Merger Control 2023 Comparisons

The Monopoly Regulation and Fair Trade Act (MRFTA) is the relevant merger control legislation in South Korea. The MRFTA prohibits “business combinations” that restrict competition (Article 9 of the MRFTA) and stipulates the transacting parties’ obligations to notify the Korea Fair Trade Commission (KFTC) (Article 11 of the MRFTA). The Enforcement Decree of the MRFTA provides additional regulations regarding merger filing and the merger review process.

The KFTC has internal guidelines for additional guidance regarding merger filing and the merger review process, such as:

• the Merger Review Guidelines;
• the Merger Filing Guidelines;
• the Business Combination Corrective Measure Imposition Criteria;
• the Business Combination Corrective Measure Imposition Guidelines; and
• the Criteria for Imposing Administrative Fines for Failure to Comply with Business Combination Related Corrective Measures.

South Korea does not have any other relevant legislation for foreign transactions or investment or relating to particular sectors. However, other statutes relating to the finance, telecommunications and broadcasting sectors, such as the Act on the Structural Improvement of the Financial Industry, the Financial Holding Companies Act and the Telecommunications Business Act, grant review authority over business combinations in the relevant sectors to the sector-specific regulators (ie, the Financial Supervisory Commission (FSC), the Korea Communication Commission (KCC) or Ministry of Science and ICT (MSIT)), but require those regulators to consult with the KFTC. In such cases, the relevant party is exempted from its obligation to notify the KFTC (Article 11.4 of the MRFTA).

The KFTC, an administrative body established under the Prime Minister’s Office, enforces the MRFTA.

Generally, other authorities are not involved in the KFTC merger review process. However, in the case of the finance, telecommunications and broadcasting sectors, the FSC, KCC or MSIT is required to consult with the KFTC during its review regarding a merger’s potential for anti-competitive effects (see 1.2 Legislation Relating to Particular Sectors). In practice, the FSC, KCC or MSIT first requests that the KFTC review whether the merger would restrict competition and will conduct its own review after obtaining the results of the KFTC review.

Notification is mandatory where the size of the merging parties exceeds the thresholds (see 2.5 Jurisdictional Thresholds).

There is no notification requirement in the following circumstances (Article 11.3 of the MRFTA):

• where an “investment company or investment association for the establishment of small and medium-sized enterprises” defined under Article 2, subparagraphs 10 and 11 of the Support for Small and Medium-Sized Enterprise Establishment Act:
1. holds shares of a “business founder” (defined under Article 2, subparagraph 2), or a “venture business” in excess of the percentage specified in Article 11.1, subparagraph 1 of the MRFTA (ie, 20%, or 15% if the target company is listed on the Korea Exchange – see 2.3 Types of Transactions); or
2. becomes the largest shareholder by participating, jointly with another company, in the establishment of a “business founder” or “venture business”; or
• where a “new technology venture capitalist” or a “new technology venture capital fund” established under the Specialised Credit Finance Business Act:
1. holds shares of a “new technology business entity” defined under Article 2, subparagraphs 14-3 and 14-5 of the Korea Technology Finance Corporation Act in excess of the percentage specified in Article 11.1, subparagraph 1 of the MRFTA; or
2. becomes the largest shareholder by participating, jointly with another company, in the establishment of a “new technology business entity”; or
• where a company subject to the notification requirement:
1. holds shares of any of the following companies in excess of the percentage specified in Article 11.1, subparagraph 1 of the MRFTA; or        
2. becomes the largest shareholder by participating, jointly with another company, in the establishment of any of the following companies:
1. an “investment company” subject to the Financial Investment Services and Capital Markets Act; or
2. a company designated as a “concessionaire of a public-private partnership project for infrastructure” under the Act on Public-Private Partnerships in Infrastructure; or
3. an “investment company” established for investing in a company referred to in section b) ii) (but limited to a company established pursuant to the relevant law for the purpose of rental housing projects); or
4. a “real estate investment company” under the Real Estate Investment Company Act.

The MRFTA imposes an administrative fine of up to KRW100 million for failure to make a timely and correct notification (Article 130 of the MRFTA).

The decision to impose an administrative fine is made through a formal resolution by the KFTC, and that resolution is made public. In 2021 and 2022, the KFTC imposed administrative fines of KRW425 million (30 cases) and KRW226 million (20 cases), respectively, for failing to notify.

Business combinations that are subject to merger control include the following transactions (Article 11.1 of the MRFTA):

• acquisition or ownership of 20% or more of the shares of another company (or 15% for companies listed on the Korea Exchange). Acquisition of shares means gaining ownership of shares by purchase or transfer of ownership from a former owner of the shares;
• acquisition of additional shares in a company where the acquiring party already holds 20% or more of the shares in the company (or 15% for companies listed on the Korea Exchange) and the acquisition results in the acquiring party becoming the largest shareholder;

• interlocking directorate (where an officer or employee holds an officer’s position in another company);
• merger with other companies, which means the absorption of one company that ceases to exist into another that retains its own name and identity and acquires the assets and liabilities of the former with the statutory formalities under the Korean Commercial Code;
• acquisition of business (or sometimes substantial assets), which means gaining ownership of a specific business including assets (liabilities and employees) by purchase or transfer of ownership from a former owner of the business; and
• participation in the establishment of a new company. Only the investor with the largest shareholding of a new company is required to notify.

