Coupang probed again, this time for membership fees

Industry

Published: 17 Jun. 2024, 18:42 Updated: 17 Jun. 2024, 19:53

Coupang probed again, this time for membership fees

A Coupang delivery truck is parked in Seoul in February. The New York-listed e-commerce giant, recently fined 140 billion won for allegedly manipulating its search results, is reportedly under investigation by Korea's Fair Trade Commission for using dark patterns to raise the prices of, and keep users subscribed to, its paid membership service. [YONHAP]

Korea's Fair Trade Commission (FTC) has launched a fresh investigation into Coupang — this time, for using dark patterns to raise the prices of, and keep users subscribed to, the platform’s paid membership — on top of the 140 billion won ($101 million) fine it levied on the online retailer last week for alleged search manipulation.

Local media outlets reported that the antitrust regulator conducted on-site inspections of Coupang and rival e-commerce platforms Market Kurly and Naver early last month.

Coupang has been accused of not honoring cancellation requests from users who applied to terminate their monthly WOW membership subscriptions midway. Its practice of including a clause regarding its membership fee in the checkout payment window, potentially causing members to inadvertently agree to price hikes, is also under scrutiny.

The company raised the price of its WOW membership to 7,890 won, an increase of 58 percent, on April 12. The new price was applied to new subscribers the day after the announcement and will apply to existing subscribers starting August.

The FTC is investigating whether the company’s operations are deceiving customers in a way that violates the Act on the Consumer Protection in Electronic Commerce.

The FTC is reportedly also looking into allegations that Coupang falsely advertised its WOW membership benefits by promising more than what it actually delivered.

A Coupang spokesperson said Monday that the company had given notice of its price hike to WOW members through pop-up ads on its website, notices and emails in line with Korean law and that canceling subscriptions was “easy and convenient compared to other companies that renew membership without notice.”

Meanwhile, Coupang has cried foul over the antitrust agency's imposed fine. It claimed that it had been penalized for an industrywide practice in a disclosure filed to the U.S. Securities and Exchange Commission on Sunday.

“The KFTC announced in its decision, in the previously disclosed investigation, that Coupang’s search ordering — a practice in line with all e-retailers in Korea and globally — is deceptive and violates Korean law,” the New York-listed firm claimed in its outline of events.

“The company does not believe that its practices are deceptive or violate any Korean laws, and will vigorously appeal the KFTC’s determination in court,” Coupang added.

The FTC announced last Wednesday that it would fine Coupang 140 billion won and file a complaint against the company and its subsidiary, Coupang Private Label Brands, to prosecution for unfair business practices.

The commission said Coupang had manipulated its search results to enhance the visibility of its private brand (PB) products and products sold through its direct purchasing service over other products listed on the online marketplace by manipulating its algorithms and ordering its employees to favorably rate and review select products. Coupang misled customers into thinking that the products were based on an objective ranking and potentially created a conflict of interest as both a platform operator and a seller, the FTC said.

The market watchdog listed the European Union and U.S. regulators’ imposing corrective measures on Amazon for prioritizing its PB products in its Featured Offer section, then known as Buy Box, as an example of e-commerce platforms being moderated for fair competition globally.

The e-commerce giant has continuously rebutted the FTC’s decision with claims that the practice of strategically placing PB products for better exposure is common among both online and offline retailers and should not be subject to corrective measures.

In a statement on Monday, Coupang gave examples of other major retailers, such as large supermarket and convenience store chains as well as competing e-commerce platforms, who have displayed their own PB products strategically in “golden zones” for better exposure.

Coupang also said that its customers have made rational and meticulous decisions despite the PB products' favorable placement on its platform, citing the fact that revenue from PB products only amounts to “5 percent of total revenue” to support its point.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]