Coupang has refused an on-site inspection by South Korea's Fair Trade Commission and filed a lawsuit against the regulator, arguing that the agency failed to give seven days' advance notice. The FTC counters that it may conduct inspections without prior notice when there is a risk that evidence will be destroyed. Coupang has previously been accused of failing to cooperate with FTC probes, including by delaying document submissions, but this is the first time it has refused an on-site inspection outright.
According to industry sources on the 27th, the FTC had planned to conduct an on-site inspection at Coupang's headquarters from the 19th through the 28th of this month. The target was Coupang's price-matching coupon program, which automatically issues a coupon when a product sold on Coupang is priced higher than on other online marketplaces, lowering the price consumers actually pay to the lowest available level. The FTC planned to investigate Coupang for a suspected violation of the Act on Fair Transactions in Large Retail Business, to determine whether the company had improperly passed the cost of those coupons on to its suppliers.
Coupang refused the inspection, saying the FTC had not notified it in advance. The company cited the Framework Act on Administrative Investigations, which in principle requires an administrative agency conducting an on-site inspection to notify the subject in writing at least seven days before the inspection begins.
On the 21st, Coupang filed a lawsuit seeking to nullify the FTC's decision and order to conduct the inspection, along with an application to suspend its execution. After confirming that the suit had been filed, the FTC withdrew from the site on the 24th. An FTC official said Coupang had delayed the inspection on various grounds from the first visit on the 19th before ultimately refusing it on the basis of the Framework Act on Administrative Investigations.
Coupang has drawn criticism in the past for an uncooperative stance toward FTC investigations. When the commission deployed a large team of investigators for an on-site inspection in January of this year, the probe was also disrupted by delayed document submissions, according to sources. At the time, the FTC's Bureau of Business Group Surveillance requested basic materials such as organizational charts to determine whether Bom Kim, chairman of Coupang Inc., should be designated as the group's controlling shareholder, but Coupang put off submitting them, saying it had no staff in place to handle the request. The inspection did not proceed smoothly and was ultimately extended by about a week beyond the original schedule. Investigators at the time reportedly said it was rare to encounter such a lack of cooperation in an inspection of a large business group.
Coupang has also repeatedly submitted materials in small batches or delayed submissions on the grounds that the documents were difficult to obtain, sources said. Officials in and around the FTC describe the approach as one that appears cooperative on the surface while in practice slowing the investigation down.
Whereas the company previously slowed the pace of inspections by delaying document submissions, this time it refused the FTC investigators' on-site inspection altogether and took the matter to court. It is the first time since the FTC's establishment that a company has fully rejected an on-site inspection by challenging the application of the law itself.
At issue is whether the advance-notice requirement applies to cases brought under the Act on Fair Transactions in Large Retail Business. The Framework Act on Administrative Investigations exempts eight statutes under the FTC's jurisdiction — including the Monopoly Regulation and Fair Trade Act, the Subcontracting Act and the Franchise Business Act — from the advance-notice provision. The problem is that the large retail business act is not on that list of exceptions. The framework act was enacted in 2007, while the large retail business act was created in 2012. The Agency Transactions Act, enacted in 2015, is likewise absent from the list. Coupang has seized on this point, arguing that because the large retail business act is not explicitly listed as an exception, notice must be given seven days before an inspection as a matter of principle.
The FTC takes the opposite position, saying that even in a case under the large retail business act, it may conduct an on-site inspection without advance notice when there is a risk that evidence will be destroyed. The Framework Act on Administrative Investigations also allows an agency to forgo advance notice if it determines that giving notice would make it difficult to achieve the purpose of the investigation because of evidence destruction or similar concerns. An FTC official said the agency had concluded that Coupang's case fell under that exception because notifying the company in advance would have created a risk of evidence being destroyed, adding that the commission expects to prevail in court.
Coupang, for its part, says it cannot accept the FTC's judgment that there was a risk of evidence destruction. The company has cited its cooperation with various requests for materials earlier this year, when a joint government investigation team was stationed at its headquarters for an extended period over a personal data breach, according to sources. Some also say advance notice was warranted because repeated investigation demands from the FTC and multiple other ministries have added to fatigue among staff.
Coupang said the legal obligation to give notice seven days before an on-site inspection is a due process safeguard that protects the rights and interests of the party under investigation, and that it plans to seek a court ruling on the FTC's failure to observe that procedure.
The FTC plans to impose a fine on Coupang for refusing the inspection and to consider a criminal referral if necessary. FTC Chairman Joo Byung-ki called the refusal unprecedented and signaled a firm response. Under the Act on Fair Transactions in Large Retail Business, refusing or obstructing an FTC on-site inspection without justifiable cause can draw a fine of up to 200 million won. Separately from the court ruling, the FTC plans to examine whether the refusal itself constitutes a violation of the law and take further action.