An interlocking directorate is subject to merger control only when the company subject to the notification requirement is a large company (ie, a company or companies with total assets or total sales of all affiliates of over KRW2 trillion). In addition, although other transactions involving a large company are subject to pre-merger notification, an interlocking directorate is subject to post-merger notification (see 3.1 Deadlines for Notification).

Transfers of shares, interlocking directorates and company establishment among affiliates are not subject to notification requirements (Articles 9.1 and 11.1 of the MRFTA). However, mergers and business transfers among affiliates are subject to notification requirements, although such transactions will be subject to simplified review (see the Merger Filing Guidelines).

Transactions not involving the transfer of shares or assets can be subject to notification requirements, for example, in the case of interlocking directorates.

There is no definition of “control” under the MRFTA for the purpose of determining the scope of a merger. However, the de facto standards of control can be indirectly inferred from the definition of transaction types as merger filing requirements, such as percentage of shares and interlocking directorate (see 2.3 Types of Transactions).

The jurisdictional threshold is that one party to the transaction (including worldwide affiliate companies both before and after the transaction) has total assets or annual turnover in the amount of KRW300 billion (or KRW2 trillion in the case of an interlocking directorate) or more and the other party in the amount of KRW30 billion or more.

The acquirer will be required to report the transaction to the KFTC even if the above requirements are not satisfied when the transaction amount meets a certain threshold and the acquiree has substantial business activities in the domestic market (Article 11.2 of the amended MRFTA). The duty to file arises when (i) the transaction amount is KRW600 billion or more and (ii) the products or services were sold or provided to 1 million purchasers or more in the domestic market in any month or the annual R&D budget was KRW30 billion or more, during the three years immediately preceding the filing (Article 19 of the Enforcement Decree of the MRFTA).

In addition to these general thresholds, local thresholds are applied to overseas mergers, including transactions where:

• a foreign company acquires another foreign company; or
• a Korean company acquires a foreign company.

If each of these merging parties (including worldwide affiliate companies) has an annual local turnover of KRW30 billion or more, notification of the merger is mandatory. Turnover generated from transactions between affiliates is not included when calculating the annual local turnover (see the Merger Filing Guidelines).

When a foreign company participates in establishing a company in Korea or when a foreign company acquires a Korean company, the local turnover threshold does not apply.

The MRFTA does not provide special jurisdictional thresholds applicable to particular sectors (see 1.2 Legislation Relating to Particular Sectors).

Jurisdictional thresholds are calculated based on total assets or annual turnover (see 2.5 Jurisdictional Thresholds), and the calculation includes worldwide affiliate companies both before and after the transaction.

When converting a foreign company’s financial statements in foreign currency to Korean won, the exchange rate as of the end of the year immediately preceding the fiscal year of the merger is applied to the total assets, paid-in capital, and total shareholders’ equity, while the average exchange rate of the immediately preceding fiscal year is applied to the total turnover (same for local turnover) and net profit (see the Merger Filing Guidelines).

Jurisdictional thresholds, based on total assets or annual turnover, are based on publicly disclosed book value.

Jurisdictional thresholds are calculated on a group-wide basis, meaning that the total assets or total turnover of all the affiliate companies worldwide, both before and after the transaction, are relevant.

In Korea, the calculation of jurisdictional thresholds is not based on the total turnover of the seller and target so the seller’s turnover does not need to be included with that of the target.

“Group-wide” is defined as companies belonging to the same “business group,” where “business group” is defined as a group of companies, the businesses of which are controlled by the same person, determined by shares or “control” (Article 2 of the MRFTA). 

Although there is no explicit regulation, the KFTC may consider changes in the business during the reference period, and the notifying party may submit additional materials relevant to a change in the business that is beneficial to them.

Foreign-to-foreign transactions are subject to merger control if each party (including worldwide affiliate companies) to the transaction has an annual local turnover of KRW30 billion or more (see 2.5 Jurisdictional Thresholds) in addition to satisfying the general thresholds. Turnover generated from transactions between affiliates is not included when calculating the annual local turnover (see the Merger Filing Guidelines).

In South Korea, there is no market share jurisdictional threshold.       

There is no special provision in the MRFTA exempting joint ventures. Thus, joint ventures will be subject to merger control under the MRFTA if the parties to the joint venture meet the threshold requirements (see 2.3 Types of Transactions). The largest shareholder of a newly established company (ie, new joint venture company) must file a merger notification to the KFTC.

The KFTC is not allowed to investigate a transaction that does not meet the thresholds for the purpose of merger control. However, the act of jointly establishing a new company (ie, a new joint venture company) can be considered collusion under certain circumstances (Article 40 of the MRFTA), and in these cases it is possible that the KFTC will conduct a cartel investigation.

The KFTC can sanction a party to a transaction in violation of the MRFTA within five years of commencing an investigation and, if there was no such investigation, within seven years from the end of the unlawful act (Article 80 of the MRFTA).

In the case of pre-notification, implementation of a transaction must be suspended until clearance by the KFTC (Article 11.8 of the MRFTA).

