South Korea's Fair Trade Commission (FTC) has levied a fine of 5 billion won (approximately $327,000) against the domestic unit of Coupang, Inc. for running misleading advertisements concerning discounts for its paid membership program.

The FTC stated that this penalty against Coupang, Inc. represents the maximum financial sanction permitted under current law. The company disseminated the deceptive promotional material on its website between August 2020 and May 2022, related to the benefits of its paid membership service.

The regulator asserted that the company informed users that Coupang Wow members could purchase certain items at prices lower than regular customers, but failed to disclose that these discounts were accessible only through a one-time use coupon.

In a statement, the FTC explained, "The advertisements published by Coupang created the false impression that Coupang Wow members had access to a separate pricing system, allowing them to enjoy permanent discounts distinct from regular customers."

"However, the advertised discount price could only be used once with a coupon provided upon membership subscription," the statement continued, noting the company's failure to clearly communicate the conditions attached to the discount.

The watchdog further indicated that Coupang, Inc. also exaggerated the benefits of the paid membership discounts during the membership cancellation process, using phrases such as "You will no longer be able to purchase items at the Wow member price."

The FTC stated that Coupang's actions likely constitute "deceptive advertising" as defined by the Fair Labeling and Advertising Act, thereby interfering with consumers' rational purchasing decisions.

The regulator pointed out that the fine was imposed because Coupang, Inc. saw significant growth in its membership numbers based on such misleading advertisements, and the violations persisted for nearly two years.

Concurrently, the FTC noted that South Korea's National Assembly is currently deliberating on a proposal to raise the maximum fine for misleading advertisements from the current 5 billion won to 50 billion won.

This move comes against a backdrop where the harm to consumers from deceptive advertising is intensifying with the proliferation of AI technology, while the penalty amounts have remained low, raising questions about the effectiveness of such fines.