Korea: Merger Control

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The Monopoly Regulation and Fair Trade Act (the MRFTA) is one of the principal merger control laws in Korea, and the Korean Fair Trade Commission (the KFTC) is the government body responsible for the enforcement of the MRFTA.

Historically, the KFTC has limited the geographical span of its enforcement of the MRFTA to business activities conducted inside Korea. In recent years, however, the KFTC has adopted a new approach, which expands the geographical span of its enforcement to business activities conducted outside Korea that have an impact on competition in the Korean market. In this regard, the KFTC promulgated the M&A Reporting Guidelines pursuant to the MRFTA, last amended on 20 December 2007. The M&A Reporting Guidelines require, inter alia, a submission of a business combination report to the KFTC for certain overseas business combinations that occur outside Korea between foreign companies (ie, foreign-to-foreign business combinations).

This chapter reviews the details of these reporting requirements.

Types of foreign-to-foreign business combinations subject to reporting requirements

Under the MRFTA, a business combination report must be submitted to the KFTC for the following types of business combinations if they meet the reporting thresholds.


  • Acquisition of shares of existing company - this is the acquisition by a company of 20 per cent or more of the total outstanding voting shares of an existing company, if such company is not listed on a stock exchange. In this regard, it is noteworthy that if the acquiring company that initially acquires more than the stipulated threshold becomes the largest shareholder of the acquired company by additionally acquiring the shares of the target after the submission of the business combination report for the initial acquisition, then the acquirer must submit another report informing the KFTC of this; and if the acquiring company initially acquires less than the thresholds but later exceeds them, then it must submit a business combination report to the KFTC for the additional acquisition of shares that puts the acquiring company over the threshold. Also, please note that, for purposes of calculating the thresholds, the shares of the acquired company owned by the acquiring company's affiliates are deemed to be owned by the acquiring company.
  • Transfer of business - this is the acquisition by a company of another company by taking over or leasing the whole or a substantial part of the other company's business; undertaking the management of the other company's business; or taking over the whole or a substantial part of the fixed operating assets of the other company. In this connection, under the M&A Reporting Guidelines, the term 'substantial part' of the other company is defined as where: the acquisition price is 10 per cent or more of the total asset amount shown on the other company's balance sheet, as of the last day of the fiscal year immediately preceding the year of the acquisition; or the acquisition price is 5 billion Korean won (approximately US$5.3 million) or more.
  • Merger - this is a merger between the acquiring and acquired company.

  • Participation in the establishment of a new company by subscribing for the shares of this new company - this is the participation in the establishment of a new company by subscribing for the voting shares of such company. A business combination report for such participation will need to be submitted to the KFTC only if there are two or more parent companies (which are not affiliates of each other) subscribing for the voting shares of the new company. If 100 per cent of the total voting shares of the new company is subscribed for by one parent company alone (or with other affiliates of such parent company), then a business combination report need not be submitted.

  • Interlocking directorship - this is the concurrent holding of a director or a statutory auditor's position in an acquired company by an officer or an employee of another company; provided that it is not necessary to report the concurrent holding of director positions in 'affiliate companies' (ie, where two or more companies belong to the same enterprise group, each company is an affiliate company of the others).


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The purpose of submitting the business combination report to the KFTC is to enable it to determine whether the business combination in question has the effect of substantially restricting competition in the relevant market in Korea.

Reporting thresholds

Under the M&A Reporting Guidelines, the reporting thresholds for foreign-to-foreign business combinations are as follows:


  • Acquisition of shares; transfer of business and merger - this is where: the total assets or turnover of one of the foreign companies is 100 billion Korean won (approximately US$106.6 million) or more; the total assets or turnover of the other foreign company is 20 billion Korean won or more (about US$21.3 million); and both foreign companies' sales in Korea equal to or exceed 20 billion Korean won.

  • Participation in the establishment of a new company by subscribing for the new shares - this is where: (i) the total assets or turnover of the largest parent of the new company is 100 billion Korean won (approximately US$106.6 million) or more; the total assets or turnover of one of the other parents is 20 billion Korean won or more (about US$21.3 million); and both foreign parents' sales in Korea equal to or exceed 20 billion Korean won or (ii) the total assets or turnover of the largest parent of the new company is 20 billion Korean won or more (about US$21.3 million); the total assets or turnover of one of the other parents is 100 billion Korean won (approximately US$106.6 million) or more; and both foreign parents' sales in Korea equal to or exceed 20 billion Korean won.
  • Interlocking directorship - this is where: the total assets or turnover of one of the foreign companies is 2 trillion Korean won (approximately US$2.1 billion) or more; the total assets or turnover of the other foreign company is 20 billion Korean won (equivalent to US$21.3 million) or more; and both foreign companies' sales in Korea are equal to or exceed 20 billion Korean won.