The KFTC can impose an administrative fine of up to KRW100 million for implementation of a pre-notified merger before its clearance (Article 130 of the MRFTA).

For reference, anti-competitive mergers were previously criminally punishable; however, criminal punishment of anti-competitive mergers has been abolished in the amended MRFTA effective 30 December 2021. 

If a party implements a transaction without the KFTC’s approval, the KFTC may issue a corrective order to the party to suspend the transaction or make remedies (Article 14 of the MRFTA). Thus, in practice, parties rarely implement transactions after notifying the KFTC but before receiving its approval. This practice applies to both foreign-to-foreign and domestic transactions.

However, there are cases where a party subject to pre-merger notification notifies the KFTC after the merger, in which case the KFTC imposes an administrative fine. The KFTC’s decision to impose an administrative fine is made public.

There is no exception to, or procedure for waiving, the suspensive effect in South Korea.

There is no circumstance in which the KFTC permits closing before clearance.

Pre-merger notification is required for certain types of business combination where (i) either of the parties to the transaction is a large company that has worldwide assets or annual turnover of KRW2 trillion or more (including the assets and turnover of its affiliates), or (ii) the transaction amount meets a certain threshold and the acquiree has substantial business activities in the domestic market (see 2.5 Jurisdictional Thresholds) (Article 11.6 of the MRFTA). If either of such requirements is satisfied, notification can be filed at any time after the date of signing the agreement but before the completion of the transaction, as long as the transaction is not completed before it is cleared by the KFTC.

If neither of the requirements above is satisfied, only a post-merger notification is required. For these mergers, notification should be made within 30 days after the completion of the transaction.

An interlocking directorate requires only a post-merger notification, even if one of the parties is a large company.

The KFTC imposes administrative fines for violation of notification deadlines in practice, and any such decisions are publicly disclosed.

Generally, both pre-merger and post-merger notifications occur after signing of a binding agreement (see 3.1 Deadlines for Notification).

However, a system of voluntary preliminary notification is also in place (Article 11.9 of the MRFTA). Even without a signed agreement, a company that plans to merge with another can request that the KFTC review the planned merger before the ordinary notification period and decide whether the planned merger would substantially restrict competition. In such a case, the notifying party still needs to file a formal notification with the KFTC and go through the simplified review process (see 3.11 Accelerated Procedure).

There is no filing fee for the KFTC’s review or notification.

The acquiring company is responsible for filing. For an acquisition or ownership of another company’s shares, the party that acquires or owns at least 20% of another company (or at least 15% for companies listed on the Korea Exchange) must notify the merger to the KFTC. For an establishment of a new joint venture company, the largest shareholder must notify the KFTC.

The KFTC provides notification forms for five different types of transactions, such as share subscriptions, in its Merger Filing Guidelines (see 2.3 Types of Transactions). A business entity subject to the notification requirement must provide information about the notifying company and the counterpart company’s status, finance, sales in South Korea, and the competition in the relevant market using the relevant form for the transaction and must submit a report about potential anti-competitive effects. If the KFTC deems it necessary, it may request further data or information.

A business entity subject to the notification requirement must submit the relevant notification form, depending on transaction type, along with the documents required by the form. The business entity must submit materials supporting the nature of the transaction, such as the shareholder status of the notifying company and the target company, the status of affiliates, the status of the relevant market, transaction agreements, the interlocking directorate plan (in the case where the notifying entity and a related party are planning to acquire shares or an interlocking directorate with respect to a company in its possession), a copy of corporate registration and the annual audit report. 

The filing must be submitted in the Korean language, and documents in a foreign language are usually submitted with a Korean translation.

Documents are not required to be certified, notarised or apostilled.

If the details of notification or attached documents are incomplete, the KFTC will request the party to supplement the materials and will suspend the review process until a sufficient response is submitted.   

The KFTC requires parties to supplement material in practice when it deems it necessary during review.

The KFTC imposes an administrative fine if the notifying party supplies misleading information in the filing (Article 130 of the MRFTA). However, it is difficult to find an instance where a notifying party supplied misleading information in practice.

The review process in South Korea is not divided into phases and there are regulations only on the possibility of extending the review period. 

In principle, the KFTC must finish the review within 30 days from the notification, but it may extend the review period up to an additional 90 days after the lapse of the initial 30-day period. Accordingly, the KFTC may review merger cases for 120 days in total.

There are no pre-notification discussions in South Korea. However, parties can submit a voluntary preliminary notification and request for the KFTC’s review prior to the formal notification (see 3.2 Type of Agreement Required Prior to Notification).

The majority of the notified mergers pass the KFTC review without further requests for information. If the KFTC finds it necessary to request additional information, mostly relating to issues raised during its review, it will ask the parties to provide the information within a certain time limit. In such case, the progress of the review period is suspended (ie, the clock is stopped) until the parties satisfactorily provide the requested additional information.

