Coupang Faces Potential Business Suspension Over Massive Data Leak, Experts Question Feasibility
The South Korean Fair Trade Commission (FTC) has indicated that a business suspension could be a potential consequence for e-commerce giant Coupang following a significant customer data leak. FTC Chairperson Ju Biung-ghi stated in a recent interview that the commission could demand corrective measures from Coupang, and if these are not adequately implemented, a business suspension might be enforced. However, industry experts and legal analysts suggest that such a drastic measure faces considerable hurdles, citing complex legal prerequisites and the potential for widespread negative repercussions on the broader business ecosystem, including small enterprises and independent delivery personnel.
The FTC’s Authority and the Path to Suspension
Under the existing E-Commerce Act, the FTC possesses the authority to impose operational sanctions on companies like Coupang. The law outlines a specific procedure when user property damage, or the likelihood thereof, arises from information theft. The process mandates that the FTC first issue recommendations for preventive measures. Should these recommendations be disregarded or if violations persist, the FTC is empowered to suspend all or a portion of the business’s operations for a period of up to one year. This suspension can be accompanied by substantial fines, calculated based on the duration of the suspension and the company’s sales revenue.
The Chairperson’s remarks to KBS on the 19th highlighted this authority: “The FTC should demand corrective measures from Coupang through interagency consultations. If Coupang fails to implement these properly, a business suspension could be imposed.”
However, the practical implementation of a business suspension is far from straightforward. Several critical steps must be meticulously followed:
- Proof of Damage: The first and most crucial step involves definitively proving that actual damage has occurred as a direct result of Coupang’s data leak. This can be a complex and time-consuming legal process.
- Corrective Recommendations: Following the establishment of damage, the FTC must formally issue recommendations for specific preventive and corrective actions to be taken by Coupang.
- Compliance Review: The FTC will then need to meticulously review Coupang’s efforts and success in complying with these recommendations. Repeated or insufficient compliance is a prerequisite for further action.
- Impact Assessment: A critical consideration in the decision-making process is the potential impact of a business suspension on third parties. The FTC must weigh the consequences for the numerous small businesses that rely on Coupang’s platform for sales and distribution, as well as the livelihoods of the thousands of delivery workers who depend on the company’s logistics network.
Chairperson Ju also acknowledged these complexities, stating, “If a business suspension could harm consumers, fines may be imposed instead.” This indicates a willingness to consider alternative penalties, such as significant financial sanctions, if a full suspension is deemed too damaging to the wider economy or consumer interests.
Historical Precedents and the Likelihood of Suspension
Historically, the FTC has demonstrated a cautious approach when it comes to suspending major online platforms. Unlike smaller online retailers that have faced operational halts, industry giants such as Naver (a dominant search engine and e-commerce portal) and Baemin (a leading food delivery service) have not experienced business suspensions from the FTC for data-related issues.
The instances where the FTC has imposed business suspensions have typically involved:
- Small Online Malls: These suspensions have generally targeted smaller e-commerce businesses.
- Repeated Violations: The reasons for suspension have often been for persistent and deliberate non-compliance, such as:
- Refusal to process customer refunds.
- Obstructing customers’ requests for order cancellations.
Illustrative examples of past suspensions include:
- Tium Communication (2023): This online clothing retailer was ordered to suspend operations for 135 days. The FTC cited the company’s repeated disregard for refund requests and its false claims that refunds were not possible.
- Korea Exchange (February): This entity faced a 135-day suspension for refusing to process refunds, even after receiving explicit corrective recommendations from the FTC.
The FTC has indicated that it will await the findings of an ongoing joint government-private investigation into the Coupang data leak. The ultimate severity of any sanctions will be determined by the scale of the damage incurred by customers and the effectiveness and sincerity of Coupang’s corrective actions in response to the incident. The current discourse suggests that while a suspension remains a theoretical possibility, the practical and economic considerations may lead the commission to opt for substantial financial penalties or other corrective measures.
