South Korean can disapprove business combination if it believes that there is a monopoly of information such as Big Data through M&A. It can disapprove M&A within innovative industry based on amount of spending in R&D and number of patents if products are not released yet.
It is expected that global corporations will not be able to carry out M&A with potential companies in South Korea to monopolize future markets. However, some are concerned that ‘innovative M&A’ will not take place if South Korean Government poorly manages this standard. It is also interesting to see how this revision will affect attempts of M&A between mobile network providers and pay-per-view broadcasting companies.
Fair Trade Commission (FTC) announced that it will enforce revised ‘criteria for M&A starting from the 27th.
FTC announced that it has come out revised criteria after deciding that its past criteria on whether M&A within innovative industry such as ICT (Information Communication Technology) impeded innovative competitions was insufficient. Another reason is that it believes that it needs to take preemptive measure against M&A that has a possibility of monopolizing information assets such as Big Data.
It is going to consider information assets (combination of information that is managed, analyzed, and utilizes after being collected for various purposes) when it evaluates M&A. It is going to consider information assets such as Big Data as goods and disapprove M&A that has a possibility of monopoly. It is also going to consider whether quality of services related to information assets becomes poorer due to M&A.
“Information assets are major goods and materials during this era of Industry 4.0.” said Hwang Yoon-hwan who is the head of FTC’s M&A Department. “It is necessary to take preemptive measures against M&As that have possibilities of monopolizing and blocking information assets to protect innovative growth.”
FTC established standards for understanding market definition, market concentration, and competitive limited effects when evaluating M&A within innovative industries.
It is not possible to understand market shares and concentration through sales when it comes to innovative market. When it comes to innovative market, various factors such as amount of spending into R&D, size of assets and capabilities that are specialized for innovative activities, number of registered patents, and number of businesses participating in innovative competitions are considered.
Innovative market is defined as ‘separate R&D market’ or ‘R&D, manufacturing, and sales market’ when M&A is evaluated. For example, if a company that sells a particular product and another company that is developing a similar product are pushing for M&A, FTC is going to recognize them as competitors and define them as single market and evaluate limitations of competitions.
“There are various forms of competitions within innovative industries that are differentiated from manufacturing and sales markets.” said Hwang Yoon-hwan. “There are chances that R&D and manufacturing and sales activities are either not recognized as competitions or underestimated even though innovative rival companies can be removed through M&A.”
FTC has decided to consider importance of companies involved in M&A, accessibility and similarity of innovative activities carried out by these companies, and number of participants in innovative competitions after M&A when it evaluates M&A within innovative industry.
“We are going to quickly process M&A that has no limitations on competitions based on our standards and we are planning to take active measures against M&A that impedes competitions.” said Hwang Yoon-hwan. “We are going to consider new criteria if we believe that M&A between mobile network providers and pay-per-view broadcasting companies is considered as innovative market.”
Staff Reporter Yoo, Seonil | ysi@etnews.com