In the KFTC Merger Review Guidelines, the KFTC presumes that the following mergers do not substantially restrict competition and therefore conducts a simplified review:

• mergers between affiliates;
• transactions in which a controlling relationship is not established between parties;
• conglomerate mergers by companies other than a large company that has worldwide assets or annual turnover of KRW2 trillion or more (including those of its affiliates);
• conglomerate mergers that are not substitutive or complementary;
• mergers with a clear purpose of investment (PEF, ABS, SPC);
• mergers that were approved by the KFTC through the voluntary preliminary notification process (see 3.2 Type of Agreement Required Prior to Notification); and
• the target is a foreign company, and the merger does not affect the domestic market, considering factors such as the parties’ nationality and business area as well as the target’s potential business area and domestic turnover.

In such cases, the KFTC only reviews factual matters of the notified case based on documentation provided and informs the company of the review result, in principle, within 15 days from the date of notification.

The KFTC has discretion to determine the timeline for clearance within the specified review period (see 3.8 Review Process) and there are no official procedures for expediting the review process.

The MRFTA prohibits a merger that substantially restricts competition in a particular market.

The MRFTA provides that the following circumstances substantially restrict competition (Article 9.3 of the MRFTA):

• when the aggregate market share of each of the merging companies meets all of the following conditions:
1. it meets the requirements for a market dominant company (that is, the market share of a single company is above 50%, or the sum of the market share for no more than three companies is above 75% in a particular market);
2. it is the largest in the relevant market; and
3. it exceeds the market share of the second-ranking company in the market by more than 25%; or
• when a merger conducted directly by a large company or through its related party meets both of the following conditions:
1. the merger is in a business area where the market share of small and medium-sized enterprises under the Framework Act on Small and Medium-Sized Enterprises is at least two-thirds of the entire market; and
2. the merger would result in the large company having at least 5% of the market share.

Consideration of Market Concentration

A merger is considered not to restrict competition substantially in the following cases (analysis of market concentration, KFTC Merger Review Guidelines):

• For horizontal mergers, one of the following applies:
1. the post-merger Herfindahl-Hirschman Index (HHI) (that is, an assessment of market concentration made by taking the sum of the squares of individual market shares of all industry participants) is less than 1,200; or
2. the post-merger HHI falls between 1,200 and 2,500, and the HHI increase between the pre- and post-merger positions is less than 250 points; or
3. the post-merger HHI exceeds 2,500, and the HHI increase is less than 150.
• For vertical and conglomerate mergers, one of the following applies:

1. in each of the relevant markets, the post-merger HHI is less than 2,500 and the market share of the party is less than 25%; or
2. each of the parties’ ranks is no higher than fourth in terms of market share in the relevant market; or
3. the market share of each party is less than 10% in the relevant market.

In the case of “innovative markets” (markets where innovative activities such as research and development are essential due to the nature of the industries, such as IT and semiconductors), market shares may be difficult to determine based on the total product sales. Consequently, the market concentration can be determined by taking into account R&D costs, size of assets and capacity specialised for innovative activities, the number of patent applications or citations, and the number of companies that participate in the innovation competition (as provided in the 2019 revision of the KFTC Merger Review Guidelines).

Consideration of Other Factors

However, whether or not competition would actually be restricted will be determined based on the totality of the following factors in addition to the market concentration:

• to determine whether a horizontal merger would substantially restrict competition, factors such as market concentration before and after the merger, monopoly effects, co-operative effects, level of foreign and global competition, the possibility of new entrants, and the existence of substitute products and adjacent markets are considered together;
• to determine whether a vertical merger would substantially restrict competition, factors such as market foreclosure effects and co-operative effects are considered together; and
• if there is a possibility that the merged company might use “information assets” (ie, a set of information that is collected for various purposes and managed, analysed and utilised in consolidation, such as big data) to form, strengthen or maintain its market power, the following factors are also considered (as provided in the 2019 revision of the KFTC Merger Review Guidelines):
1. whether the information assets that would be obtained through the merger are difficult to obtain through other methods;
2. whether the merging companies’ incentive and ability to limit their competitors’ access to information assets would increase as a result of the merger;
3. whether, for example, restriction on access to information assets after the merger would be expected to have negative effects on competition; and
4. whether the merged company would be more likely to impede non-price competition, such as reducing the quality of the services related to the collection, management, analysis and utilisation of information assets.

The definition of the market related to the transaction is determined based on the object of the transaction (product market) and the transaction region (geographic market).

Product Market

The product market, based on the objective of the transaction, is seen as the collection of products that a considerable number of buyers could instead choose to purchase in the event of a meaningful increase in the price of a certain product for a meaningful period of time. The following factors are considered:   

• similarity of the products’ functions and utilities;
• similarity of the products’ prices;
• buyers’ perception of product substitution and related purchasing behaviour;
• sellers’ perception of product substitution and related decision-making behaviour;
• Korean Standard Industrial Classification notified by the National Statistical Office of Korea;
• transaction stage (manufacturing, wholesale, retail); and
• transaction counterparty.

However, in the case where the industry of the merged company, by its nature, requires innovative activities such as R&D or involves sustainable innovative competition, and where at least one of the merging parties is an important business entity in that competition, areas with similar innovative activities can be defined separately (innovative market) or defined together with the manufacturing and sales markets (as provided in the 2019 revision of the KFTC Merger Review Guidelines).

