Fair Trade Commission in Sejong City, South Korea. [Photo by Yu Dae-gil]
The Korea Fair Trade Commission has finalized an agreement regarding Coupang and its private brand subsidiary, CPLB, related to violations of subcontracting laws, establishing a cooperation plan worth 3 billion won (approximately $2.3 million).
On June 23, the Fair Trade Commission confirmed the agreement concerning Coupang and CPLB's violations of subcontracting laws. This marks the first finalized case since the introduction of the consent decree system for subcontracting laws in July 2022.
The commission began investigating Coupang in October 2022 for failing to provide legally required documentation to 314 subcontractors when outsourcing the production of private brand products. The investigation also examined Coupang's promotional activities for private brand products that were not included in agreements with 94 subcontractors, which involved lowering supply prices.
Coupang proposed corrective measures to improve subcontracting practices and provide substantial compensation for affected parties, prompting the commission to initiate the consent decree process in August of last year. The final agreement was recently confirmed.
The cooperation plan includes 3 billion won aimed at enhancing the rights of subcontractors. This plan consists of 1.05 billion won for costs incurred during product development, production, and delivery; 1 billion won for support of online advertising promotions; 450 million won for offline promotional costs, including participation in trade fairs; 400 million won for consulting services and market expansion; and 100 million won for prizes and promotional events.
Additionally, the agreement outlines corrective measures to improve transaction order, such as ensuring signatures on contracts and orders, establishing minimum production request quantities and lead times for new private brand orders, and pre-consultation on promotional activities and cost-sharing ratios.
The minimum production request quantity is intended to help subcontractors recover initial investment costs for production facility upgrades and product development while ensuring reasonable profits. Lead time refers to the duration from order request to product production, delivery, and sales commencement.
The Fair Trade Commission reviewed the agreement considering improvements to transaction order, prevention of recurrence, and compensation for subcontractor damages. They deemed the cooperation plan appropriate for protecting subcontractor rights and improving subcontracting practices.
A commission official stated, "Specifying cost-sharing ratios and minimum production request quantities in contracts is a corrective measure that is difficult to achieve through sanctions alone. This is a first-of-its-kind case in private brand subcontracting that will alleviate the burden on subcontractors and contribute to improving subcontracting practices."
On June 23, the Fair Trade Commission confirmed the agreement concerning Coupang and CPLB's violations of subcontracting laws. This marks the first finalized case since the introduction of the consent decree system for subcontracting laws in July 2022.
The commission began investigating Coupang in October 2022 for failing to provide legally required documentation to 314 subcontractors when outsourcing the production of private brand products. The investigation also examined Coupang's promotional activities for private brand products that were not included in agreements with 94 subcontractors, which involved lowering supply prices.
Coupang proposed corrective measures to improve subcontracting practices and provide substantial compensation for affected parties, prompting the commission to initiate the consent decree process in August of last year. The final agreement was recently confirmed.
The cooperation plan includes 3 billion won aimed at enhancing the rights of subcontractors. This plan consists of 1.05 billion won for costs incurred during product development, production, and delivery; 1 billion won for support of online advertising promotions; 450 million won for offline promotional costs, including participation in trade fairs; 400 million won for consulting services and market expansion; and 100 million won for prizes and promotional events.
Additionally, the agreement outlines corrective measures to improve transaction order, such as ensuring signatures on contracts and orders, establishing minimum production request quantities and lead times for new private brand orders, and pre-consultation on promotional activities and cost-sharing ratios.
The minimum production request quantity is intended to help subcontractors recover initial investment costs for production facility upgrades and product development while ensuring reasonable profits. Lead time refers to the duration from order request to product production, delivery, and sales commencement.
The Fair Trade Commission reviewed the agreement considering improvements to transaction order, prevention of recurrence, and compensation for subcontractor damages. They deemed the cooperation plan appropriate for protecting subcontractor rights and improving subcontracting practices.
A commission official stated, "Specifying cost-sharing ratios and minimum production request quantities in contracts is a corrective measure that is difficult to achieve through sanctions alone. This is a first-of-its-kind case in private brand subcontracting that will alleviate the burden on subcontractors and contribute to improving subcontracting practices."
* This article has been translated by AI.
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