Coupang founder Bom Kim / Korea Times file

By Lee Kyung-min

A full-fledged trade dispute could occur between Korea and the U.S., triggered by the Korean antitrust agency moving to designate Kim Bom-suk, founder of Coupang, Korea's e-commerce giant, as the head of large conglomerate, according to market watchers, Friday. The Korean American with U.S. citizenship is widely known as Bom Kim.

This adds concern to the already shrinking foreign investments in Korea, bogged down by regulations and arbitrary applications and interpretation of the law, trumping free market principles.

Some are calling for the abolition of what they call an archaic designation in effect since 1986 that limits the power and influence of Korea's top conglomerates, adding that Korea is the only country where firms' business activities are regulated by their asset size. Under the Fair Trade Commission (FTC) law, any business organization with over 5 trillion won ($3.8 billion) in total assets is designated as a large conglomerate every April. Those designated as large conglomerates are prohibited from cross-investments and have their investment ceilings restricted.

Tighter scrutiny

The FTC seeks to place Kim and key executives of the New York Stock Exchange-listed firm's overseas subsidiaries under tighter scrutiny, requiring them to disclose the shares held by what Korean law defines as "close family members."

Any deliberate omission or manipulation of critical data will result in a prison term of up to two years or a fine of up to 150 million won.

This according to the U.S.' top trade authorities, including Under Secretary of Commerce for International Trade Marisa Lago, violates the "most-favored-nation" status, a bedrock World Trade Organization principle whereby member countries should treat all their trade partners equally. It means no one country should be given special treatment to goods or services coming from one particular trading partner. Lago reportedly asked that the issue be placed at the top of the agenda during a working-level meeting held on the sidelines of the Korea-U.S. summit in May.

The issue could escalate to the investor-state dispute settlement (ISDS) process and challenges have been raised by the Office of the U.S. Trade Representative (USTR).

The U.S. can claim that Kim is being treated unfavorably, compared to S-Oil. The FTC designated the Korean entity of the refinery as the head of the firm. Saudi Arabian oil company Aramco owns a 63.4-percent stake in S-Oil, while 90 percent of Aramco shares are owned by the Saudi royal family.

Whether the FTC will take the issue with this consideration remains to be seen, since the U.S. raised the issue for the second time in May, only about a month after a group of Korea's policy coordination body officials visited the U.S. in April.

The antitrust agency will announce the designation next week.