July 9, 2024
2 mins read

Coupang Hit with Record Fine Amid Allegations of Fake Reviews and Algorithm Manipulation

In an unprecedented move, South Korea’s Fair Trade Commission (FTC) has levied a record fine of 140 billion won (approximately $110 million) against e-commerce giant Coupang and its subsidiary. The highest penalty imposed on a distribution company in South Korea stems from allegations that Coupang manipulated search algorithms and posted fake reviews to boost its products.

Coupang’s Controversial Practices

Coupang, South Korea’s leading e-commerce platform, operates two primary business models: direct sales of its branded products and a marketplace for third-party sellers. According to the FTC, Coupang manipulated its search algorithm from February 2019 to July 2022, artificially elevating the rankings of over 64,000 products under its brand. This resulted in a significant increase in exposure and a 70% surge in sales for these products.

Moreover, Coupang allegedly organized over 2,200 employees to write more than 72,000 fake reviews for its products, averaging a rating of 4.8 out of 5. This deceptive practice aimed to build consumer trust and boost sales, further disadvantaging third-party sellers on the platform.

Manipulating search algorithms and fabricating reviews misled consumers and created an unfair competitive environment, violating South Korea’s Monopoly Regulation and Fair Trade Act.

Market Repercussions and Regulatory Scrutiny

Coupang’s actions have drawn significant regulatory attention. Rival platform 11Street filed a complaint earlier this year, accusing Coupang of unfair competition. South Korea’s tax authorities have also launched a special investigation into Coupang’s financial transactions between its domestic and international subsidiaries.

The heightened regulatory scrutiny serves as a reminder of the increasing oversight and potential risks large e-commerce platforms face, which investors should closely monitor.

Competitive Landscape

Coupang has reported strong financial performance despite its regulatory challenges, with a 20% year-on-year increase in revenue, reaching $24.4 billion in 2023. The platform also boasts 21 million active buyers, an increase of 16% from the previous year. However, Coupang’s dominance is challenged by Chinese e-commerce giants like AliExpress and Temu, which have rapidly gained market share in South Korea.

The rise of competitive Chinese platforms, known for their aggressive pricing and robust supply chains, presents a significant threat to Coupang’s market position.

The Rise of AliExpress and Temu

AliExpress and Temu have made significant inroads into the South Korean market. In March, AliExpress achieved 8.87 million monthly active users, surpassing local competitors like 11Street, Gmarket, and WeMakePrice and becoming the second-largest e-commerce platform in South Korea after Coupang. Temu, a newer entrant, has grown rapidly, reaching 8.29 million active users within months of its launch.

The success of AliExpress and Temu underscores the shifting dynamics in South Korea’s e-commerce market, which is driven by competitive pricing and extensive digital marketing strategies.

Future Outlook

Coupang’s challenges are far from over. The FTC has referred to the case for further investigation, which could lead to additional penalties and operational constraints. This ongoing scrutiny could have significant implications for Coupang’s business model and market strategy.

Investors and market participants should closely follow the regulatory developments surrounding Coupang, as they could impact the company’s future performance and competitive position.

What are your thoughts on Coupang’s recent regulatory challenges and the growing influence of Chinese e-commerce platforms in South Korea? How do you see these dynamics evolving? Share your insights and join the discussion below.

This article aims to provide a thorough analysis of Coupang’s current issues and the evolving competitive landscape in South Korea’s e-commerce market. Stay tuned for more updates and in-depth insights on this topic.

Joe Zhang

Independent Consultant. 2X Founder and Contributor. Based in Shenzhen, China.

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Joe Zhang

Independent Consultant. 2X Founder and Contributor. Based in Shenzhen, China.


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