- Companies can now submit remedies to address potential antitrust concerns -
-Exemption from merger notification for PEF establishment and other cases with low competitive concerns -
Starting August 7, companies involved in mergers will be able to submit remedies to address potential antitrust concerns, which the Korea Fair Trade Commission (hereinafter referred to as the "KFTC") can consider when imposing corrective measures. Additionally, the obligation to notify mergers for the establishment of Private Equity Funds (PEFs) and other cases with minimal antitrust concerns will be exempt from the same date.
This follows the enforcement of the amended Monopoly Regulation and Fair Trade Act on February 6, with the KFTC carefully listening to opinions from various sectors to revise or establish three administrative rules (①Detailed Operational Guidelines for Submission of Merger Remedies, ②Rules on the Operation of KFTC Meetings and Case Handling, ③Merger Notification Guidelines), which will be implemented on August 7. The KFTC has been committed to preventing monopolistic concerns arising from mergers, and the enforcement of these laws and administrative rules is part of that effort.
<Remedy Submission System>
Until now, the KFTC has directly designed and imposed corrective measures for anticompetitive mergers, and in cases with significant monopolistic concerns, merger prohibitions were imposed. From August 7, companies will be given the opportunity to submit remedies to address antitrust concerns based on their extensive market information, which the KFTC can consider when imposing corrective measures. This new remedy submission system will operate as follows:
- The KFTC examiner, upon determining that a merger may restrict competition and that it is necessary to provide the merging companies with an opportunity to submit remedies, can notify the companies of the examiner's preliminary judgment on the potential antitrust concerns.
- The merging companies can then submit remedies to the examiner addressing these concerns.
- If the examiner finds the proposed remedies insufficient to alleviate the antitrust concerns, they may request revisions and, if necessary, consult with experts during the evaluation process. The time taken for these revisions will be excluded from the statutory merger review period (up to 120 days).
- The examiner can draft the action opinion in the review report based on the submitted remedies.
The KFTC will then consider the examiner's action opinion when deciding on corrective measures. If the merging companies submit appropriate remedies to address antitrust concerns and agree in writing with the content of the review report, the decision-making process will be expedited (fast-track).
Specifically, whereas a hearing is typically held within 30 days after the merging companies submit their opinions on the review report, in this case, the hearing will be held within 15 days. The decision report, which is usually prepared within 35 days after the hearing, will now be completed within 20 days, significantly shortening the decision-making period.
If merging companies do not submit remedies or do not respond to requests for modification, the KFTC will continue to design and impose corrective measures directly as is the current practice. If it is determined that the submitted remedies or other methods cannot alleviate monopolistic concerns, the KFTC may prohibit the merger, as is the current practice.
<Expansion of Exemptions from Notification Requirements>
To focus review resources on mergers that have a significant impact on the market, notification requirements will be exempted for types of mergers with minimal antitrust concerns. Specifically, the following cases are exempted from notification:
- Establishment of PEFs (Private Equity Funds),
- Mergers or business transfers between parent and subsidiary companies under the Commercial Act,
- Concurrent appointment of non-representative executives of another company when the number of concurrent executives is less than one-third of the total number of executives,
- Mergers between affiliated companies where the size of the merging company is less than KRW 30 billion,
- When part of a company’s business is transferred, and the transfer amount is less than 10% of the transferring company's total assets and less than KRW 10 billion.
The previous threshold was set at KRW 5 billion, which has been adjusted in consideration of the fourfold growth in GDP since it was first established in 1997.
From August 7, companies will not be required to notify these types of mergers. However, if the obligation to notify such a merger arose before August 7, the obligation will not be waived.
It is important to note that while the establishment of a PEF is exempt from notification, any subsequent investment activities by the PEF, such as acquiring shares of companies, will still require merger notification as per the current rules.
<Other Refinements>
To improve the efficiency and accuracy of merger notifications, all mergers must now be reported online, and for complex mergers, pre-consultations can be held to share information on key issues and industry structures.
<Expected Effects>
The implementation of the revised laws and administrative rules is expected to significantly improve the efficiency and effectiveness of Korea's merger notification and review system.
With the full implementation of the remedy submission system, market-related information held by companies can be effectively utilized during the merger review process. This is expected to enhance the effectiveness and feasibility of the corrective measures. Since the remedy submission system is a practice used by most competition authorities worldwide, it is anticipated that the international alignment of Korea's merger review system will also improve.
Additionally, with the expansion of exemptions from notification requirements, the KFTC will be able to concentrate its review efforts on mergers with potential antitrust concerns, while companies required to submit notifications will experience a reduction in administrative burdens with the activation of online notifications and pre-consultations.
The KFTC plans to continue operating the merger notification and review system efficiently and effectively, preserving competition in the market while actively supporting innovation and the creation of new services arising from mergers.