When calculating the total assets and turnover of the acquiring company and the acquired company for purposes of determining the above reporting thresholds, the total assets or turnover of their affiliates must be included; provided that only those affiliates that remain as affiliates both before and after the completion of the business combination need be included. In the case of transfer of business, the total assets or turnover of the transferring company need not include the assets or turnover of the affiliates of the transferor.

Parties responsible for submitting the business combination report
The following parties are responsible for submitting the business combination report to the KFTC:


  • acquisition of shares - the acquiring company;

  • mergers - the company that remains after the merger;

  • transfer of business - the transferee;

  • subscription for new company shares - the largest parent company; and

  • interlocking directorate - the company that first employed the director who subsequently holds a director's position at another company.


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There are no filing fees in Korea for submitting a business combination report.

Submission deadlines for business combination reports

If the business combination in question falls under one of the types described above and meets the reporting thresholds, it is necessary to submit a business combination report to the KFTC within the following submission deadlines.

Post-closing submission

A post-closing submission means that the business combination report is submitted after the closing of the business combination.

A post-closing submission is required if neither company to the business combination (except for interlocking directorship) has total assets or turnover of 2 trillion Korean won or more; the business combination in question concerns interlocking directorship (which is always subject to post-closing rather than pre-closing submission, even though the reporting threshold for interlocking directorship is 2 trillion Korean won or more); or the business combination in question concerns an acquisition of new shares of an existing company (an acquisition of new shares of an existing company is also always subject to post-closing submission rather than pre-closing submission, regardless of whether the total assets or turnover of the companies concerned is less than, equal to or greater than 2 trillion Korean won).

A post-closing submission must be made within 30 days after the closing of the business combination.

Pre-closing submission

A pre-closing submission means that the business combination report is submitted to the KFTC after the execution of the relevant agreement for the business combination but before the closing of the business combination.

Specifically, except in the cases of interlocking directorship and acquisition of new shares of an existing company (which is always subject to a post-closing submission as mentioned above), if one of the companies to the business combination has total assets or turnover of 2 trillion Korean won or more, a pre-closing submission must be made within 30 days after the execution date of the relevant agreement and before the closing of the business combination. The business combinations that are subject to pre-closing submission may not be consummated before the termination of the KFTC's review period explained below.

Voluntary submission

A voluntary submission means that the business combination report is submitted before the above mandatory submission deadlines. The purpose of a voluntary submission is to find out in advance from the KFTC whether the business combination in question has the effect of substantially restricting competition in the relevant market and whether the KFTC will issue its clearance on the business combination.

Review of the business combination report by KFTC

After receiving the business combination report, the KFTC will review it to determine whether the business combination in question substantially restricts competition in the relevant market in Korea. If the KFTC determines that the business combination has no such effect, then it is likely to issue a clearance on the business combination. On the other hand, if the KFTC determines that the business combination does have such effect, it may issue: a conditional approval (ie, the approval of the business combination is contingent upon the satisfaction or fulfilment of certain conditions mandated by the KFTC); or a disapproval (which, in the case of a post-closing submission, could include an order to undo the business combination), unless the KFTC determines that the amount of efficiency increase resulting from the business combination is greater than the negative effects of competition restriction resulting from the business combination and such efficiency increase can only be achieved through the business combination in question. In this connection, in cases where the business combination in question has a major impact on the relevant market, the recent trend in Korea for the parties submitting the business combination report is to also submit an economic report explaining the efficiency increase that can be achieved through this business combination.

KFTC's review period

For a post-closing submission, there is no mandatory review period stipulated in the MRFTA. In the past, however, it usually took about 30 days for the KFTC to review a post-closing submission, although these days, owing to heavy workload at the KFTC, it usually takes longer than 30 days.

For a pre-closing submission and a voluntary submission, the mandatory KFTC review period is 30 days from the date of the pre-closing submission which may be shortened or extended (in the case of an extension, the KFTC may extend the 30-day review period by a maximum of 120 days). The reason that the KFTC may decide to extend the review period is so that it can take its time and more carefully review whether the business combination in question has the effect of substantially restricting competition in the relevant market in Korea.

Penalties for filing violations

A filing violation (eg, a failure to submit or a delay in submitting the business combination report) could result in administrative fines up to 100 million Korean won (approximately US$106,587). The exact amount of the administrative fine is calculated according to a formula (which takes into consideration the type of filing violation and number of previous violations, etc) specified in a notification promulgated by the KFTC pursuant to the MRFTA.

In addition, if a business combination that has not been reported to the KFTC is later discovered by the KFTC and the KFTC determines that this business combination has the effect of substantially restricting competition in the relevant market in Korea, then the KFTC may disapprove such business combination by issuing a corrective order, which may include an order to undo this business combination.

In light of the foregoing, it may be advisable for foreign companies contemplating any of the business combinations described in this article to consult with their local counsel in Korea to find out whether it is necessary for them to submit a business combination report to the KFTC for the business combination that they are contemplating.

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