The prosecution has charged Coupang with manipulating algorithms without detention. It is alleged that Coupang artificially manipulated its algorithms to expose direct purchase items and private brand (PB) products at the top of its website and mobile application. This disposition comes 11 months after the Fair Trade Commission reported Coupang to the prosecution for algorithm manipulation.
On the 1st, the Seoul Eastern District Prosecutors' Office Criminal Division 6 (Director General Lee Sang-hyuk) announced that it has charged Coupang and its subsidiary CPLB with violations of the Monopoly Regulation and Fair Trade Act without detention. CPLB is the company responsible for developing Coupang’s PB products.
Previously, the Fair Trade Commission accused Coupang of violating the Fair Trade Act last June and imposed a penalty surcharge of 162.8 billion won. The amount of the penalty surcharge is the largest in the history of domestic retail.
The Fair Trade Commission determined that Coupang manipulated its algorithms to ensure that the direct purchase items it sells directly and its self-produced PB products were displayed above external sellers' products on its website and mobile app. It also claimed that Coupang mobilized its employees to write positive reviews for PB products, misleading consumers. The Fair Trade Act prohibits inducing competitors’ customers to transact with oneself unfairly.
The prosecution, which conducted an 11-month investigation into the case, concluded that Coupang arranged the search rankings for 51,300 direct purchase and PB products arbitrarily from March 2019 to November 2024, keeping them fixed at the top. Although Coupang informed consumers that the search rankings were objectively calculated based on the products' past sales performance, user preferences, product information fidelity, product competitiveness, and search accuracy, this was found to be false.
The prosecution also found that from December 2020 to September 2021, Coupang artificially adjusted the search rankings of certain direct purchase and PB products by weighting the basic scores used to determine the search rankings by up to 1.5 times. A prosecutor noted, “Coupang misled consumers by presenting ‘direct purchase products’ and ‘PB products’ as superior and favorable compared to ‘intermediary products’ of competitors, thereby attracting customers of intermediary product sellers.”
According to the prosecution, these algorithm manipulation acts were carried out through the role division between Coupang and CPLB. The department responsible for Coupang's direct purchase and PB products and CPLB selected the products to be positioned at the top, while the ranking development and operations department fixed the selected products at specific search rankings or increased the basic scores to raise the final search rankings.
However, the prosecution found no charges against Coupang for mobilizing employees to write reviews for PB products. A prosecutor stated, “There is insufficient evidence to determine that positive review writing was forced to influence search rankings.”
On the day of the prosecution's disposition, Coupang stated, “We will thoroughly clarify this during the upcoming trial process.”
Meanwhile, Coupang filed a motion for a temporary injunction to suspend the enforcement of the corrective order and penalty surcharge against the Fair Trade Commission's disposition at the Seoul High Court. The Seoul High Court granted the suspension of the corrective order but stated that the penalty surcharge must be paid. The corrective order reportedly requests that “illegal acts such as future algorithm manipulation and mobilizing employees for review writing are not performed.” The main lawsuit is currently ongoing in the Administrative Division 7 of the Seoul High Court, with Kim & Chang Law Office representing Coupang.