Geographic Market

The geographic market, based on the transaction region, is seen as the entire region into which a considerable number of buyers could shift their purchases in response to an event where the price of a certain product remains constant in all other regions, but there is a meaningful increase in the product’s price for a meaningful period of time in a specific region. The following factors are considered:

• characteristics of the product (product decay, transmutability, fragility) and seller’s business ability (production capacity, scope of sales network);
• the buyer’s perception of the possibility of changing the purchasing region and related purchasing behaviour;
• the seller’s perception of the possibility of changing the purchasing region and related decision-making behaviour; and
• ease of shifting purchasing region in terms of time, economy and legality.

There is no de minimis clause based on the parties’ total sales or market size in South Korea.

The KFTC refers to the relevant decisions of foreign competition authorities in some cases. In particular, as the US, EU, Japanese and Chinese authorities and the KFTC often simultaneously conduct reviews of the same transaction, it is common for the KFTC to consider decisions from the foregoing jurisdictions.

The KFTC investigates whether competition would be substantially restricted in a certain transaction area, regardless of the nature of the merger, such as horizontal, vertical, or both. The KFTC considers monopoly effects, co-operative effects and market foreclosure effects in addition to market concentration in its investigation (see 4.1 Substantive Test).

Even if a merger would restrict competition, if the effect of enhanced efficiency resulting from the merger would be larger than the negative effects of restricting competition, or if a merging company cannot survive without the merger, the KFTC may permit such a merger (Article 9.2 of the MRFTA). However, the burden of proof of the above lies with the merging parties.   

The effect of “enhancing efficiency as a result of a merger” refers to the enhanced efficiency in the areas of production, sales and R&D, or the effect of enhanced efficiency on the national economy as a whole as determined based on the following (KFTC Merger Review Guidelines).

The effect of enhancing efficiency in the areas of production, sales and R&D can be assessed by taking the following into consideration:

• whether production cost can be minimised through economy of scale, integration of production facilities or rationalisation of production process, among others;
• whether sales cost can be lowered, or sales or exports can be boosted by integrating or sharing sales networks;
• whether sales or exports can be boosted by sharing market information;
• whether logistics cost can be minimised by sharing transportation and storage facilities;
• whether production-related technology and research abilities can be improved by complementing each other’s technology or sharing or effectively utilising a skilful workforce, organisation and capital; and
• whether other expenses can be reduced considerably.

The effect of enhancing efficiency on the national economy as a whole can be assessed by taking the following into consideration:

• whether the enhanced efficiency makes a significant contribution to job creation;
• whether the enhanced efficiency makes a significant contribution to the development of regional economies;
• whether the enhanced efficiency makes a significant contribution to the development of forward- and backward-related markets;
• whether the enhanced efficiency makes a significant contribution to the stabilisation of the nation’s economy through a stable supply of energy, among others; and
• whether the enhanced efficiency makes a significant contribution to addressing environmental pollution.

The KFTC takes into account non-competition issues (eg, job creation, development of regional economies, development of forward- and backward-related markets, stabilisation of the nation’s economy and reductions in environmental pollution) in determining national enhanced efficiency effects (see 4.5 Economic Efficiencies), which is explicitly permitted under the KFTC Merger Review Guidelines.

The notifying company submits a report on enhanced efficiency effects in a merger filing, and the KFTC takes this into account during its review. However, in practice, there has been no case where a merger was permitted, despite a finding that the merger restricted competition, because of enhanced efficiency effects.

The MRFTA treats joint ventures as business combinations that are subject to merger control. A party in the process of becoming the largest shareholder of a newly established company (ie, new joint-venture company) must file a merger notification to the KFTC.

In any case, some joint ventures formed between competitors may be considered unlawful restrictive agreements or practices if the parties (ie, parent companies) intend to carry out the main part of their business by establishing a joint venture (Article 40.1 of the MRFTA).

The KFTC can prohibit or interfere with a transaction by imposing various remedies, including (Article 14 of the MRFTA):

• prohibition of transactions;
• disposition of all or parts of the shares acquired;
• resignation of an officer;
• transfer of business;
• restrictions on the business method or business scope of the combined enterprise to prevent the negative effects of restricted competition; and
• any other measures necessary to correct violations of the MRFTA.

The KFTC imposes remedies in the form of corrective measures when it makes an adverse decision on a case. The KFTC can require that the parties make a report confirming compliance with remedies within a certain time period.

When the KFTC has concerns about a transaction, the parties may voluntarily submit corrective measures, such as divestitures or behavioural remedies, and apply for a “consent decree”. A “consent decree” is a procedure whereby a company subject to the KFTC investigation submits a corrective measure for voluntary resolution to resolve anti-competitive concerns, and the KFTC concludes its investigation without finding any infringement when the corrective measure is deemed fair, to restore free competitive order (Article 89 of the MRFTA). 

In September 2013, Microsoft executed an agreement with Nokia to acquire Nokia’s mobile phone and service business and filed a merger notification with the KFTC in November 2013. In February 2015, the KFTC decided to initiate the consent decree process with Microsoft to resolve issues in connection with the acquisition. This was the first merger review case where the KFTC decided to initiate the consent decree process. 

When complying with standards for imposing remedies regarding a merger, the KFTC must comply with the following general principles.

