A growing coalition of US investors in Coupang Inc. is escalating a legal battle with the South Korean government, alleging discriminatory treatment following the company’s significant data breach last year. This dispute is contributing to rising tensions between Korea and the United States.
Abrams Capital, Durable Capital Partners, and Foxhaven announced Wednesday they’ve joined Greenoaks and Altimeter Capital in pursuing investor-state dispute settlement proceedings against Seoul. They claim the Korean government made “defamatory claims” against Coupang, a US-listed e-commerce giant, after it disclosed a data breach in November that affected approximately 33.7 million users in South Korea.
Greenoaks and Altimeter had previously notified the Korean government of their intent to pursue arbitration under the US-Korea Free Trade Agreement (KORUS FTA) and filed a petition with the US Trade Representative (USTR) seeking an investigation into Korea under Section 301 of the Trade Act.
In a January statement, they asserted that the regulatory pressure exerted by the Korean government on Coupang “appears to far exceed the scrutiny imposed on domestic Korean and Chinese competitors.”
The investors contend that these allegedly defamatory claims against Coupang have resulted in billions of dollars in losses for US shareholders. Coupang’s stock, currently trading around $17 (as of Thursday), has fallen more than 30 percent since the data breach was disclosed. The five investment firms collectively own approximately 6.26 percent of Coupang shares.
Seoul has refuted these accusations, maintaining that authorities acted lawfully in responding to the data breach and did not discriminate against US companies. The South Korean Justice Ministry stated it will address the additional notices of intent to arbitrate through its existing interagency task force. A notice of intent does not constitute a formal claim, but arbitration proceedings can typically commence 90 days after submission.
The dispute is gaining traction within the US Congress. The House Judiciary Committee has issued a subpoena to Coupang leadership, compelling them to provide testimony later this month as part of an inquiry into whether foreign enforcement actions are being used unfairly to target US companies operating abroad.
“Coupang will fully cooperate with the US House Judiciary Committee investigation, including production of documents and witness testimony as required by the subpoena,” the company stated.
Some market observers believe this case could have significant implications for other US venture-backed companies, such as Viva Republica, the operator of the popular South Korean financial technology app Toss, which is reportedly considering a US listing. Any potential US IPO could be delayed until the regulatory risks highlighted by the Coupang controversy are resolved, they suggest.
