The Korean Fair Trade Commission Expected to Review Merger between KSOE and DSME in January 2022
The Korean Fair Trade Commission (FTC) is expected to make a decision on the proposed merger between Korea Shipbuilding & Offshore Engineering (KSOE) and Daewoo Shipbuilding & Marine Engineering (DSME) in the middle of next month in consideration of the European Union’s schedule for a review of the matter.
The commission initially planned to complete its review of the merger by the end of 2021.
Unlike EU fair competition authorities that only judge whether the merged company will monopolize the global LNG carrier market, the Korean Fair Trade Commission is also studying the possibility of the merged company monopolizing demand for shipbuilding materials and parts.
Domestic shipbuilding materials and parts companies express concerns that the merged shipbuilder may commit unfair practices such as demanding unreasonably low prices for shipbuilding materials and parts and technology thefts. Civic groups, including the People's Solidarity for Participatory Democracy, say that if the world’s No. 1 and No. 2 shipyards are combined, there will be a monopoly on demand for parts and equipment, which will significantly increase the possibility of the unified company abusing its power.
On top of that, unlike the EU which evaluates voluntary corrective measures submitted by KOSE, the Korean Fair Trade Commission must even come up with its own corrective measures. In this process, the commission’s reviewing period may be relatively prolonged, as consultations with companies are also required.
Another reason for the Korean commission’s delay in making a decision is that the merger will fall apart if the EU opposes it. Last month, the European Commission put off the review deadline to Jan. 20 next year. The Korean FTC is expected to hold a plenary session after the EU’s review deadline.
EU fair competition authorities are concerned because the two companies are technologically unrivaled, so there are not many alternative companies. When KSOE acquires DSME, its LNG carrier market share will jump to 60 percent. KSOE offered to freeze LNG ship prices for years and transfer its shipbuilding technology to other companies in its bid to ease EU's concerns, but EU competition authorities are reportedly somewhat skeptical about the offer.