KFTC's 'Surprise Investigation' of Coupang Faces Court Battle ... Court Requests Further Explanation from KFTC

Coupang: "Advance Seven-Day Notice Required" vs. KFTC: "No Obligation for Prior Notification"
Court Orders Comparative Review With Similar Laws
Decision to Follow After One-Week Submission of Additional Materials

The issue of prior notification by the Korea Fair Trade Commission (KFTC) has emerged as a key point of dispute in the legal battle surrounding the KFTC’s on-site investigation of Coupang. The court has requested further clarification from the KFTC regarding its claim that investigations can proceed without advance notice. The court will receive additional written statements within one week, review them, and then decide on whether to grant Coupang’s application for a stay of execution.

On September 2, the Seoul High Court Administrative Division 6-2 (Presiding Judges Choi Hangseok, Park Youngjoo, and Kim Minki) held a hearing on Coupang’s application for a stay of execution regarding the KFTC’s decision to initiate an ex officio investigation. The central issue was whether the “seven-day prior notice” principle applies to investigations under the Large-Scale Retail Business Act, and the court asked the KFTC to further consider this matter. In particular, the court asked the KFTC to review again whether there is no obligation to provide prior notice by comparing the relevant legal provisions with those in other statutes that have a similar structure.

The key dispute between the two parties is whether the KFTC is required to inform Coupang in advance when it investigates suspected violations of the Large-Scale Retail Business Act.

According to the Framework Act on Administrative Investigations, as a rule, targets of on-site investigations must be notified in writing of the purpose, duration, and details of the investigation at least seven days in advance. However, exceptions are permitted if another law provides otherwise, or if prior notification would undermine the objectives of the investigation, such as through the destruction of evidence.

Coupang argued that the KFTC was required to provide notification seven days prior to the investigation. The company claims that since the KFTC launched its on-site investigation on August 19 without prior notice, the procedures were flawed.

The KFTC, on the other hand, argued that there is no obligation to provide advance notice. The Commission asserts that in cases of suspected violations of the Fair Trade Act, the seven-day notification principle does not apply. The KFTC emphasized, “As investigations under the Large-Scale Retail Business Act are conducted in the same manner as those under the Fair Trade Act, there is no requirement for advance notification.”

However, the court expressed skepticism over this argument by the KFTC. The court pointed out that while laws such as the Subcontracting Act, the Franchise Business Act, and the Labeling and Advertising Act also follow the investigative procedures of the Fair Trade Act, they are not all exempt from the prior notification requirement. Therefore, the court asked the KFTC to re-examine whether the absence of a prior notification obligation can be justified solely because the Large-Scale Retail Business Act follows the investigative framework of the Fair Trade Act.

The question of whether this situation qualified as an “exception” to the prior notification rule also became a point of contention.

The KFTC claimed, “If companies are notified in advance of the investigation, there is a risk of destruction of evidence, such as the deletion of documents or collusion among related parties, which could undermine the effectiveness of on-site inspections.”

Coupang countered that in this case, objective documents such as contracts and settlement records with suppliers are still available, and facts can also be verified through the suppliers themselves. The company argued that the KFTC failed to provide concrete grounds for its concerns that Coupang would actually destroy evidence.

Another issue was whether the court still needs to suspend the investigation, given that the scheduled investigation period has already ended.

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The KFTC argued that since the on-site investigation period specified in the official notice ended last month, there is currently no ongoing investigation for the court to suspend. The Commission explained that if Coupang is to be investigated on-site again in the future, a new procedure would have to be initiated, and thus this case for a stay of execution is separate from any future investigations.

However, the court pointed out that since it granted Coupang’s application to temporarily suspend the effectiveness of the investigation decision before the investigation period had ended, further clarification was needed on whether there is any remaining suspended investigation period.

Previously, on August 27, the court had temporarily suspended the effectiveness of the decision to launch the ex officio investigation, in order to prevent the KFTC from conducting its investigation while Coupang’s application to stay the execution was under review. This suspension remains effective until September 23.

Another dispute was whether the KFTC had adequately informed Coupang as to “what was being investigated.” Coupang argued that the initial notice covered a broad scope of potential violations under the Large-Scale Retail Business Act and did not specify exactly what was being investigated.

The KFTC countered that even the initial notice was sufficient to identify the scope of the investigation, and that the Commission provided even more concrete explanations after Coupang raised concerns.

The court requested the KFTC to clarify whether the subsequent specification of the investigation topics constituted an official amendment to the original investigation decision, or was merely an additional explanation provided in discussions with Coupang.

There was also a dispute over whether the court could cancel or suspend the legal force of the KFTC’s official on-site investigation notice itself. Coupang argued that since the company could be subject to a fine for failing to comply with an on-site investigation, the investigation decision alone affects the company’s rights and obligations. The KFTC, in contrast, maintained that the official notice of the investigation plan and the actual conduct of the investigation, such as entering business premises and demanding documents, are distinct actions.

The court instructed both parties to submit supplemental written materials on these issues within one week. After reviewing the additional submissions, the court will decide whether to grant Coupang’s application for a stay of execution.

Meanwhile, on the morning of September 2, the KFTC again launched an on-site investigation to collect evidence of alleged Fair Trade Act violations. It was reported that Coupang cooperated with the investigation without resistance.

Legal experts say this case demonstrates the need for establishing procedural legitimacy in administrative actions. Sukkyoon Kang, Managing Partner at Yulchon LLC, stated, “The exercise of public authority must ensure not only substantive legitimacy, but also procedural legitimacy.” He further emphasized, “Since the KFTC’s on-site investigation is an exercise of public authority, it is necessary to clarify the investigation procedures. The KFTC must focus on ensuring procedural legitimacy as well as substantive legitimacy in order to maintain public trust in its actions.”

This content was produced with the assistance of AI translation services.