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KFTC Standards for Merger Remedies

KFTC Standards for Merger Remedies

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Published by MSH_JD_CPA
Divestiture of asset, etc., given priority
consideration for Remedies against
Anticompetitive Mergers (June 3, 2011)
Divestiture of asset, etc., given priority
consideration for Remedies against
Anticompetitive Mergers (June 3, 2011)

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Categories:Business/Law
Published by: MSH_JD_CPA on Jun 22, 2011
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06/22/2011

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1
KOREA FAIR TRADE COMMISSION
 
Press Release
June 3, 2011
 
Divestiture of asset, etc., given priorityconsideration for Remedies againstAnticompetitive Mergers
under the "Standard for Imposing Merger Remedies” newly established by theKFTC
The Korea Fair Trade Commission (KFTC, Chairman: Dongsoo Kim) has established the"
Standard for Imposing Merger Remedies
" which sets forth the criteria and considerationsfor imposing remedies against anticompetitive mergers
*
.
* The draft standard, which passed the Regulatory Reform Committee on May 12, wasreviewed and approved at the plenary session of the KFTC Committee deliberation onJune 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 remediesagainst anticompetitive mergers.
* Corrective measure that brings about certain change in the ownership structure of themerged 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,
 
2
quantities, etc,) and effective in remedying competitive harm*. Thus, it is expected thatconsumer harm that may arise from anticompetitive mergers can be restrained moreeffectively when structural remedies are allowed to have precedence over behavioralremedies.
* Structural remedies help keep the market structure itself competitive andconsequently prevent a merged firm from developing the ability to engage inanticompetitive behavior such as price increase, etc.
This principle of preferring structural remedies over behavioral ones is in line with theglobal standard, which has generally been incorporated into the guidelines for correctiveactions 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 theimposition 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 competitiveconcerns 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), aglobal consultative body that seeks to facilitate cooperation among competitionauthorities, 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 restraintthat 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 andcriteria for determining remedies by type.
 The standard sets forth general principles for crafting optimal remedies tailored to specificanticompetitive 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.

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