KOREA FAIR TRADE COMMISSION

Press Release
June 3, 2011

Divestiture of asset, etc., given priority consideration for Remedies against Anticompetitive Mergers
under the "Standard for Imposing Merger Remedies newly established by the KFTC The Korea Fair Trade Commission (KFTC, Chairman: Dongsoo Kim) has established the "Standard for Imposing Merger Remedies" which sets forth the criteria and considerations for imposing remedies against anticompetitive mergers*. * The draft standard, which passed the Regulatory Reform Committee on May 12, was reviewed and approved at the plenary session of the KFTC Committee deliberation on June 15. Major Details Major details of the Standard for Imposing Merger Remedies are as follows. 1. The standard specifies the principle that "Structural remedies take precedence." The standard specifies that structural remedies* designed to keep the market structure itself competitive take precedence over behavioral remedies** in crafting and imposing remedies against anticompetitive mergers. * Corrective measure that brings about certain change in the ownership structure of the merged firm, such as full-stop injunction, divestiture of part of assets, etc. ** Corrective measure that temporarily limits the merged firm's method or scope of sales, such as restriction on the price increase, maintenance of supply quantities, etc. Structural measures are less intrusive to the market (since not directly regulating price,
1

quantities, etc,) and effective in remedying competitive harm*. Thus, it is expected that consumer harm that may arise from anticompetitive mergers can be restrained more effectively when structural remedies are allowed to have precedence over behavioral remedies. * Structural remedies help keep the market structure itself competitive and consequently prevent a merged firm from developing the ability to engage in anticompetitive behavior such as price increase, etc. This principle of preferring structural remedies over behavioral ones is in line with the global standard, which has generally been incorporated into the guidelines for corrective actions by major competition authorities in, such as, the United States, EU, UK. 2. The standard provides for IPR-related actions and specifies the reasons for the imposition of such actions. In line with the recent trend* of international discussions, the standard prescribes disposal or licensing of intellectual property rights (IPR) or other IPR-related actions if competitive concerns regarding a merger primarily arises from the overlap or concentration of intellectual property rights. * The review report (released in June 2005) of INC (International Competition Network), a global consultative body that seeks to facilitate cooperation among competition authorities, puts such IPR actions under a separate category of merger remedies. IPR actions may be considered a type of asset divestiture or behavioral remedies, but, -- now being prescribed separately in the standard-- are expected to work as more effective restraint that prevents the merged firm from acquiring dominant market power upon consolidation of intellectual property rights. 3. The standard presents general principles of imposing merger remedies and criteria for determining remedies by type. The standard sets forth general principles for crafting optimal remedies tailored to specific anticompetitive effects; the principle of effectiveness, the principle of proportionality, the principle of clarity and enforceability, etc. It classifies merger remedies into structural and behavioral ones, and specifies each type of such remedies and criteria for imposing remedies by type. It prescribes full-stop injunction, divestiture of assets and IPR actions for structural remedies, and specifies reasons and criteria for imposing such measures.
2

As for behavioral remedies, measures designed to strengthen the status of competitors and regulate market performance are prescribed, and specific types of such measures are presented in the Annex.

Expected Effects The KFTC is striving to enhance clarity and predictability in the imposition of merger remedies by establishing specific criteria for crafting and imposing merger remedies that comply with the global standard. The newly established standard is expected to help prevent consumer harm caused by an anticompetitive merger more effectively by enabling imposition of optimal remedies against various competitive harms such as price increase or degradation of quality.