Coupang fined 140 billion won for manipulating algorithms and reviews

The Fair Trade Commission (FTC) has taken a strong stance against Coupang, the country's leading e-commerce platform, by filing a complaint and imposing a record-breaking 140 billion won fine. The allegations are serious, accusing Coupang of fraudulent practices such as manipulating algorithms to promote its private brand (PB) products and orchestrating fake positive reviews. This fine, the largest ever imposed by the FTC on a domestic retailer, underscores the severity of the situation.

The FTC concluded that customers who search for certain products on the Coupang platform could be deceived by the way Coupang’s PB products are listed on top, regardless of sales or other objective data. For example, Tamsasoo, Coupang’s PB bottled water, is placed on top if consumers type in “bottled water.” More than 60,000 PB goods and those directly purchased by Coupang got to the upper part of search pages than products of Coupang’s suppliers from February 2019 to July last year.

Customers are likely to find what is shown higher on the search results list more appealing than other options when looking for particular products online. Given this, Coupang can affect consumers’ purchase decisions by capitalizing on algorithms to preferably show PB or directly purchased items, which bring greater benefits to the business. Some items, which only ranked lower than 100th in their rankings, jumped to the top spot with some tweaks made to algorithms. What’s more, Coupang did not make “self-recommended” PB items distinguishable from non-PB products.

The extent of Coupang's deceptive practices is staggering. The company organized a group of 2,000 executives and employees to write over 70,000 reviews on 7,000 types of private brand items. These reviews were then rated as high as 4.8 out of 5 stars, creating a false sense of product quality to entice customers. Coupang even provided specific guidelines to reviewers, instructing them to highlight more positives and negatives and to avoid showing their company in photo reviews. This level of manipulation is a clear violation of consumer trust.

Coupang is not only the largest e-commerce platform but also tops the domestic retail market both online and offline. It is an unforgivable act for such an influential business as Coupang to deceive customers to maximize its benefits. Its legal liability needs to be examined thoroughly in the upcoming administrative litigation as Coupang has claimed that it is an unprecedented example of making an issue of the way retailers display their items.