OECD kpcdb

1. Scope

 

Article 7 (1) of the MRFTA prohibits anyone from substantially lessening competition in a particular business area – directly or through a person having special interest - by conducting a business combination including, but not limited to:

 

1. Acquisition or ownership of stocks of other companies,
2. Concurrent holding of an executive position in another company,
3. Merger with other companies;
4. Acquisition by transfer, lease or acceptance by mandate of the whole or main part of a business of another company.
5. Participation in the establishment of a new company. (Joint Ventures can be considered as one form of such participation in the establishment of a new company.)

 

2. Notification

As per Article 12 (1) of the MRFTA, business combination must be notified to the KFTC if the combination meets the following requirements: when total assets, or world-wide turnover, of at least one of the parties involved is KRW 200 billion or more.

 

In addition to the aforementioned threshold, cross-border M&As, and business combinations between foreign-based companies, however, need to be notified to the KFTC, when the local turnover in Korea of each of the foreign companies involved is KRW 20 billion or more.

 

Article 12(6) of the MRFTA stipulates that notification of business combinations shall be made within 30 days after the date of such combination. However, business combinations involving a large company with total assets or world-wide turnover of KRW 2 trillion are subject to ex-ante notification. In other words, they need to notify the combination between the date of the contract and the date of the consummation of the concerned combination.

 

Failure to notify: Article 69-2 of the MRFTA stipulates that if a party has failed to notify or has falsely notified an M&A, the party shall be charged with an administrative fine not exceeding KRW 100 million.

 

Voluntary pre-merger notification: Under Article 12-(9), any person intending to pursue a notifiable business combination, and who is concerned about the application about Article 7, may request the KFTC to assess whether a combination has the potential to fall into the category of practices substantially restraining competition, even before the notification period.

3. Procedural Rules

The KFTC shall review the submitted business combinations and inform the parties on the outcome within 30 days from the date of notification. If necessary, the KFTC can extend the review period up to 90 days from the expiration date of a 30 day period.

 

Procedural fairness: In accordance with Article 52 (opportunity to express opinion) of the MRFTA, the merging parties have the right to express their opinion to the KFTC. The parties can submit their opinion at any time before the decision is made on a merger.

3. Assessment

The KFTC conducts the “Substantive Lessening of Competition Test” to determine whether or not a combination at issue substantially restricts competition, taking into account the possibility of collusion and, existence of similar goods, amongst others. More details about the assessment are provided for in “Chapter VI Criteria for Competition Restriction Effect” of the Guidelines for the Combination of Enterprises Review.

 

Safe harbour: According to the above mentioned guidelines the following cases are not to be viewed as substantially anti-competitive:

 

- Horizontal M&A (not applied by Article 7(4))

 

a)  Less than 1,200 Herfindahl-Hirschman Index (hereinafter referred to as “HHI”)

b)  From 1,200 to 2,500 HHI, and an HHI increase of less than 250

c)  More than 2,500 HHI, and an HHI increase of less than 150

 

- Vertical M&A or conglomerate M&A

 

a)  HHI is less than 2,500, and the market share is less than 25%, in the particular business area that the company takes part in.

b)  The company ranks number 4 or lower in each area of trade.

 

Article 7 (4). 1 stipulates that any business combination is to be presumed anti-competitive if the aggregated market share of the parties satisfies all the elements below:

 

1)  the aggregated market share of the combined company meets the MRFTA market share thresholds for presumption of market dominance (i.e., if an enterprise has a market share of 50 per cent or more, or if the top three enterprises’ total market share is 75 per cent or more with no individual enterprise having less than a 10 per cent share);

2)  the aggregated market share of the combined company is the largest in the relevant market; and

3)  the aggregated market share of the combined company exceeds that of the company holding the second-largest market share by not less than 25 per cent of the aggregated market share of the parties.

4. Remedies and sanctions

The KFTC may impose prohibition orders, structural remedies or behavioural remedies against anti-competitive business combinations.

 

The KFTC has adopted and implemented guidelines on merger remedies (enacted by the Established Rule. No. 2011-3, 22 June 2011,”Guidelines ") in order to improve the predictability in the design and choice of remedies. Structural remedies include also divestiture of assets, and Intellectual property (IP) remedies. (Guideline IV. 2.)

 

Behavioural remedies involve enabling measures and controlling outcomes. (Guideline IV. 3.) Enabling measures aim to improve a position of the parties' competitors or aims to stimulate competition in the market. Other types of behavioural remedies are employed to control or restrict the outcomes of the parties’ business activities. These types include price caps, supply commitments and service or quality controls.

 

Article 66 (Penalty Provisions) (1) sets forth that any person who violates Article 7 (1) shall be punished by imprisonment of up to three years or by a fine not exceeding KRW 200 million.

 

 

* This information is based on Competition Law in Asia-Pacific: A Guide to Selected Jurisdictions (2018).