Korea's Regulatory Discrimination Against US Tech Firms Demands a Solution

A recently released Congressional report highlights South Korea's discriminatory treatment of U.S.-based technology firms, exposing a critical gap in the U.S.-Korea relationship: the absence of a mechanism to resolve digital trade disputes. This gap threatens a partnership that spans trade, emerging technology, and security. Closing it will require the two governments to negotiate a dispute-settlement mechanism built specifically to resolve digital trade issues.

The report centers on a data breach Coupang suffered last year, after a former employee used stolen credentials to access consumer data. Coupang is a U.S.-based technology company often called the “Amazon of South Korea," where it runs the majority of its operations. In June 2026, months after the breach, Korea's Personal Information Protection Commission (PIPC) fined Coupang about $410 million—the largest privacy penalty in the country's history.

Coupang's treatment is the latest instance in a long pattern of disproportionate enforcement by Korean authorities against American companies. Between 2019 and 2022, the Korea Fair Trade Commission (KFTC) imposed its largest single-firm fine of that period against Google, roughly equal to what it imposed across four Samsung companies in 2021. Similarly, between 2016 and 2019, the KFTC fined U.S.-based Qualcomm an amount that was triple the aggregate fines it issued against 13 Korean firms over the same period.

A recent National Bureau of Asian Research (NBR) report documents that American firms often face intense scrutiny, prolonged investigations, and complex compliance requirements at the hands of Korean authorities. Operating in such an environment forces U.S. firms to divert critical resources toward meeting Korean regulatory demands, thereby pulling investment away from innovation and steadily eroding America's competitive edge.

Additionally, South Korea is one of America's most important strategic partners, and the U.S.–Korea Free Trade Agreement (KORUS) is the second-largest U.S. free trade agreement by trade flows. The partnership deepened in November 2025, when Seoul pledged $350 billion in U.S. investment in exchange for lower tariffs and both governments agreed to work more closely on semiconductors, AI, and shipbuilding. Korea's treatment of U.S. firms now threatens that progress.

Such cooperation depends on mutual trust. By moving aggressively against Coupang just months after promising not to discriminate against U.S. firms, Korea eroded that trust. It also sent a broader signal: that Korea can wield regulatory enforcement to disadvantage foreign firms while protecting domestic incumbents. Faced with these challenges, U.S. firms may lose confidence in the Korean market and pull back from investing, eventually weakening a business relationship built over decades.

Yet the deeper problem is the absence of a proper mechanism to resolve digital trade disputes, and here KORUS falls short in three ways. First, its dispute-settlement chapter offers only a government-to-government track. Either country can request a review when it believes the other has broken the agreement, yet a single firm's grievance rarely escalates into a full state-to-state case.

Second, the agreement's electronic-commerce chapter is outdated. It guarantees only that digital products face no customs duties and has no mechanisms to resolve regulatory frictions that define the new digital economy—platform designation rules, network usage fees, and discretionary enforcement of competition law, to name a few.

Third, the competition chapter is carved out of binding dispute settlement altogether. It offers only consultations between the two countries, with no enforceable ruling, and therefore cannot compel either side to withdraw or reverse the contested enforcement of a law. Beyond KORUS, Korea's non-discrimination pledge on digital services sits in a joint fact sheet rather than binding treaty text and doesn’t offer a solution either.

To address this shortcoming, the two countries should negotiate a dedicated mechanism for resolving bilateral digital trade disputes. With U.S. frustration mounting and given the importance of the partnership, a mutually agreed and enforceable framework is in both countries' interest. It would give firms a forum to challenge the application of digital trade regulations, speed up resolution, and set clear expectations for how each country treats the other's digital companies.

The path to building it already exists. As Washington and Seoul convert the 2025 fact sheet into binding commitments through the Joint Committee, the Office of the United States Trade Representative should insist on embedding such a mechanism directly in the agreement, paired with a system that monitors Korea's treatment of other American firms so it can catch a recurring pattern before it escalates. Together, these steps would replace mistrust with a durable, rules-based channel—one that protects American firms while keeping a vital alliance strong.