Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

In principle, a filing needs to be made by the acquiring party within 30 days after the consummation of the underlying transactions (such as a merger or the acquisition of shares). However, if a large company (with total assets or annual turnover of 2 trillion won or more on a consolidated basis) is involved in the business combination (except for the case of an interlocking directorate), the notification becomes a pre-closing obligation, in which case, the filing must be made after the date of signing of the transaction agreement and before the closing date, meaning that the transaction for the business combination cannot be consummated until clearance is received from the Korea Fair Trade Commission (KFTC).

Under the Monopoly Regulation and Fair Trade Act (MRFTA), a failure to file a business combination report may result in the imposition of an administrative fine of up to 100 million won. In 2020, the KFTC imposed administrative fines totalling 110 million won in 12 cases for failure to file.

Which parties are responsible for filing and are filing fees required?

The acquiring company is responsible for reporting the business combination to the KFTC. In the case of a joint venture company establishment, the party having the largest shareholding in the company is responsible for filing. There are no filing fees in Korea.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

All notifications (both pre-merger and post-merger notifications) are subject to a 30-day initial review period after the filing date. The 30-day initial review period may, at the discretion of the KFTC, be extended by up to an additional 90 days in which case the total review period may last up to 120 days. However, the actual review period may be longer than 120 days as the time between the date of issuance of a request for information by the KFTC and the date of submission of a response to such request is excluded from the calculation of the review period.

In the case of a transaction subject to the pre-closing notification obligation, the parties are prohibited from closing the transaction until the KFTC provides clearance.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

In cases that require pre-closing clearance, the KFTC may file a legal action against companies that close their transactions before receiving clearance. For example, in a merger or new joint venture establishment case, the KFTC may initiate court action to nullify such business combination that closed without clearance. In practice, the KFTC usually imposes an administrative fine of up to 100 million won on the company responsible for filing. This sanction is enforced without fail as long as the violation is detected.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

In foreign-to-foreign mergers that require pre-closing clearance, the KFTC may impose sanctions on foreign-to-foreign mergers that close without clearance. The KFTC imposed sanctions on five foreign companies in 2012 for violation of the merger control rules (including failure to file, delay in filing as well as closing before clearance). Recent data on such sanctions are not open to the public.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

The KFTC has never accepted any solutions (such as ‘hold separate’ arrangements) in a foreign-to-foreign merger subject to pre-closing clearance that would permit closing before clearance.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

In the case of public takeover bids, the notification must be filed within 30 days of the date on which the acquisition of shares takes place even if a large company is involved in the transaction (ie, the usual pre-closing 2 trillion won threshold does not apply in this case).

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The reporting party must provide the KFTC with sufficient information to allow the KFTC to review the underlying transactions. Full details of transactions are required, and various forms must be completed and submitted together with supporting documents. The KFTC provides a list of the necessary documentation relating to the proposed transaction to enable it to determine whether there will be any anticompetitive impact on the market. Under this general rule, data or information on the financial statements of the parties, identities of the shareholders of the parties, financial statements of affiliated companies (including organisation charts, etc), as well as market information in the relevant sector are required. If the KFTC deems it necessary, it may request additional data or information.

If the KFTC case handler discovers any incomplete or incorrect information, a request for supplementary information may be issued. In this case, the clock stops on the date the request is issued and restarts once the requested information is received in full. The KFTC may impose an administrative fine of up to 100 million won for misleading information. Also, fraudulently providing information in response to a request for information by the KFTC may be subject to criminal penalty including a fine of up to 150 million won.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

There is no distinction of review phases such as Phase I and Phase II in Korea and there is also no official process for a pre-notification consultation with the authority. To expedite the review process, the notification may be filed on a voluntary basis before the definitive agreement is signed. However, for this voluntary review request, the same set of documents as those required for the official notification need to be submitted. If the KFTC case handler concludes that there are no substantive competition issues arising from the proposed transaction, clearance may be given without having to go through the deliberation procedures of the Commissioners.

However, if the KFTC case handler identifies serious anticompetitive concerns during the merger review process and determines that remedies are required, an examiner’s report with proposed remedies (ie, a document similar to the statement of objections issued by the European Commission) will be issued. The notifying party will be given a chance to submit its rebuttal brief after receiving the examiner’s report and there will be a hearing held by the Commission to deliberate on the matter. After the hearing, the KFTC will determine whether remedies are required, and if so, what types of remedies will be appropriate, and will render its final decision with the written decision being posted on the KFTC’s website.

What is the statutory timetable for clearance? Can it be speeded up?

The KFTC has 30 days after the filing to issue its decision on whether to grant clearance under the MRFTA. However, the 30-day period may, at the discretion of the KFTC, be shortened or extended by up to additional 90 days. The common reasons for an extension include the complexity of the potential transaction and the KFTC’s requests for additional information (whether owing to the incomplete nature of the information filed with the KFTC in the initial report or because the KFTC deems that the complexity of its investigation requires further data to enable it to reach a determination based on sufficient research on the question of clearance). In such a case, the period required by the KFTC to obtain supplementary documents will not be included in the review period.

In general, whether the review period can be shortened is entirely at the discretion of the KFTC. However, in case of mergers that qualify for a ‘simplified review’, a shorter review period of 15 days will apply. A simplified review process applies if the merger falls under any of the following:

  • a merger between affiliates;
  • a merger that does not result in the acquisition of control;
  • a conglomerate merger that does not involve a large company (ie, a company, together with its affiliates worldwide, that has total worldwide assets or worldwide annual turnover of 2 trillion won or more);
  • a conglomerate merger that does not involve overlapping or supplemental products between the merging parties;
  • a merger previously reviewed by the KFTC through the voluntary preliminary review process that did not result in any finding of anticompetitive impact; or
  • a merger involving the establishment of an overseas joint venture company that does not impact the domestic market.