KFTC Proposes to Formalize Voluntary Remedy Proposal System for Mergers

The Korea Fair Trade Commission (the “KFTC”) has issued an administrative notice for the adoption of the “Detailed Operational Guidelines for the Voluntary Submission System of Corrective Measures in Business Combinations” and the amendment of the “Rules on the KFTC’s Committee Operation and Case Handling Procedure,” to set the operational methods and detailed procedures related to the formal voluntary remedy proposal for merger cases under the revised Monopoly Regulation and Fair Trade Act (the “MRFTA”). The public comment period for this administrative notice is from June 13, 2024, to July 2, 2024.

The proposed details related to the voluntary remedy proposal system for mergers are as follows:

Key Details of the Proposed Notice and Amendments

The KFTC’s voluntary remedy proposal system in its merger review proceeds as follows: ① Notification of preliminary assessment regarding potential anti-competitive concerns → ② Submission of remedy proposals by the merging parties (technically by the notifying person of the relevant merger notification) →

③ The KFTC’s evaluation and modification of the submitted remedy proposals → ④ Issuance of the KFTC’s Statement of Objections (“SO”) → ⑤ The KFTC deliberation process.

① [Notification of Preliminary Assessment Regarding Potential Anti-Competitive Concerns] If the KFTC’s case team preliminarily determines that a business combination may pose potential anti- competitive concerns, the case team can notify the merging parties of the preliminary assessment results and the basis for these results in writing during an in-person meeting. At this stage, the case team may also suggest directions for necessary remedy proposals to address the anti-competitive concerns raised.

② [Submission of Remedy Proposals by Merging Parties] The merging parties may submit a written remedy proposal aimed at resolving the anti-competitive concerns raised. The proposal must include details on how the remedy proposals effectively address the concerns and how they can be promptly implemented.

③ [The KFTC’s Evaluation and Modification of the Remedy Proposals] The KFTC case team, if necessary, will evaluate the appropriateness of the submitted remedy proposals, consulting experts and other opinions as needed. If the measures are deemed inadequate, the case team can request the merging parties to submit revised proposals. The merging parties may then modify and resubmit the remedy proposals accordingly.

④ [Preparation of the SO] If the finally submitted remedy proposals are deemed appropriate, the case team will take them into account as it prepares the SO which includes the case team’s recommendations on the corrective orders to be imposed by the KFTC.

⑤ [The KFTC Deliberation] The KFTC can issue corrective orders based on the final version of the remedy proposals submitted. If the merging parties submit remedy proposals and agree with the SO, the deliberation period is shortened. Currently, a plenary hearing is held within 30 days after the submission of the merging parties’ response brief to the SO, and the final written decision is issued within 35 days after the plenary hearing. If voluntary remedy proposals are submitted, the plenary hearing will be held within 15 days after the submission of the merging parties’ response brief to the SO, and the Commission’s final written decision will be issued within 20 days after the plenary hearing.

Implications and Expected Outcome

Until now, there has been no formal mechanism for the merging parties to submit remedy proposals during the KFTC case team’s merger review. In practice, the merging parties have been free to offer remedies to resolve competitive concerns of their proposed transactions. However, the KFTC case team had no formal authority to tentatively accept, reject or further negotiate such remedy proposals. Rather, the KFTC case team’s mandate has been to independently review the proposed transactions and issue the SO containing its recommended resolutions even though in some cases the case team and the merging parties may have unofficially and tentatively agreed to the competitive concerns and remedies offered by the parties. With the revised MRFTA set to take effect on August 7, 2024, the merging parties’ offering voluntary remedies in merger cases and the case team’s reviewing them for adequacy will benefit from the formalized and clear procedures, which in turn will likely promote more efficient and speedy resolution of merger review matters.

In particular, with the newly introduced formal voluntary remedy proposal system in merger cases, the KFTC case team is required to notify the merging parties of its preliminary opinions on potential competitive concerns, which in turn may expedite the KFTC’s overall review and determination process and enhance the predictability and transparency of the merger review process. Furthermore, once a tentative remedies agreement is reached between the case team and the merging parties and such a proposed resolution is presented to the Commission for formal deliberation, an expedited timeline will apply, thus promising much more efficient and speedier resolution of the matters.

Undoubtedly, as the new system is utilized, there may arise new procedural and other practical questions. While with further experience and input from the interested parties, those glitches and issues will likely be resolved over time, it remains to be seen how this facially flawless new system will be initially implemented and used in practice.

By Yulchon, Korea, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact korea@transatlanticlaw.com

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