On June 20, 2023, the Cabinet approved a proposed bill to amend the Monopoly Regulation and Fair Trade Law (“FTL”), which seeks to (i) expand the exemptions from the merger notification requirement, (ii) enable companies to submit voluntary commitments to the Korea Fair Trade Commission (“KFTC”) and obtain conditional clearance of anti-competitive mergers, and (iii) allow electronic submission and delivery of documents. If the National Assembly ultimately passes the bill, the amendments are expected to help facilitate a more efficient review of M&As and a more streamlined hearing process at the KFTC. Once approved by the President, the amendment bill will be submitted to the National Assembly for legislative review and approval.
Key Details of the Proposed Amendment
1. Expansion of Merger Notification Exemptions
The proposed amendment will newly exempt from the merger notification requirement the following four types of transactions, which accounted for approximately 42% of all M&A transactions notified to the KFTC in 2022. If the proposed amendment takes effect in its current form, this is expected to result in a significant drop in the number of merger filings the KFTC reviews each year, allowing a more efficient allocation of resources within the M&A Division.
Establishment of PEFs,1 which have a legal personality but are still merely pools of capital to be invested in other companies, because their formation alone would have no substantive impact on competition (a PEF’s acquisition of a target company will continue to be notifiable if the relevant thresholds are met)
Statutory mergers/consolidations and business transfers between a parent company and its subsidiary (i.e., a company over which the parent company already has sole control through a direct shareholding of more than 50%)
Interlocking directorships involving less than 1/3 of the board members (excluding the representative director) because they would not enable the appointing company to exercise a decisive influence on major decisions of the receiving company
Inter-affiliate mergers involving a target (on a stand-alone basis) with total assets or worldwide revenue of less than KRW 30 billion
2. Introduction of Voluntary Commitment System
The proposed amendment will introduce a new system allowing companies to submit formal voluntary commitments to address anti-competitive concerns during the merger review process. The KFTC currently relies on limited information (e.g., provided in the merger filing documents or unofficially submitted remedy proposals) in drafting the corrective orders it imposes against anti-competitive mergers. Under the proposed system, companies will be able to submit a formal voluntary commitment proposal that provides information on the relevant markets and the parties’ views on the feasibility of the commitment terms. In response, the KFTC would review the proposed commitment terms and may request changes if it concludes that the initially proposed terms are insufficient to effectively address the anti-competitive concerns. As similar voluntary commitment systems already exist in other major jurisdictions (e.g., US, EU, and UK), this is expected to enhance procedural consistency across different jurisdictions in global merger transactions.
3. Electronic Submission and Delivery of Documents during Hearing Process
The proposed amendment will introduce the tentatively-named Electronic Data Processing System that will allow respondent companies to submit documents to the KFTC electronically during the hearing process, and the KFTC, with the respondent companies’ consent, will also be able to use electronic means when delivering documents and notices to the respondent companies. Documents and notices sent by the KFTC will be electronically accessible by respondent companies at any time, and companies will still have the option of receiving documents and notices from the KFTC in hardcopy by mail. If a respondent company that agreed to receive documents and notices from the KFTC electronically fails to view a document uploaded on the new system, the document will be deemed to have been delivered after seven days (14 days for the KFTC’s final decision). The new system is expected to remove the administrative inefficiencies associated with paper submissions and notifications and help expedite the overall hearing process.
Going forward, the KFTC is expected to participate in the National Assembly’s review process to ensure that the amendment bill receives proper attention throughout the remaining legislative process and also work on updating the subordinate regulations and guidelines to facilitate a seamless transition to the proposed systems.
1 The actual language in the proposed amendment bill specifically refers to the establishment of PEFs under the Capital Markets and Financial Investment Business Act, and therefore, companies will need to monitor how the KFTC will treat the establishment of PEFs under the laws of other countries.