The Korea Fair Trade Commission (“KFTC”) recently amended its Guidelines for Merger Review (”Guidelines”), which took effect from February 27, 2019. The Guidelines now provide for particular issues relating to “innovation markets” and “big data” that will be considered during the KFTC’s review of mergers within R&D-intensive (i.e. innovative) industries.

I. Major Amendments

1. ‘Big Data’ defined as “Information Assets”

Information Assets  Data (i.e. information) sets consisting of data collected for varying purposes and managed, analyzed or utilized in a systematic and integrated manner.


2. “Innovation Market” definition for mergers within innovative industries

Innovation Market If innovation is essential to, or there is continuous innovation competition in, the industry in which the merger parties operate, and one of the merger parties is a significant innovator, then a separate “innovation market” may be defined, encompassing ① the area of innovation alone, or ② the area of innovation, together with the relevant products/services to which that innovation relates.


3. Market concentration and anti-competitiveness assessment criteria for mergers within innovative industries or involving Information Assets

Criteria for Assessment of Market Concentration in Innovation Markets The degree of market concentration in an innovation market will be determined based on criteria such as amount of R&D expenditure, size of R&D assets and capacity, patent portfolios (number of patents or utilizations thereof), or the number of competitors competing in the relevant R&D activities.
Criteria for Assessment of Competitive Effects of Mergers in Innovation Markets ① Whether one of the merger parties is a significant innovator in the relevant industry.
② The proximity or similarity of the merger parties’ previous or current R&D activities.
③ Whether a sufficient number of innovators actually competing will remain post-merger.
④ The gap in innovative capacity that may result between the combined entity and remaining competitors.
⑤ Whether the merger is a means of eliminating potential competitors from the relevant product market.
Criteria for Assessment of Competitive Effects of Mergers involving Information Assets ① Whether the merger is the only available means of acquiring the Information Assets.
② Whether the combined entity would have the ability or incentive to restrict competitors’ access to its Information Assets.
③ Whether restricting access to the combined entity’s Information Assets would restrict competition.
④ Whether the merger may restrict non-price competition due to a reduced incentive of the combined entity to improve its quality of services relating to the collection, management or utilization of its Information Assets.

II. Implications of the New Amendments
As can be seen by major information technology company mergers such as the Facebook/WhatsApp merger in 2014 and the Microsoft/LinkedIn merger in 2016, foreign competition authorities have recently had to consider particular issues inherent to M&A transactions involving R&D and information assets, such as the potential for barriers to entry and network effects.

Similarly, the KFTC also considered innovation harm during its review of the 2015 merger among semiconductor equipment manufacturers. However, back then, there was no means to predict whether the KFTC would find anti-competitive effects within an innovation market, or what the KFTC would view as anti-competitiveness from a merger of information assets, due to the lack of clear guidelines.

Through the Guidelines, the KFTC attempts to clarify the standards for determining the competitive harms that may result in innovation markets, as well as anti-competitive effects from mergers involving information assets. However, the Guidelines are still worded in abstract terms and the KFTC has yet to provide further guidance on how the Guidelines would actually be applied. Accordingly, absent further clarification from the KFTC regarding application of the Guidelines, it is still difficult to predict exactly how the Guidelines would actually affect future merger reviews, and increased uncertainty is anticipated in how clearances will be granted in related M&A transactions, as well as the potential remedies that may be imposed.

However, it could be argued that the Guidelines provide a basis for anti-competitive concerns based on innovation harm or anti-competitiveness resulting from a monopoly on information assets (for example, in acquisitions of R&D-intensive companies) or when companies are in possession of significant information assets, even in a scenario where such targets may not yet possess significant market shares. Accordingly, companies seeking to undertake acquisitions in innovative industries (i.e. involving significant R&D) or of information assets (i.e. such as in industries involving significant data accumulation, such as telecommunications, SNS, or finance), should take particular care regarding the above-mentioned concerns throughout their M&A preparations and during the merger notification process.


T: 82.2.772.4940

Genny S. KIM
T: 82.2.6386.6269

Kee Won SHIN
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