XML 32 R17.htm IDEA: XBRL DOCUMENT v3.24.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Commitments
Unconditional purchase obligations include legally binding contracts with terms in excess of one year that are not reflected on the consolidated balance sheets. These contractual commitments primarily relate to technology related service contracts, fulfillment center construction contracts and software licenses. For contracts with variable terms, we do not estimate the total obligation beyond any minimum pricing as of the reporting date.
New Guards Group
As a result of efforts to restructure unfavorable economic terms within licensing arrangements involving New Guards Group Holdings S.p.A. and certain of its subsidiaries (collectively “NGGH”), a subsidiary acquired in the Farfetch Acquisition, and Authentic Brands Group LLC (the “licensor”), NGGH received a termination notice from the licensor in October 2024. The license agreement granted NGGH distribution rights for Reebok-branded footwear and apparel ranges within certain countries in the European region and provided for minimum guaranteed royalties to be paid by NGGH over the remaining eight years of the agreement, with no cancellation rights. NGGH’s minimum guarantee liability was recorded at fair value at acquisition and had a carrying value of $136 million as of September 30, 2024. Licensor has alleged as an effect of the notice all unpaid minimum guarantees and other related breach payments totaling $312 million became payable by NGGH to the licensor, and all rights in and to the licensed property reverted to the licensor. Coupang has not guaranteed payments under the license agreement, and the liability is limited to NGGH. The brand license intangible asset acquired was recorded at fair value at acquisition and had a carrying value of $44 million as of September 30, 2024.
Legal Matters
From time to time, we may become party to litigation incidents and other legal proceedings, including regulatory proceedings, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, we consider other relevant factors that could impact our ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. Our reserves may change in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of currently pending legal matters will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Litigation
On August 26, 2022, a putative class action was filed on behalf of all purchasers of Coupang Class A common stock pursuant and/or traceable to Coupang’s registration statement issued in connection with our initial public offering. Choi v. Coupang, Inc. et al was brought against Coupang, Inc., and certain of its former and current directors, current officers, and certain underwriters of the offering. The action was filed in the United States District Court for the Southern District of New York alleging inaccurate and misleading or omitted statements of material fact in Coupang's Registration Statement in violation of Sections 11, 12, and 15 of the Securities Act of 1933. The action was amended on May 22, 2023, and added allegations of securities fraud under Sections 10 and 20 of the Securities Exchange Act of 1934. The action seeks unspecified compensatory damages, attorneys’ fees, and reasonable costs and expenses. Between August and December 2023, three separate stockholders’ derivative actions were filed in the United States District Court for the Southern District of New York against certain of Coupang’s former and current directors and current officers. Coupang was named as a nominal defendant in the actions. These derivative actions purport to assert claims on behalf of Coupang and make substantially similar factual allegations to Choi v. Coupang, Inc. et al, bringing claims for, among other things, breach of fiduciary duty, unjust enrichment, and violations of securities laws. The actions seek compensatory damages, governance reforms, and other relief. We believe all the aforementioned actions are without merit and intend to vigorously defend against the aforementioned actions. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time. Accordingly, we can provide no assurance as to the scope and outcome of this matter and no assurance as to whether our business, financial position, results of operations or cash flows will not be materially adversely affected.
Korea Fair Trade Commission Investigations
In June 2021, the Korea Fair Trade Commission (the “KFTC”) initiated an investigation into a potential violation of the Monopoly Regulation and Fair Trade Act, including alleged preferential treatments of private labelled products provided by our subsidiary, Coupang Private Label Brands. In June 2024, the KFTC publicly announced that as a result of their investigation, they determined that our product search rankings violated Korean law; a regulatory finding subject to judicial review, and that they would impose an administrative fine on us and that they intended to direct us to take certain related corrective actions. Payments of fines to the KFTC are not stayed during an appeal process and as a result, we accrued the administrative fine in the second quarter of 2024, resulting in a charge, included within operating, general and administrative expenses, of approximately $121 million. The Company will pay the administrative fine in six installments over two years and made the first payment in October 2024 and will make the last payment in June 2026.
In August 2024, we received the KFTC’s formal written decision, and in September 2024, we appealed such decision. That appeal is pending, and the first hearing of the administrative litigation action will be held on November 21, 2024. We also filed a preliminary injunction with the Seoul High Court to stay the fine and corrective orders during the pendency of the appeal. In October 2024, the Seoul High Court granted our request for suspension of the KFTC’s corrective orders, but dismissed the request for a stay of the KFTC’s administrative fine. The KFTC subsequently appealed the Seoul High Court’s decision to grant a suspension of the corrective orders.
The KFTC is also investigating us on other matters related to the alleged violations of certain KFTC regulations. We are diligently cooperating with these investigations, and actively defending our practices as appropriate.
Under Korean law, the issues addressed in the investigations can be resolved through civil, administrative, or criminal proceedings. The ultimate case resolution could include fines, orders to alter our processes or procedures, and criminal investigations or charges against individuals or us. We cannot reasonably estimate any penalties, loss or range of loss that may arise from these other KFTC Investigations, in excess of the amounts accrued. Accordingly, we can provide no assurance as to the scope and outcome of these other matters and no assurance as to whether our business, financial position, results of operations or cash flows will not be materially adversely affected.