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Market competition restrictions may not be based on
If you judge a company that cannot be reactivated, you can allow it
Examination by foreign competition authorities also acts as a variable
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Hanjin Group with Korean Air Asiana Airlines (020560) As the acquisition took place, it emerged as a variable whether or not the Fair Trade Commission will examine the business combination. This is because when the two airlines are combined, an airline with a domestic market share of more than 60% is created, but the FTC may not allow a business combination due to restrictions on competition in the market. However, it was interpreted that if the FTC approved the merger of ‘Jeju Air-E-Star Air’ and ‘Hyundai Motor-Kia Motors’, and if Asiana Airlines was deemed to be a non-renewable company, the two companies could be combined.
According to the government on the 15th, when the Korean Air mergers and acquisitions of Asiana Airlines are confirmed and Hanjin Group submits a business combination report, the FTC plans to begin the review process in earnest. When conducting an M&A under the Fair Trade Act, if the reporting company’s total assets or sales are more than 300 billion won or more than 30 billion won in the previous business year, they must obtain approval from the Fair Trade Commission.
If the mergers and acquisitions of the two companies are successful, a dinosaur company is born that occupies a large part of the national market. At the end of last year, Korean Air’s domestic market share was 22.9% and Asiana Airlines accounted for 19.3%. When the shares of the two companies, including Jin Air, Air Busan and Air Seoul, are added together, their stake at the time of the merger is estimated to be 62.5%.
The FTC may reject the merger itself if it determines that the merger creates a monopolistic, market-dominant business and increases the price. This is to avoid monopoly damages in the market.
Some predicted that the FTC could conditionally approve the combination of Korean Air and Asiana Airlines. However, with conditional approval, measures such as a ban on price increases that exceed the rate of increase in consumer prices and the sale of main routes are being implemented, and such conclusions are rare in combination with a company suffering from management difficulties. .
Consequently, Asiana Airlines is more likely to be a non-renewable company rather than restrictions on competition or conditions to allow business combinations. This is because the FTC is a company that cannot be regenerated, so if it is difficult to continue using production facilities in the market without a business combination, it is exceptionally allowed even if it restricts market competition. In April, the Fair Trade Commission approved Jeju Air’s acquisition of Eastar Jet with the same logic and allowed Hyundai Motors to take over Kia Motors in 1999 during the last financial crisis.
As there is also the possibility that the government will formalize Hanjin Group’s acquisition of Asiana Airlines at a ministerial meeting related to strengthening industrial competitiveness next week, the FTC is expected to actively examine when a report is received. On the 13th, the Vice Chairman of the Financial Services Commission, Doh Gyu-sang, said: “If we talk about it in a very common sense, there is no reason to refuse as a government if it is a good solution.”
It is a variable that must also be examined by foreign competition authorities. Even if the FTC approves it, if Korean Air and Asiana Airlines do not approve the merger in a foreign country where they have sales, the merger between the two companies is expected to collapse.
/ Reporter Park Si-jin [email protected]
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