% of its total sales in Korea.
Meanwhile, there is also a view that Coupang's surprise announcement was the best possible defensive step and a remedial action a corporation can take. A legal professional active between Korea and the United States said, "Domestically, negative reactions seem to have come first, but in the United States, it could be seen as a case of a corporation proactively stepping up to resolve a problem."