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FTC says Coupang tricked users into staying subscribed

Published: 02 Dec. 2024, 19:31 Updated: 19 Jan. 2025, 13:29

KIM JU-YEON
[email protected]

Coupang's headquarters in Songpa District, southern Seoul [NEWS1]

Korea's antitrust watchdog sent Coupang an examiner's report regarding the e-commerce platform's alleged use of deceptive user interface design intended to force users to remain subscribed to its monthly membership service and agree to its price hikes, a first step toward legal and disciplinary measures.

The Fair Trade Commission (FTC) alleges in its report that the New York-listed marketplace violated the Act on the Consumer Protection in Electronic Commerce, the agency's spokesperson said Monday. It accuses Coupang of knowingly using manipulative and coercive interfaces, known as dark patterns, to hamper users from canceling their monthly paid WOW subscriptions.

Coupang is now required to submit any rebuttals and hold discussions with the FTC, after which disciplinary measures such as a corrective order, penalty fees or a lawsuit can be issued. Coupang did not disclose its deadline for those submissions.

WOW membership comprises benefits including free delivery and returns, free delivery for food service Coupang Eats and access to streaming platform Coupang Play.

Users can receive a full month’s refund for the subscription through a customer service center if they haven't used membership benefits within that time period, but they cannot receive refunds for leftover days if they cancel midway through a month.

Users who try to cancel their WOW subscriptions on Coupang's app are currently met with the text “all benefits will disappear if you cancel now” (translated) along with the number of days left until the next payment date. The text under the dates reads: “make your decision after trying out the benefits during the remaining time.” The instructions have led to confusion over whether benefits cease immediately upon cancellation - which, if true, would incentivize a user to cancel as close to their renewal period as possible - and if subscribers would be refunded for any leftover days in their monthly subscription period. [SCREEN CAPTURE]

The policy mirrors those of streaming service Netflix — which doesn't allow users to cancel midway after seven days — as well as domestic online marketplaces Naver and Market Kurly. The FTC has also recently audited Naver and Market Kurly regarding their policies on mid-subscription cancellations, and Netflix in August.

Under FTC regulations, Coupang is required to refund customers for the period that they did not use their membership if they cancel midway. Streaming services YouTube and Disney+ allows such refunds; Wavve and Tving also do, with a cancellation fee. Google changed its policy to allow refunds for the remaining period for its monthly YouTube Premium subscription after receiving an FTC order and fine in 2020.

The FTC said it would also take action against Coupang’s practice of including a clause regarding its membership fee in the checkout payment window, potentially causing members to agree to the price hike without knowing.

The company raised the price of its WOW membership by 58 percent to 7,890 won ($5.62) earlier in the year.

The FTC began investigating Coupang regarding two potential consumer protection act violations in June. Coupang had then said that the company had given notice of its price hike to WOW members that was easily accessible and in line with Korean law. The company said canceling the subscriptions was “easy and convenient compared to other companies that renew membership without notice.”

The e-commerce giant is also under investigation by the FTC for allegedly unfairly bundling its food delivery and streaming platform services, as well as making subcontractors shoulder the costs of the discount events that its subsidiary, Coupang Private Label Brands, held for its underperforming private brand products. The FTC is also probing Coupang Eats following allegations that the food delivery service forced its listed stores to match their menu prices and discounts to those of other delivery apps.

BY KIM JU-YEON [[email protected]]