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KFTC’s Amended Merger Review Guidelines Take Effect


On April 29, 2024, the Korea Fair Trade Commission (the “KFTC”) released the amended Merger Review Guidelines (the “Guidelines”) after an extended period of public consultation, which were set to become effective on May 1, 2024. While the final version of the Guidelines reflects some notable changes in response to public comments on the draft version released in November 2023, most of the provisions remain unchanged.

The amended Guidelines feature significant updates to the KFTC’s approach to market definition, competitive assessment, and the assessment of efficiencies from mergers in the digital sector. The amended Guidelines also introduce new criteria for seeking the KFTC’s fast-track review. You can find a summary of the initial draft in our November 2023 newsletter (Link).
Below is a summary of the main changes made in the final draft compared to the initial draft.


Market Definition Criteria

In the final Guidelines, the KFTC now includes examples of nominally free services (zero-price services) in the market definition section. Examples provided by the KFTC are cases where video streaming services are provided in exchange for mandatory viewing of advertisements or collection of personal data, such as search history, instead of monetary payment.


Competitive Assessment

As noted in our November 2023 newsletter, the amended Guidelines expand the list of factors to consider for competitive assessment, especially when analyzing mergers involving online platforms, such as non-price competition, network effects, etc.

In the final Guidelines, however, the KFTC has reduced the extent to which non-price competition or network effects are to be considered in the competitive assessment. They changed the requirement from “must be considered” to “may be considered,”  allowing for greater flexibility in case-by-case assessments.

Further, for conglomerate mergers, the final Guidelines more fully address the “ecosystem” level theory of harm. Unlike the initial draft, which did not acknowledge the positive effects of ecosystem-level competition, the final Guidelines recognize that the creation of an ecosystem can promote inter-ecosystem competition, but may also create entry barriers for service providers offering only a specific subset of the services included in the ecosystem. In other words, while the initial draft only emphasized the anticompetitive concern of building an entry barrier, the final Guidelines make it clear that the KFTC should consider and balance both procompetitive and anticompetitive effects.

The Guidelines now provide that, in addition to market share and the level of concentration, the KFTC may consider other evidence of competitive effects in conducting its assessment. They include:

  • Past cases showing changes in the competitive dynamics in the same or similar markets resulting from merger transactions or new market entries;

  • Upward Pricing Pressure (“UPP”) analysis that can determine the likelihood of price increases even in the absence of a full market concentration analysis;

  • Historical evidence of post-merger changes adopted by the merging parties in previous M&A transactions; and

  • Expert or stakeholder opinions, etc.


Criteria for Assessing Efficiency-Enhancing Effects in Digital Sector

The final Guidelines retain the same criteria for assessing efficiency-enhancing effects as proposed in the initial draft.


Updated Criteria for Fast-Track Review

Under the previous Guidelines, conglomerate mergers involving non-complementary and non-substitutable products were eligible for fast-track review. The initial draft of the amended Guidelines rendered certain types of conglomerate mergers by platform operators ineligible for the fast-track review where the target either has (i) sold or provided its products or services to an average of at least 5 million people or users (about 10% of Korea’s population) during the immediately preceding year, or (ii) invested at least KRW 30 billion in R&D. However, the final Guidelines removed the R&D investment criteria, and retained only the annual average number of customer/user criteria for this exemption.

The final Guidelines further clarify the standards for calculating the number of users. For example, if only a specific business within a company is being acquired, then the number of users specifically associated with the business being transferred should be counted for the purposes of determining whether the transaction is eligible for fast-track review. Additionally, the final Guidelines specify that the number of users of an online service should be counted as the number of unique users, removing duplicate uses by a single user.


Periodic Review of Validity of the Guidelines

Lastly, the final Guidelines introduce a new provision requiring the KFTC to evaluate the validity of the Guidelines every two years beginning January 1, 2024, and to make necessary improvements.

The changes adopted in the final Guidelines reflect relatively minor fine-tuning and clarifications of the specific criteria and standards already proposed in the initial draft. The KFTC’s primary focus continues to be on preventing dominance and promoting the well-being of consumers and small to medium-sized companies, especially in the digital sector. Please refer to our November 2023 newsletter (linked above) for further details on the anticipated implications of the amended Guidelines.