[BizHanKook] Naver has become embroiled in a legal dispute due to a conflict with a seller on its Smart Store platform. After Naver determined that products sold by the vendor were counterfeit and took action to remove the store, the business pushed back against the findings and filed a lawsuit for damages. Furthermore, allegations that Naver has been withholding sales proceeds for over a year have fueled controversy surrounding the appropriateness of the platform’s seller sanctions and the freezing of settlement funds.
Naver’s source, Polo Ralph Lauren Hong Kong, deems products “counterfeit”… Gems New York claims “officially sold at U.S. stores”
According to Bizhankook’s reporting, it has been confirmed that "Gems New York," a major seller of overseas direct purchase items on Naver, is embroiled in a legal battle with Naver over its expulsion from the Smart Store. Gems New York filed a damages suit against Naver and Polo Ralph Lauren last December, arguing that Naver’s removal of the store based on a counterfeit determination for its products was unjust.
Gems New York is a business that sells overseas brand products, including Polo Ralph Lauren, purchased in the U.S. to the domestic market. Since joining Naver Smart Store in 2017, the company has reportedly recorded approximately 350,000 cumulative sales, with an average annual revenue of about 5.6 billion won.
The conflict between the two sides began in September 2024 when a customer who bought a Polo Ralph Lauren T-shirt from Gems New York raised suspicions that it was counterfeit. According to Gems New York, the customer initially demanded a free size exchange; when refused, the customer reported the product as a fake. Although Gems New York believed the issue had been resolved in October of that year after submitting proof of purchase and other supporting documents, Naver requested an appraisal of the product from Polo Ralph Lauren’s Asia-Pacific corporate office in Hong Kong in December.
In February 2025, after the Polo Ralph Lauren Asia-Pacific office issued an opinion stating the item was a counterfeit, Naver notified Gems New York of its impending expulsion. However, Gems New York disputed the appraisal, maintaining that the items were authentic products purchased through official U.S. distribution channels. Although the expulsion was temporarily put on hold following Gems New York's explanation, Naver proceeded to conduct additional appraisals on other products.
When further appraisals in May of the same year also labeled the items as counterfeits, Naver issued a provisional expulsion on May 22 and finalized the permanent removal from the store on November 24. Gems New York claims that as a result, it has lost its primary sales channel and has suffered a decline in operating profit of approximately 1.3 billion won through September of this year.
The two sides remain at odds over the legitimacy of the expulsion. Naver maintains that it made the decision based on comprehensive appraisal results of several products, but Gems New York is pushing back against Naver’s judgment, claiming that some appraisal results were changed and that errors occurred during the verification process.
A representative from Gems New York stated, “We maintained that since the items were purchased in the U.S., an appraisal from Polo Ralph Lauren’s U.S. headquarters was necessary, but Naver presented appraisal results from Hong Kong, claiming they represented the headquarters.” They added, “The Hong Kong side gave an opinion that it was a counterfeit because the material number of the short-sleeved T-shirt did not match their records, but we confirmed that the same number appears normally in the U.S. Polo Ralph Lauren official outlet store system.”
They continued, “We have secured and submitted to the court findings from two independent appraisal institutions stating that all the products in question are authentic. We are currently preparing for an appraisal by a third-party expert designated by the court.” They asserted, “The credibility of the Polo Ralph Lauren appraisal and whether Naver’s subsequent expulsion was justified must be scrutinized.”
In response, Naver explained, “Naver operates a 'Counterfeit Clean Program,' which includes monitoring for counterfeit products to minimize consumer harm. We also cooperate with brands and professional appraisal agencies to protect user rights.” However, they did not disclose specific details regarding the grounds for the counterfeit determination in this case or the appropriateness of the expulsion.
Seller expelled under ‘One-Strike Out’ policy during counterfeit dispute… Naver says “Difficult to confirm details”
In this dispute, Naver’s "One-Strike Out" policy has also emerged as a key issue. It is known that Naver operates a policy where a seller is expelled without warning if even one instance of selling a counterfeit product is detected, in order to block the distribution of fakes and protect consumers.
While the One-Strike Out policy has the advantage of quickly curbing the sale of counterfeits, critics point out that the reliability of the appraisal results and the fairness of the sanctioning process are critical, given that a single determination can halt a seller’s entire operation.
The two sides also differ on the procedures followed in this case. Gems New York argues that the expulsion was maintained even though some appraisal results were changed, and that they were not given a separate opportunity to explain long-sleeved shirts. Conversely, Naver maintains that they followed proper procedures, including providing the seller with multiple opportunities to explain their side.
A controversy over the settlement of sales proceeds has also flared up. When Naver notified Gems New York of the expulsion in May of last year, it informed them that it would withhold approximately 107 million won in settlement funds. This is because Naver has a system in place to withhold sales proceeds for a certain period when a seller is identified as selling counterfeits, in order to support brands in taking legal action or negotiating damages.
Gems New York claims that Naver informed them the funds would be released after one year, but that they have yet to receive the payment. They explain that Naver is still withholding the settlement even now, past the initially stated release date, citing the ongoing lawsuit as the reason.
A representative from Gems New York stated, “After a year passed, we requested the release of the withheld settlement funds, but we were told it could not be released until the lawsuit is concluded.” They added, “Not only have we been unable to receive over 100 million won in sales proceeds for a long period, but we are also bearing the burden of collateral payments for the lawsuit. We asked for the justification for continuing to withhold the entire settlement amount, but we have not received a specific answer.”
Bizhankook inquired with Naver regarding the reasons for withholding the settlement funds and future payment plans, but Naver responded, “It is difficult to provide specific details as this is a matter currently involved in a lawsuit with the business.”