Coupang Faces Scrutiny Over Data Breach: Business Suspension Looms Amidst Legal Complexities
The specter of a business suspension now hangs over e-commerce giant Coupang following a significant customer data leak. The Chairperson of the Fair Trade Commission (FTC) has indicated that such a drastic measure is a possibility, though industry experts suggest it may be a complex path due to intricate legal prerequisites and the potential for widespread disruption to small businesses and delivery personnel who depend on the platform.
During an interview on the 19th, FTC Chairperson Ju Biung-ghi outlined the commission’s stance, stating, “The FTC should demand corrective measures from Coupang through interagency consultations. If Coupang fails to implement these properly, a business suspension could be imposed.” This statement highlights the FTC’s authority to potentially halt Coupang’s operations under existing legislation.
The E-Commerce Act provides the framework for such actions. In cases where user property damage occurs or is anticipated as a consequence of information theft, the FTC is mandated to first issue recommendations for preventive measures. Should these recommendations be disregarded or if violations persist, the commission possesses the power to suspend all or a portion of the business’s operations for a period of up to one year. This suspension can also be accompanied by fines, the calculation of which is intrinsically linked to the duration of the suspension and the company’s sales revenue.
However, the path to a business suspension is far from a simple decree. Several critical hurdles must be cleared. Firstly, concrete proof of damage stemming directly from Coupang’s data leak is a prerequisite. Following this, the FTC must formally issue its corrective recommendations, and then critically assess Coupang’s adherence to these directives. Moreover, any decision must carefully weigh the far-reaching consequences for the ecosystem that relies on Coupang. This includes the numerous small businesses that utilize the platform for sales and the vast network of delivery workers whose livelihoods are intertwined with Coupang’s operations. Chairperson Ju acknowledged these complexities, noting in the same interview, “If a business suspension could harm consumers, fines may be imposed instead,” underscoring the potential for financial penalties as an alternative sanction.
Historical Precedents and the Path Forward
Historically, the FTC has demonstrated a reluctance to impose business suspensions on major online platforms. Prominent examples include industry leaders like Naver and Baemin, which have not faced such severe penalties. The instances where suspensions have been enforced have largely targeted smaller online marketplaces that have repeatedly flouted regulations, such as refusing to process refunds or actively hindering customers’ attempts to cancel orders.
Illustrative of this pattern, in 2023, Tium Communication, an online clothing retailer, was subjected to a 135-day operational suspension. This penalty was a direct consequence of its consistent refusal to honor refund requests and its dissemination of false information regarding the impossibility of refunds. More recently, in February, the Korea Exchange faced a similar 135-day suspension for its non-compliance with corrective recommendations concerning refund refusals.
The FTC has indicated that it will adopt a measured approach, awaiting the outcomes of an ongoing joint government-private investigation into the Coupang data leak. The severity of any sanctions will be determined based on a comprehensive assessment of the extent of the damage incurred and Coupang’s demonstrated commitment to implementing effective corrective actions. This approach suggests a desire to balance accountability with the need to avoid undue economic disruption.