Remedies must reflect the facts of a merger properly and be reviewed on a case-by-case basis, and must remedy effectively anti-competitive concerns caused by the merger. This is determined by considering factors such as whether the remedy can resolve all of the anti-competitive concerns caused by the merger, whether the remedy can be easily implemented and supervised, and whether the anti-competitive concerns can be eliminated in the near future.

The remedy must be imposed to the minimum extent necessary to resolve the anti-competitive concerns caused by the merger and restore or maintain the current level of competition effectively and the remedy must be feasible and sufficiently clear and specific to determine objectively whether it has been implemented.

In the event that a remedy is imposed, the remedy must be structural, and behavioural remedies can only be imposed with the structural remedies to supplement the implementation of the structural remedies. However, if structural remedies are impossible or ineffective, imposing only behavioural remedies is permitted.

The KFTC imposes appropriate structural and behavioural remedies to resolve concerns about anti-competitive effects on a case-by-case basis. In recent cases, the KFTC mainly imposed measures such as restrictions on the business method and transfer of business.

However, it is difficult to find cases where a remedy addressed non-competition issues.

When the KFTC has concerns about a transaction, the parties may voluntarily submit corrective measures, such as divestitures or behavioural remedies, and apply for a “consent decree” (see 5.2 Parties’ Ability to Negotiate Remedies).

The KFTC cannot initiate a consent decree procedure on its own. Instead, the company suspected of a violation must submit a written application for a consent decree to the KFTC. The consent decree application must include facts that specify the conduct engaged in by the company and corrective measures necessary for the restoration of competitive order (Article 89 of the MRFTA).

The KFTC decides whether to initiate the consent decree process by comprehensively considering factors such as the need for quick measures and the need for direct compensation for consumer harm. Once the consent decree process is initiated, the KFTC must provide interested parties, including the applicant, an opportunity to submit their opinion during a period of at least 30 days, and provide notification thereof to interested parties or make an announcement through its official gazette or website (Article 90 of the MRFTA).

The KFTC may approve a consent decree when the corrective measure submitted by the applicant satisfies the following requirements:

• the corrective measure must be in balance with the corrective measure and other sanctions expected to be ordered in the event that the relevant conduct is found to be a violation of the MRFTA; and
• the corrective measure must be likely to be found appropriate to restore fair and free competitive order.

When imposing asset divestitures, the KFTC must specify the assets to be sold, the sale period and other additional obligations.

The merging company as a rule selects the counterparty of the divestiture, and the KFTC may require the merging company to consult in advance with the KFTC on the adequacy of the counterparty.

The KFTC may require the merging company to consult with the KFTC before concluding the asset sale agreement in order to supervise the adequacy of such agreement.

As a rule, the deadline for implementing a divestiture is determined by considering the size of the assets to be sold, the scope, complexity, overall economic conditions and industry practices within the range of three to six months. However, the KFTC may extend the implementation period once within the range of three to six months, pursuant to its authority or at the request of the merging company.

In the event that the KFTC imposes a remedy, it has in effect approved the transaction on the condition that the remedy is implemented, and thus the transaction can proceed. However, the remedy must be implemented within the specified period.

In the event that a party fails to implement the remedy imposed by the KFTC, the KFTC can impose an enforcement fine (Article 16 of the MRFTA).

Furthermore, if a party does not comply with a remedy, the party may be punished by imprisonment of not more than three years or by a fine not exceeding KRW150 million (Article 125 of the MRFTA).

The KFTC issues a formal written decision after completing the review process.

The KFTC only publicises the result of its review if an anti-competitive merger was brought to a full Commission hearing or if it is in the public interest.

In 2022, a total of 112 merger notifications were filed with the KFTC regarding foreign-to-foreign transactions, and none of those transactions were subject to corrective measures.

In 2021, a total of 110 merger notifications were filed with the KFTC regarding foreign-to-foreign transactions, and none of those transactions were subject to corrective measures.

In 2020, a total of 105 merger notifications were filed with the KFTC regarding foreign-to-foreign transactions, and the KFTC imposed remedies in connection with Danaher Corporation’s acquisition of the biopharma business from General Electric Company. The KFTC required the sale of all Danaher or General Electric assets related to eight biopharmaceutical processing products.

In 2019, a total of 127 merger notifications were filed with the KFTC regarding foreign-to-foreign transactions, and none of those transactions were subject to corrective measures.

In 2018, a total of 95 merger notifications were filed with the KFTC regarding foreign-to-foreign transactions, and the KFTC imposed remedies in the following two cases:

• in connection with Qualcomm’s acquisition of NXP, the KFTC required the sale of standard-essential patents and system patents owned by NXP; and
• in connection with the merger between Linde and Praxair, KFTC required the sale of all Linde or Praxair assets held in South Korea related to domestic supply of oxygen, nitrogen and argon.

Furthermore, in November 2017, the KFTC imposed behavioural remedies on the share acquisition between Maersk Line A/S and Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG. In April 2017, the KFTC imposed structural remedies on the acquisition of E. I. du Pont de Nemours and Company by The Dow Chemical Company.

There is no regulation on ancillary restraints in Korea.

Third parties are not allowed to participate actively in the review process. However, they can submit information and their opinions. Third parties are not required to show a special interest in the transaction.

