economy
Entered 2024.05.09 18:27 Modified 2024.05.10 01:43 Basis A1
A decision to be made at the full meeting of the Fair Trade Commission next month
Coupang flatly denies that there was any manipulation
It has been revealed that the Fair Trade Commission is considering imposing a fine of up to 500 billion won on Coupang, which is accused of exposing its own brand (PB) products at the top of searches by manipulating an algorithm. Coupang completely denies the allegations, so a fierce battle in the plenary session (the court’s first trial function) is expected to be held from the end of this month according to a comment by the Korea Economic Daily on the 9th, the Commission has Fair Trade ruled that Coupang’s preferential treatment of PB products amounted to ‘hierarchy’ under the Fair Trade Act A review report (corresponding to the prosecution’s indictment) was sent containing an opinion on sanctions, considering it an act of ‘removing customers by . ‘ The Fair Trade Commission has been conducting related investigations since 2021 based on its own recognition and reports from civic groups. In the review report, the Fair Trade Commission determined that Coupang had designed an algorithm to ensure that its PB products were unconditionally included in product search sites sorted by ‘Coupang Site’. The company was also believed to be deceiving consumers by inducing executives and employees to write product reviews.
In particular, given that Coupang is subject to algorithmic manipulation, the Fair Trade Commission decided that ‘related sales’ subject to fines should be calculated based on sales at Coupang’s headquarters, not at the subsidiary (CPLB) that supplies products PB. Sales that meet this standard are estimated at 10 to 12.5 trillion won. Attracting customers through hierarchy can lead to a fine of up to 4% of the related sales, so the Fair Trade Commission is considering imposing a fine of up to 400 to 500 billion won.
The Fair Trade Commission intends to hold a full meeting on the 29th and 5th of next month to confirm sanctions. The amount of fines can be reduced during the plenary session. Coupang said, “It is not true that we gave our company preferential treatment based on employee product reviews, and there was no algorithm manipulation.” A Coupang official said, “We will reveal the facts and proceed to provide explanations through a plenary meeting.”
Fair Trade Commission “Manipulation of search algorithm” vs. Coupang “Exposure to products desired by customers”
Fair Trading Commission suspects ‘consumer fraud’… Coupang flatly denies Fair Trading Commission claims
The core of the suspicion of preferential treatment for Coupang’s own brand (PB) is whether Coupang revealed PB products at the top of searches through algorithm manipulation. The Fair Trading Commission believes that consumers have been deceived by highlighting PB products at the top of searches, regardless of the pre-published ranking criteria. Coupang protests that it is an unreasonable interpretation to say that it is an algorithmic manipulation to prioritize showing users the products they want the most.
○ Fair Trade Commission “PB products are treated to advantage”
The Fair Trade Commission began an investigation in July 2021 after becoming aware of allegations that Coupang had manipulated the search algorithm to reveal PB products before those of other suppliers. Later, in March 2022, civic groups such as People’s Unity for Participatory Democracy reported to the Fair Trade Commission that Coupang, whose algorithms have become difficult to manipulate after the Fair Trade Commission’s investigation, was increasing the exposure of PB products by motivating officials executive and employees. to write multiple product reviews. As a result of the investigation, it appears that the Fair Trading Commission has decided that most of the allegations are true. In particular, the ‘Coupang ranking’ sorting method is raised as an issue. Coupang informs the app that it determines Coupang’s position by comprehensively judging sales performance, customer preference, delivery period, etc., but in fact, regardless of this, it has designed an algorithm to ensure that its PB products are unconditional at the top of the ranking list. The Fair Trade Commission is of the opinion that Coupang has, through this, deceived consumers by making it appear that Coupang’s ranking is derived from objective criteria such as ‘lowest price’ or ‘sales volume’.
The Fair Trading Commission’s view is that suspected handling of reviews by operators and employees also amounts to consumer fraud. Although the statement that it was written by an employee experience group was inserted at the end of the product review, it was considered that general users would see that the review was written by the same public.
It is known that the Fair Trading Commission has been calculating ‘related sales’, which is the basis for imposing fines, since 2019. This is the year Coupang introduced an algorithm that adjusts prices in real time to maintain the lowest price . Coupang’s sales, which were KRW 7.153 trillion in 2019, grew rapidly to KRW 31.8298 trillion in 2023 through COVID-19. Of these, related sales are estimated to be between 10 and 12.5 trillion earned on a five-year cumulative basis. This is why the Fair Trade Commission considers a maximum fine of 400 to 500 billion won. It is known that the Fair Trade Commission has a strong intention to punish Coupang.
○ Coupang “Why is the exposure of good products a treatment?”
Coupang flatly denied the Fair Trade Commission’s allegations. First, regarding the suspicion of algorithm manipulation, Coupang said, “Showing customers the products they want in the way they want is what the distribution industry is all about,” and added, “The claim that revealing products that are advantageous in terms of delivery speed, authenticity, price, etc. manipulating an algorithm is something that every retailer does “It’s like identifying that the way the product is displayed is a problem,” he said.
Regarding claims of review manipulation by executives and employees, Coupang refuted, saying, “All reviews written by experience groups, including executives and employees, must clearly state that they were written by the experience group ,” and “Nor is it true that PB products were highlighted at the top through employee product reviews.”
Some in the distribution industry point to the fact that the Fair Trade Commission’s sanctions are unreasonable. An official in the distribution industry said, “If the claims of the Fair Trade Commission are followed, mechanical neutrality must be maintained, such as reducing PB products in the search sites even if they sell well,” and added, “I have not seen cases where there are others. countries require distributors to be search neutral.”
For this reason, it is anticipated that the fines given at the Plenary Meeting held on the 29th and 5th of next month could be lower than expected. Last year, there was speculation that the Fair Trade Commission would impose a fine of 600 billion won on CJ Olive Young for breaching the Large Scale Distribution Business Act, but as Olive Young’s dominant market position was not recognised, it imposed a fine of 1.9 billion was won, which was considerably less than expected.
Correspondent Seulgi Lee/Seonah Lee surugi@hankyung.com
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