Merger Controls First Edition - J Sagar Associates

Barun Law Korea
Moreover, in determining the degree of impediment to competition by mergers, various factors, such as the following, are
considered in addition to market shares: a) the degree of demand substitutability among products supplied by the merged
company (“merged company products”); b) the possibility for purchasers to switch merged company products with products
supplied by other competitors; c) the presence of overseas competition and international economic trends; d) the possibility
of new market entry; e) the possibility of cooperative action among competitive businesses; and f) whether similar products
and adjacent markets exist.
In determining the “unilateral effect” of the Hana Financial Group-KEB merger, the KFTC stated that no unilateral effect
has been found, “since competing banks are able to compete equally with KEB as they are strengthening their overseas
sales network and foreign exchange related personnel”, and because “switching to other banks in case of price hikes will
be easy”.
In the above merger analysis, the competition structure and transferability have been taken into consideration.
Today, the Merger Simulation Model and Upward Pricing Pressure Index are also widely used in the quantitative analysis
of the effects of price hikes caused by unilateral effect of horizontal mergers. 12
Lastly, the KFTC approved the “Guideline on the Submission of Economic Analysis Evidence” on July 21, 2010, which
sets forth basic principles and specific examples of economic analysis evidence, and seeks for a reasonable enforcement
of the law.
Economic analysis evidence should be relevant to the related case, and its economic and legal issues, present a complete
set of evidential materials, disclose a transparent hypothesis, and provide a consistent result even when conducting multiple
economic analyses.
Approach to remedies (i) to avoid second stage investigation and (ii) following second stage investigation
Merger reviews in Korea are not divided into “first stage investigation,” and “second stage investigation” as in Europe.
In case a merger is deemed to create excessive market dominance, such merger becomes subject to behavioural remedies
(“corrective order”) to prevent such market dominance.
In other words, corrective orders are not given in advance in order to avoid second stage investigation, since second stage
investigation does not exist in Korea.
Key policy developments
There have been no key policy developments in Korea over the past year.
However, the KFTC’s newly established “Criteria on Imposing Corrective Measures against Mergers”, which provides
the criteria for making decisions and issues to consider when imposing corrective measures against merger transactions
that impede competition. 13
The above criteria was approved to reinforce the effects of corrective measures imposed against mergers that restrict
competition pursuant to international standards, and to impose clear and predictable corrective measures to companies.
The newly established “Criteria on Imposing Corrective Measures against Mergers” are as follows:
A. Primary consideration of structural remedies14 Corrective measures imposed by the KFTC are categorised into the following two types: behavioural remedies; and
structural remedies.
Behavioural remedies mean measures that temporarily limit the method of sale or range, such as price hikes, supply of
products, of a merged company. Structural remedies mean imposing certain changes to the ownership structure of a merged
company, such as imposing a ban or disposing some parts of the company’s asset.
The KFTC announced in June, 2011 that structural remedies, rather than behavioural remedies, should be given a primary
consideration when imposing corrective measures against merged companies, in order to maintain competition in the
market.
Structural remedies make little intervention in the market as they do not directly control prices or quantities and thus, such
remedies are considered to be effective in correcting impediments to competition.
Therefore, once the principle of primarily considering structural remedies becomes firmly rooted, consumers can receive
protection against harm that may arise from mergers that restrict competition.
B. Introduction of “Measure regarding Intellectual Property Rights”
A new measure that allows the disposal or exercise of Intellectual Property Rights (“IPRs”) that are overlapping or
concentrated in case such IPRs are deemed to impede competition has been established.
Such IPR measure is provided separately to effectively prevent a merged company from dominating the market with an
overlap or concentration of IPRs.
Global Legal Insights ­ Merger Control First Edition
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