First Refusal of On-Site Inspection Since Enforcement of the Large-scale Retail Business Act
Dramatic Shift in Stance Following U.S. House Criticism of Unannounced Investigations
Potential Ramifications Beyond Imagination if the Court Sides with Coupang
An unprecedented incident has occurred in which Coupang forced the Korea Fair Trade Commission (KFTC) to withdraw from an unannounced on-site inspection, citing procedural flaws. Analysts say that Coupang’s unusually strong response—almost unthinkable for a typical Korean company—is based on new momentum from recent U.S. political criticism of Korean antitrust investigations, aiming to put the KFTC’s ‘dawn raids’ under the spotlight. For the KFTC, which had been pursuing an unprecedentedly large-scale crackdown, this has become an unexpected and formidable obstacle.
Sudden Shift After U.S. House Report… Years of Tension Erupt
View of Coupang headquarters in Songpa-gu, Seoul. Coupang.
Coupang’s refusal to cooperate with the investigation aligns with growing sentiment in the U.S. political community that Korean authorities are treating American businesses unfairly. On July 1, the U.S. House Judiciary Committee released a report that addressed discriminatory practices by Korean agencies, stating, “The KFTC’s surprise inspections weaponize aggressive practices, including unannounced raids and extensive demands for documents,” and, “Due process and fairness are lacking.” Shortly after, Kang Kyung-wha, the Korean Ambassador to the U.S., made an extraordinary temporary return to Korea, remarking that the Coupang issue is “lasting much longer than expected.” Ambassador Kang attended a National Security Council (NSC) meeting on Korea-U.S. trade and security issues, where KFTC Chairperson Joo Byung-ki was also summoned.
Until now, Coupang had cooperated with on-site probes; however, in this climate, the company made a complete reversal. Referring to the Administrative Investigation Framework Act—which stipulates that “when an administrative agency conducts an investigation, it must provide written notice to the subject at least seven days in advance”—Coupang blocked the KFTC’s four attempts to enter its premises from August 19 to 24, filing lawsuits for cancellation and injunction against the investigation decisions in court. Upon receiving notice of the lawsuits, the KFTC withdrew. This clash is layered upon other ongoing disputes: a lawsuit to cancel a 140 billion won fine for manipulating the ranking of private label products, litigation challenging the designation of Chairman Kim Beom-seok as the same person (de facto owner), and a review over “tying” in its Wow Membership program. This latest investigation centers on allegations under the Act on Fair Transactions in Large Business Groups that Coupang unfairly shifted ‘customized coupon’ costs onto suppliers. It is the first time that an on-site inspection has been refused since the law came into effect.
“Abuse of Power Weakening Defendants’ Rights” vs “Signal of Evidence Destruction”
!["KFTC's Surprise Inspections Lack Due Process": Did the U.S. House Report Boost Coupang’s Confidence? Legal Showdown Looms Between Coupang and KFTC [Why&Next]](https://www.asiae.co.kr/news/img_view.htm?img=2026082610001993058_1787706019.jpg)
The root cause of this situation lies in structural loopholes due to the ‘legislative gap’ between the 2007 Administrative Investigation Framework Act and various subsequent statutes. While the framework law explicitly excluded the Monopoly Regulation and Fair Trade Act at the time of enactment, the Act on Fair Transactions in Large Business Groups (enacted in 2012) and the Agency Transactions Act (2016) are not among the exceptions. This gives some credence to Coupang’s argument that the ‘seven days written notice’ rule should technically apply. The KFTC, however, has continued its practice of conducting unannounced inspections by relying on the exemption for “preventing destruction of evidence.” A retail industry representative explained, “Applying the exemption 100% even to companies that have submitted documents and undergone months of investigation is an abuse of power,” adding, “Korean companies cannot easily object for fear of crossing the KFTC.”
In the second quarter of this year, the KFTC carried out 91 on-site inspections—a 2.5-fold increase compared to the same period last year—aggressively stepping up its investigative efforts. Yet, faced with this confrontation, the KFTC said it would wait for the court’s decision. A KFTC representative commented, “For cases that could result in severe administrative penalties, the risk of evidence destruction is, legally, assumed as a matter of course, and the investigating authority determines whether such risk exists. Notifying subjects seven days in advance amounts to giving them a window to destroy evidence, which would completely undermine the investigation.”
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Although many expect that the court will side with the KFTC by recognizing its discretion and concerns about evidence destruction, if Coupang’s argument prevails, the ramifications could be enormous. Strict application of the advance notification requirement would paralyze investigations under the Act on Fair Transactions in Large Business Groups and the Agency Transactions Act. Moreover, if procedural flaws are found, the exclusionary rule on illegally obtained evidence could jeopardize the legal validity of numerous ongoing retail cases. A legal expert remarked, “Should the court recognize a procedural defect, urgent legislative amendments—such as specifically adding new exceptions to the Administrative Investigation Framework Act—would become necessary.”
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