Coupang threatens to halt rocket delivery, curb investments after record antitrust fine

By Candice Kim Posted : June 14, 2024, 15:25 Updated : June 14, 2024, 15:25
This undated photo show the headquarters of Coupang in Seoul.  Aju Press
SEOUL, June 14 (AJU PRESS) - South Korea's e-commerce giant Coupang has signaled that it may halt its fast delivery service and investment plans after the government imposed a record fine on the company for providing unfair business advantages to its private-label products.

The Fair Trade Commission (FTC) on Thursday slapped Coupang with a 140 billion won ($108 million) fine for manipulating search algorithms and posting false product reviews. Alongside imposing the heaviest penalties ever on Korean companies, the regulator plans to file a complaint with the prosecution against Coupang and its private-label producers.

Coupang pushed back immediately, warning that if barred from freely recommending and selling items eligible for its Rocket Delivery service, the company may be forced to discontinue the next-day shipping option that has been key to its meteoric growth. Coupang claimed this could greatly inconvenience consumers.

"If the FTC prohibits product recommendation practices, all of our direct product purchasing services, including Rocket Delivery, will become difficult to maintain," Coupang said.

It added that the previously promised 3 trillion won logistics investment for nationwide free shipping and the 22 trillion won allocation for Rocket Delivery inventory may also have to be suspended.

In an apparent move to reevaluate future logistics outlays, Coupang abruptly canceled the planned groundbreaking ceremony for an advanced logistics hub in the southern port city of Busan, slated for June 20.

Coupang blasted the 140 billion won penalty—equivalent to 23 percent of its 2022 operating profit—as excessive, claiming it is "unprecedented globally" for merely product display practices.
The company said it would file an administrative lawsuit.

While the FTC move stoked concerns about broader crackdown on private labels across retail channels, other e-commerce players have indicated little impact is expected.

Many view it as specifically targeting Coupang's algorithm manipulation rather than an industry-wide crackdown on promotional activities.

"If search algorithms were manipulated, then sanctions are understandable,” a domestic e-commerce firm said.

The FTC countered that the punishment does not prohibit or regulate Rocket Delivery or general product recommendations.

“Claims that it could make Rocket Delivery impossible or diminish the service are misleading the public,” the FTC said.

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