Sejong = Yonhap News) Reporter Kim Soo-hyun = Coupang's win-win plan worth 3 billion won, prepared by Coupang to avoid sanctions for allegedly lowering the unit price of its own brand (PB) products, was accepted by the Fair Trade Commission.
As a result, Coupang will avoid sanctions and support suppliers' related costs, such as product development and advertising.
The Fair Trade Commission announced on the 23rd that it finally confirmed the consent resolution related to the alleged violation of the 'Act on Fair Subcontracting Transactions' (Subcontracting Act) by Coupang Co., Ltd. and CPLB, which inherited Coupang's PB product manufacturing consignment and sales business, at a small meeting (chairman Hwang Won-cheol).
Coupang has been under investigation by the Fair Trade Commission since October 2022 for providing documents to 314 suppliers that did not contain legal information or were not signed and stamped (violation of the obligation to issue documents) while entrusting the manufacturing of PB products.
There was also a charge of lowering the unit price of supply (unfair subcontracting payment determination) while holding a promotional event for PB products that were not in the contract for 94 subcontractors.
โ Support of KRW 1.05 billion from development to delivery of PB products for suppliers
Coupang applied for the start of a consent resolution process to the Fair Trade Commission in March of last year to avoid sanctions and prepare a corrective plan to relieve damage to suppliers, and the Fair Trade Commission decided to start the consent resolution process in August of the same year.
Afterwards, Coupang collected opinions from relevant organizations and stakeholders twice and drafted a final consent resolution.
The final consent resolution included a win-win plan to promote the rights and interests of suppliers worth a total of 3 billion won.
Coupang decided to support 1.05 billion won in costs incurred during product development, production, and delivery to suppliers involved in unfair subcontract payments.
Specifically, it was decided to pay 10 million won each to 94 subcontractors, and give the balance to beneficiaries involved in violation of the obligation to issue written documents.
Coupang also plans to support 1 billion won in advertising costs incurred to promote the supplier's PB products on Coupang's internet site and mobile application (app).
In addition, Coupang decided to invest 450 million won to promote offline promotion of the supplier's PB products, such as participating in on-site fairs.
Based on the transaction history of the suppliers, 'excellent suppliers' will be selected and 100 million won will be provided in the form of prize money and promotional events.
We also plan to provide consulting services related to the development of PB products for suppliers and support KRW 400 million for the cost of developing overseas markets.
In addition, Coupang decided to form a regular council with suppliers to gather opinions, improve quality, and secure safety, and prepare win-win cooperation measures.
Aside from financial support, Coupang is also pursuing corrective measures to improve transaction order.
Coupang will improve the system to allow signatures and seals to be placed on purchase orders in the future.
In addition, it was decided to sign ancillary agreements for each product that stipulate the minimum production request quantity and promotional cost sharing ratio, etc., which were decided in consultation with suppliers before the launch of PB products.
The 'lead time', which is the period from the order request to the product production period, receipt, and sales start date, is also planned to be specified in the attached agreement for each product to reduce the burden on suppliers of having to stock up inventory in advance.
โ Last week, the 60 billion won win-win plan was dismissed due to โdemanding preferential treatmentโ
This is the first time since the consent resolution system was introduced in the Subcontracting Act in July 2022 that a consent resolution has been confirmed in relation to unfair subcontract payment decisions.
In the case of Coupang, on the 18th, in order to correct the charge of demanding preferential treatment from stores, it prepared a win-win plan worth 60 billion won over 4 years and applied to initiate a consent resolution process, but it was rejected, but received a different judgment this time.
The difference in results appears to be due to โฒ improvement of transaction order and prevention of recurrence โฒ relief for damage to suppliers โฒ balance with the expected level of sanctions.
The Fair Trade Commission explained that it took into account the fact that it was difficult to conclude that Coupang made an unfair subcontract payment decision simply by proposing a promotional event to the supplier.
There were cases where the subcontractors themselves proposed promotional events to deplete inventory and increase sales, and among the total 504 subcontractors, only 94 (18.6%) of the subcontractors had their unit prices reduced, which is a small proportion.
On the other hand, at the time of dismissal last week, the Fair Trade Commission emphasized the fact that there were many stores and consumers affected by Coupang's violations.
Coupang's expected fine for this violation is in the range of 600 million to 1.1 billion won, but it was also taken into consideration that Coupang's coexistence plan is about 3 to 5 times larger than this.
In particular, the unit price reduction of the subcontractors due to unfair subcontract payments was about 700 million won, but the fact that the amount of support Coupang provided to them was 1.05 billion won, exceeding this, also influenced the judgment.
On the other hand, last week, it was revealed that Coupang could be fined 25 to 42 billion won just for demanding the most favorable treatment for stores. Including charges of tying sales without applying for the consent resolution process, the maximum fine reaches 200 billion won.
An official from the Fair Trade Commission said, โWe plan to check quarterly with the Korea Fair Trade Mediation Board to see if Coupang faithfully implements this consent resolution.โ
