Fair Trade Commission "We will consider designating the same person"... Will Coupang’s Kim Beom-seok become the ‘head of a conglomerate’?

As pressure continues from the government and political circles surrounding Coupang, which announced the '33.7 million personal information leak incident' on November 29 last year, the Fair Trade Commission's sword is becoming sharper. The Fair Trade Commission announced that it would conduct multiple investigations regarding suspicions of Coupang's unfair practices and even review whether Coupang Inc Chairman Kim Beom-seok was designated as the same person. At a joint hearing on the Coupang incident held on December 31 last year, Fair Trade Commission Chairman Joo Byeong-gi said, "We will look closely at (Chairman Kim's designation of the same person) when we review in May next year," and added, "Even if the same person is designated, it is weak to impose actual punishment, so we will consider complementary measures."

‘Same person (same person)’ refers to the actual controller (head) of a business group, the so-called ‘chaebol’, under the Fair Trade Act. There is a 'natural person' method that designates a specific individual as the controller, such as Samsung Electronics Chairman Lee Jae-yong or Hyundai Motor Group Chairman Eui-sun Chung, and a 'corporation' method that designates the 'corporation' itself when the head of the company is unclear.

Is it possible to specify the total number?

In May of last year, the Fair Trade Commission designated the same person at Coupang as a 'corporation' rather than its founder, Chairman Kim Beom-seok. At the time, it was judged that Coupang had met all of the same person exception requirements under the Enforcement Decree, including whether the controlling natural person invested in a domestic affiliate, prohibiting relatives from participating in management, and whether or not there was a debt guarantee or fund loan between the natural person or relative and the domestic affiliate.

However, the situation changed as the personal information leak incident revealed the inner workings of Coupang, the number one company in the domestic distribution industry. In particular, when it became known that Vice President Kim Yoo-seok, the younger brother of Chairman Kim Beom-seok, received a large amount of compensation while working at Coupang, the question of whether relatives would participate in management began to surface. According to data submitted to the U.S. Securities and Exchange Commission (SEC), it was confirmed that Vice President Kim received approximately 14 billion won in compensation from 2021 to 2024 in incentives in the form of cash and restricted stock (RSU). If a relative is determined to have served as an executive or participated in management, Coupang will be exempt from the exception requirements for designating the same person as a corporation.

As Vice President Kim emerged as the 'smoking gun' that will determine whether to designate the same person, the ruling party's offensive targeting him also intensified. Previously, at a joint hearing on Coupang on December 30 last year, Democratic Party lawmaker Kim Young-bae asked Vice President Kim, "Isn't it strange that they are paying such a large salary even though they are not executives?" The next day, Rep. Kim Hyun of the same party also pointed out, “Isn’t Vice President Kim the ‘third-in-command’ of Coupang?” and “It’s difficult to view him as a simple employee.”

Accordingly, attention is focused on the results of the Fair Trade Commission's designation of business groups subject to disclosure, scheduled for May. In accordance with the Fair Trade Act, the Fair Trade Commission designates a business group with total assets of a certain size (5 trillion won or more) every year and also announces the 'same person (head)' who effectively controls the group.

At this time, if founder and Chairman Kim Beom-seok are designated as the same person, Coupang will be subject to additional regulations under the Fair Trade Act, such as the obligation to disclose relatives' transactions, holding company regulations, and restrictions on voting rights. Park Jun-woo, head of the fair trade team at One Law Firm, said, “The economic activities of Chairman Kim’s family members may be restricted, and companies run by relatives are also likely to be included as related persons.” Dong-hu Son, a New York attorney at SJKP (Daeryun Law Firm, USA), who is leading a class action lawsuit for victims of Coupang's personal information leak in the U.S., emphasized, "In the case of U.S. listed companies, the designation of the same person may be perceived as a factor that increases governance risk from the perspective of global investors."

For this reason, whether to designate the same person is considered one of the issues that global companies are reluctant to issue. A representative example is the designation of the same person by Lee Hae-jin, chairman of Naver’s board of directors. Chairman Lee Hae-jin, founder of Naver, requested that he be exempted from the designation as 'the same person' ahead of the Fair Trade Commission's designation as a business group subject to public disclosure. He cited reasons such as his own stake being low at around 4% and that business could suffer if his image as a 'chaebol leader' were highlighted. However, the Fair Trade Commission designated Chairman Lee as the same person based on his dominance as the founder of Naver and the existence of a related company.

However, given that Coupang is a company listed on the New York Stock Exchange, questions are raised as to whether the same person system can actually work. Attorney Son explained, "In the United States, there is no single person system that pre-designates a specific individual as the person in charge of regulation of a business group," and "Korea's logic of designating the same person can be perceived as a way to excessively place individuals at the center of regulation from the perspective of American law."

Regarding Vice President Kim Yoo-seok's actual participation in management, he said, "There must be clear evidence that he directly intervened in the personnel, financial, and business decisions of the Korean affiliate, and that there are documents, instructions, contractual relationships, or evidence of ongoing decision-making involvement that can support such intervention."

Coupang, a Korean company, is now

On the Newsroom website, Coupang's 'report channel', an article titled 'We would like to inform you about false rumors about Coupang' was posted on July 17, 2019. In the article, Coupang called itself a “proud Korean company” and said, “It was founded and grew in Korea, and we operate most of our business within Korea.”

However, it has been pointed out that Coupang's response to this personal information leak is quite different from the past. On December 10 of last year, Coupang appointed American Harold Rogers as the successor to Park Dae-jun, CEO of Coupang Co., Ltd., a Korean corporation, and first disclosed to the U.S. Securities and Exchange Commission (SEC) the results of its own investigation, which revealed that the size of the leak was 3,000, not 33.7 million, without consulting with the Korean government.

Hwang Yong-sik, a professor of business administration at Sejong University, pointed out, "There is bound to be criticism that the so-called 'dark-haired foreigners' only make profits in the country and do not take responsibility," and added, "Even the movement to designate them as the same person is underlined by the perception that it is necessary to demand responsible management."

On the other hand, there are also skeptical views about the effectiveness of the same person system. Lee Hwang, a professor at Korea University Law School, said, “The core value of the same-person system lies in regulating the expropriation of private interests, and even if it is not the same person, anyone with actual control can cause the problem of private-benefit expropriation,” and suggested, “A separate legal framework is needed to institutionally recognize and discipline business groups.”

Reporter Gong Gong-kyung by_jk@chosun.com

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FTC "We will consider designating the same person"... Will Coupang Kim Beom-seok become the ‘head of a conglomerate’? (Shortcut)