Any class of third party (eg, formal complainant) does not have different rights from those of other third parties (Article 93.1 of the MRFTA). Third parties can also be heard during the full Commission hearing upon the KFTC’s approval (Article 93.2 of the MRFTA).

When the KFTC recognises that it is necessary, it can consider the opinions of interested parties. In the case of a merger that has anti-competitive concerns, the KFTC often contacts third parties for their opinions (ie, competitors, customers, suppliers and experts), and the KFTC generally respects these opinions. In addition, third parties can also be heard during a full Commission hearing and present their opinions upon the KFTC’s approval.

In practice, the KFTC contacts third parties in a variety of ways, such as telephone calls or a formal request to submit an opinion regarding the relevant transaction.

Because there is no negotiation procedure in Korea, there are no cases where the parties propose remedies or where the KFTC contacts a third party regarding a market test of the remedies.

The KFTC does not publicise merger notifications or related information obtained during its review. The KFTC only publicises the result of its review if an anti-competitive merger was brought to a full Commission hearing or if it is in the public interest.

The KFTC keeps information related to business secrets confidential, and any party can request that certain information it provides to the KFTC be kept confidential.

Based on Article 56 of the MRFTA, the KFTC can:

• conclude co-operation agreements with foreign governments;
• provide assistance for the enforcement activities of foreign competition authorities (this must not infringe South Korean national laws or important national interests); and
• support a foreign government’s law enforcement activities through reciprocity, even though it may not have signed any co-operation agreement with the foreign government.

Co-operation can occur regarding both general policy matters and specific transactions. However, in practice, co-operation occurs in relation to reviews of the same or similar transactions.

The KFTC is not required to obtain the parties’ permission to co-operate with other jurisdictions.

Any party engaged in a merger can file an appeal with the KFTC or Seoul High Court if dissatisfied with a decision of the KFTC.

The appellant can file an appeal with the KFTC for reconsideration within 30 days of receiving the written decision it wishes to challenge (Article 96 of the MRFTA). It can also appeal directly to the Seoul High Court within 30 days of receiving the written decision it wishes to challenge for judicial review (Articles 99 and 100 of the MRFTA). If the appellant is dissatisfied with the result of the KFTC’s reconsideration of its original decision, it can still file an appeal to the Seoul High Court for judicial review within 30 days after receiving the KFTC’s written decision on reconsideration of its original decision.

In the case of a merger where Shinsegae acquired shares of Wal-Mart Korea, the KFTC imposed a remedy ordering Shinsegae to transfer four Wal-Mart Korea regional branches to a third party other than the top three companies in terms of sales. The Seoul High Court found that:

• in the case of Daegu’s Siji-Gyeongsan district, which was one of the four regions, only Shinsegae and Wal-Mart operated stores there among the top three companies;
• it is difficult to find a potential acquirer other than the top three companies in an oligopoly of four to five companies; and
• the order violated the proportionality principle because Shinsegae would have no choice but to accept unfavourable sales conditions, given that both the sale period and target transfer company were limited.

Thus, the Seoul High Court held that the KFTC’s remedy orders for all four regions were unlawful (Seoul High Court Decision 2006Nu30036 rendered on 3 September 2008).

Third parties have no right of appeal.

There is no foreign direct investment or foreign subsidies legislation with separate filing requirements for transactions other than those mandated by the MRFTA.

In February 2023, the KFTC issued an advance notice of an amendment bill for the MRFTA that would exempt certain types of transactions from notification obligation (eg, inter-affiliate mergers and establishment of PEFs) and allow parties to officially submit voluntary commitments as remedies during the review process. The amendment bill is expected to be submitted to the National Assembly before or in June 2023.

In December 2022, the KFTC revised its Merger Review Guidelines in order to expand the applicability of simplified review and safe harbours to vertical and conglomerate mergers. Under the revised Guidelines, the following mergers are subject to simplified review: (i) real estate investment for the purpose of earning investment returns; (ii) additional investment in an institutional private placement fund to become a new limited partner; (iii) concurrent executive employment accompanying investment in a startup company; and (iv) other cases with a clear investment purpose. Furthermore, in the case of vertical and conglomerate mergers, there is a presumption of no anti-competitive concerns where the combined market share of the parties involved is below 10% in each relevant market.

The KFTC also revised its Merger Filing Guidelines in order to expand the applicability of simplified filing to the following: (i) establishment of a project finance investment company; (ii) additional investment in an institutional private placement fund; and (iii) concurrent executive employment accompanying investment in a startup company. Simplified filing allows for reduced submission requirements and requires online filing in principle.

In December 2020, the MRFTA was wholly amended, and the amended MRFTA has been effective since 30 December 2021. With respect to merger filings, the duty to report based on the transaction amount has been added by the amendment. Even when an acquiree’s total assets or annual turnover do not meet the current filing thresholds, the acquirer will be required to report the transaction to the KFTC when the transaction amount meets a certain threshold and the acquiree has substantial business activities in the domestic market (Article 11.2 of the MRFTA).

The transaction amount subject to filing is KRW600 billion. Substantial business activities of the acquirer in the domestic market will be determined based on whether the products or services were sold or provided to 1 million purchasers or more in the domestic market in any month or the annual R&D budget was KRW30 billion or more, during the three years immediately preceding the filing (Article 19 of the Enforcement Decree of the MRFTA).

