Additional Exemptions to the Merger Notification Requirement, New Merger Remedy Discussion Process and Electronic Document Delivery System Introduced to the Monopoly Regulation and Fair Trade Law

On January 25, 2024, the National Assembly passed an amendment to the Monopoly Regulation and Fair Trade Law (“FTL”). The amendment bill was earlier approved by the Cabinet on June 20, 2023, as mentioned in our previous newsletter (Link). This amendment is expected to bring significant changes to the current merger control regime, including merger notification thresholds, as well as introducing a new remedy discussion process and changing the hearing process of the Korea Fair Trade Commission (“KFTC”).

We summarize the key details of the amended FTL below:

Expansion of Merger Notification Exemptions

The amendment will newly exempt from the merger notification requirement the following four types of transactions, which, according to the KFTC, accounted for approximately 42% of all M&A transactions notified to the KFTC in 2022. This exemption will take effect six months after the amendment is promulgated by the Government.

Establishment of PEFs (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), 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 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.

Merging Parties’ Submission of Remedy Proposal

Currently, remedy discussions in merger cases are informal, and the KFTC has complete discretion in creating corrective orders. However, under the new system, companies will have the opportunity to submit formal remedy proposals during the review process to address these concerns and discuss the specific remedies with the case team. The KFTC’s remedies will continue to be issued in the form of corrective orders, but the KFTC can reflect these proposals when devising a corrective order if they are sufficient to address competitive concerns that may arise from the merger and can be implemented within a reasonable timeframe.

This new system is expected to result in corrective orders that are more reflective of the actual market conditions, as they are proposed by the market participants. Furthermore, since similar systems already exist in major jurisdictions, such as the US, EU, and UK, it is expected to improve procedural consistency in global merger transactions. This exemption will come into effect six months after the amendment is promulgated.

Electronic Submission and Delivery of Documents during Hearing and Deliberation Process

The amendment will allow for the electronic submission and delivery of documents during the hearing and deliberation process upon consent by the recipient. Documents will be deemed delivered once the recipient checks them. If the recipient fails to check a document uploaded on the new system, it will be deemed delivered after seven days (except for the KFTC’s decision, which is given 14 days).

This new system is expected to eliminate administrative inefficiencies associated with paper submissions and notifications, expediting the overall hearing process. This exemption will take effect three years after the amendment is promulgated.

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