A regulatory fine levied against e-commerce giant Coupang for a data breach has escalated into a significant diplomatic flashpoint between South Korea and the United States, raising questions about Seoul’s treatment of American technology companies.
Coupang, which is South Korea’s largest online retailer despite being headquartered in Seattle, has become the center of a growing dispute that has rattled relations between the two countries. The situation became serious enough that Kang Kyung-wha, Seoul’s ambassador to the U.S., traveled back to the South Korean capital on Wednesday to consult with officials in President Lee Jae Myung’s administration.
“The (Coupang) issue is dragging on much longer than I expected,” Kang told local media when asked about U.S. criticism of the matter. She indicated the issue would be handled separately from other bilateral agreements already in place between the two nations.
The broader stakes are considerable. A $350 billion South Korean commitment to invest in the United States, Seoul’s goal of constructing nuclear-powered submarines, and ongoing coordination regarding China and North Korea are all potentially affected by the growing tensions.
Beyond the Coupang matter, South Korea has also faced criticism from the U.S. State Department over changes to its communications laws that would increase financial penalties on content publishers found to have spread misinformation online. The State Department expressed “significant concerns” that the amendments could lead to excessive content regulation and threaten free speech. Those changes would apply to both domestic platforms and global companies including Google, Meta, X, and TikTok.
South Korean lawmakers who spoke with Reuters said they worry Washington is treating the Coupang case as a litmus test for how open Seoul is to American business, rather than viewing it as a domestic privacy matter.
“This is not discrimination against an American company,” said ruling Democratic Party lawmaker Park Sun-won. “It was action over a personal data leak affecting 35 million people. It would be the same for any company.”
A fellow ruling party lawmaker, Kim Young-bae, argued that framing the Coupang dispute as evidence of anti-American bias misrepresents both the facts and the overall direction of the alliance between the two countries.
South Korea’s Foreign Ministry has similarly stated that the Coupang matter should not be connected to ongoing security negotiations, including Seoul’s submarine ambitions — a plan that U.S. President Donald Trump endorsed last December.
When asked about the dispute, a State Department spokesperson said South Korea “should not impose disproportionate burdens on U.S. companies.” The White House did not respond to a request for comment.
Coupang pointed to its prior statements, saying the company hoped to reach a constructive resolution. A source familiar with the negotiations, who asked not to be named given the sensitivity of the matter, said Coupang had spent months seeking a “constructive off-ramp” with Seoul — “literally hundreds of times over the last seven months” — including requests for what it described as a fair technical review and an appropriate penalty.
The dispute traces back to November, when Coupang disclosed a data breach affecting more than 33 million customers after a former employee in China accessed its systems. In June, South Korean regulators issued a fine of 625 billion won — approximately $422.62 million — saying the penalty was meant to protect consumers. Coupang has said it plans to contest the fine, claiming regulators failed to account for corrective actions the company had already taken.
Following the fine, a number of U.S. Republicans came out in support of Coupang and criticized the South Korean government’s actions. A report released this month by the U.S. House Judiciary Committee accused South Korea of discriminating against American-owned businesses, alleging that Seoul had weaponized its regulations against Coupang and other companies.
South Korea’s presidential office rejected those claims, saying the report unfairly reflected Coupang’s viewpoint while ignoring Seoul’s position. A House Judiciary Committee spokesperson responded by telling Reuters that Seoul’s reaction showed “South Korea is acting just like other foreign governments that have been caught targeting and harassing innovative U.S. companies.”
Lawmaker Kim Joon-hyung of the minor Rebuilding Korea Party said some in the U.S. were conflating the business complaints around Coupang and the communications law changes with accusations of election fraud — allegations that members of South Korea’s far right have made against President Lee.
In June, an opinion piece published in the Wall Street Journal by two American conservatives accused the Lee administration of undermining the U.S.-South Korea alliance, pointing to the Coupang case as an example, and also alleged the administration was pushing constitutional changes to extend its hold on power indefinitely. The piece drew sharp criticism from South Korean officials and the presidential office.
“This time the problem is more serious because it is combined with extreme claims — and it is being done organizationally,” Kim said.