In February 2019, the KFTC revised its Merger Review Guidelines in order to take into account “innovative markets” and “information assets (such as big data)” in the merger review process. The revision specified standards for defining the relevant market, calculating the market concentration and determining anti-competitive effects in reviewing M&A relating to industries based on innovation (ie, industries where innovation competition such as R&D is essential and occurs continuously), such as IT, and provided a more effective review of innovation reducing effects manifested in, for example, potential acquisition of competitors.

According to the revised KFTC Merger Review Guidelines, when a company acquires another company in the process of product R&D or that has accumulated a large amount of information assets, even if the acquiring company’s external market share in the relevant industry is not large, the M&A can still consider anti-competitive issues resulting from “innovation reducing effects” or the “monopolisation of information assets” in an innovation market. Thus, in reviewing M&A in the innovative industries (R&D-intensive industries) or information assets industries (industries that accumulate a large amount of data such as mobile communications, SNS and finance), the KFTC is now able to consider the characteristics of innovative markets in defining the relevant industry and reviewing anti-competitive effects (see 4.1 Substantive Test and 4.2 Markets Affected by a Transaction).

The KFTC took into account “information assets” during its deliberation over the acquisition of Woowa Brothers, the largest food delivery app operator in South Korea, by Delivery Hero SE, a German food delivery service company. The KFTC ruled that the acquisition of Woowa Brothers by Delivery Hero raised anti-competitive concerns because consumers might become locked in the services at substantially lower cost and higher efficiency than competitors due to the merging of information assets (see 10.2 Recent Enforcement Record).

In 2022, the KFTC reviewed a total of 1,027 merger filings (amounting to KRW325.5 trillion), which was a decrease of 86 cases compared with 2021. The KFTC imposed administrative fines in 20 of those cases. The KFTC reviewed a total of 112 foreign-to-foreign transactions and none of those transactions were subject to corrective measures. The main details of the cases most recently reviewed by the KFTC are as follows.   

• In April 2023, the KFTC conditionally approved Hanwha Group’s acquisition of Daewoo Shipbuilding & Marine Engineering. The KFTC found anti-competitive concerns in the domestic naval vessel parts market and the domestic naval vessels market due to Hanwha Aerospace and Hanwha Systems’ significant presence in the domestic naval vessel parts market and Daewoo Shipbuilding & Marine Engineering’s prominent position in the domestic naval vessels market. The corrective measures placed by the KFTC on Hanwha Aerospace, Hanwha Systems and Daewoo Shipbuilding & Marine Engineering, for a period of three years, prohibit: (i) discriminatory pricing for naval vessel parts; (ii) providing technical information regarding naval vessel parts on a discriminatory basis; and (iii) providing trade secrets obtained from competitors to affiliates.
• In February 2022, the KFTC granted conditional approval of the acquisition of Asiana Airlines, the second-largest airline in South Korea, by Korean Air, the largest airline in South Korea. The KFTC found that the merger raised concerns of restraining competition on some of the overlapping routes and imposed structural remedies such as transfer of slots and traffic rights within the next ten-year period. In parallel, the KFTC imposed a restriction on rate increases on the routes in question and a prohibition on a decrease in the number of supplied seats that would last during the performance of the structural remedy.
• In January 2022, Korea Shipbuilding & Offshore Engineering withdrew its merger filing with respect to its acquisition of Daewoo Shipbuilding & Marine Engineering. The reason appears to be that the European Commission prohibited the merger between the two companies on 13 January 2022. The KFTC terminated its review following the withdrawal of filing.
• In 2021, the KFTC reviewed a total of 1,113 merger filings (amounting to KRW349 trillion), which was anincrease of 248 cases compared with 2020. This increase in filings resulted from the upturn in the M&A market that followed the economic downturn caused by COVID-19. The KFTC imposed administrative fines in 30 of those cases. The KFTC reviewed a total of 110 foreign-to-foreign transactions and none of those transactions became subject to corrective measures.
• In December 2020, the KFTC granted conditional approval of the acquisition of Woowa Brothers, the largest food delivery app operator in South Korea, by Delivery Hero SE, a German food delivery service company. By reasoning that the acquisition raised anti-competitive concerns, the KFTC imposed a remedial order under which all of the shares (100%) of Delivery Hero Korea, the second-largest food delivery app operator in South Korea, held by Delivery Hero SE had to be sold.

According to the KFTC’s work plan for 2023, the KFTC will review mergers in the so-called “fourth industrial revolution” industries including gaming and the cloud based on their ripple effect on upstream and downstream industries as well as consumer welfare. The KFTC also plans to conduct thorough reviews of mergers involving big tech companies that raise concerns about increasing market dominance.

To enhance the scrutiny of mergers involving platform companies, the KFTC is considering the following amendments to its Merger Review Guidelines, with the revised Guidelines expected to come into effect as early as 2023:

• addressing market definition techniques and principles tailored to the platform industry;
• addressing criteria for assessing anti-competitive concerns tailored to the platform industry;
• addressing efficiency gains unique to platform mergers; and
• reclassifying certain non-substitutable and non-complementary conglomerate mergers involving platforms so that they are no longer subject to simplified review.