To keep pace with the current trend of increasing business combinations involving digital service suppliers, including online platforms, the Korea Fair Trade Commission (KFTC) seeks to amend the Merger Review Guidelines (Review Guidelines) to account for the specific characteristics of the digital sector when conducting merger reviews. The KFTC issued an advance administrative notice of the proposed amendment of the Review Guidelines with the public notice period running from November 15, 2023 to December 5, 2023.

The main proposed amendments to the Review Guidelines include (i) the method of defining the relevant market (market definition for industries in which entities provide free services and multi-sided markets) and (ii) the method of evaluating the restriction on competition (network effects, increased barriers to entry, and methods for assessing the restriction on competition during the provision of free services) in reviewing business combinations involving the digital sector. In particular, the proposed amendments address new concerns on potential anti-competitive effects that may arise even in the case of conglomerate mergers involving online platforms (not considered within traditional industries) such as network effects and bundling to strengthen an ecosystem.

In addition, there have been concerns that due to the special characteristics of the digital sector, there may be difficulty referring to the current indicators (market definition, market share, among others) for determining restrictions on competition in merger reviews, which may result in a significant lack of enforcement in relevant merger reviews. In light thereof, the KFTC seeks to supplement the “market definition” sector of the Review Guidelines, including the market definition for industries in which entities provide free services, multi-sided markets, and innovation market. Also, the KFTC has specified in these proposed amendments that direct evidence, such as an example of a previous market and economic analysis, may be used in evaluating restrictions on competition. Moreover, the proposed amendments address the possibility of unique efficiencies that may occur only in business combinations involving online platforms, and newly included descriptions and examples of efficiencies that may occur therein. .

The current Review Guidelines presume that conglomerate mergers that do not involve complementarity or substitutability among the entities’ business have no restriction on competition and are thereby subject to a simplified review. However, as noted above, there are concerns that conglomerate mergers involving online platforms may have anti-competitive effects. Based thereon, the proposed amendments seek to exclude from a simplified review those business combinations involving online platforms, even in the case of a conglomerate merger, if the online platform acquires a target that exceeds the prescribed threshold of monthly users or expenditure on R&D activities. For business combinations that qualify for a simplified review, the KFTC reviews only for the accuracy of the facts submitted in the merger filing, and the review process period takes 15 days in principle (excluding the period covering requests for supplemental information). Under the proposed amendments, however, online platforms seeking clearance of a conglomerate merger and which does not otherwise qualify for a simplified review could now be subject to a review process period of 30 days in principle (excluding the period covering requests for supplemental information), and the KFTC will review for both the accuracy of the facts submitted in the merger filing as well as concerns relating to restrictions on competition.

Below are details of the proposed amendments to the Review Guidelines discussed above.


  1. Definition of relevant market

Amendment Contents of Amendment
Market definition for industries in which entities nominally provide free services l  If a service is provided as nominally free, but there is an exchange of something of value between the service provider and the user*, a transaction area may be defined.

* Example: An online platform operator generating advertising revenue from receiving data including the personal data of users.

l  In defining the market, the transaction area may be defined by considering the quality of the service and the cost incurred by the user.


Market definition for multi-sided markets l  For multi-sided services that facilitate interactions between different user groups, multi-sided markets may be defined by user groups or by user group receiving the service*.

* Example: A delivery platform that facilitates transactions between consumers and restaurants may be defined as the “delivery platform market”

* Example: “Social networking market” and “advertising services market” may be defined separately for platforms that provide social networking services to consumers and advertising services to businesses

Additional examples of innovation market definition l  The combination of businesses whose activities involving innovation, such as R&D, are essential or active, may be defined as “innovation market” considering that the companies are competing in terms of innovation rather than price.

* Example: For businesses competing to develop semiconductor manufacturing  equipment, a “next-generation semiconductor manufacturing equipment development market” may be defined separately


  1. Determining restrictions on competition

Amendment Contents of Amendment
Consideration of network effects l  When reviewing a business combination between online platforms, the strength of direct and indirect network effects of increasing the number of users or scale of data is considered.
Evaluating the restriction on competition for the provision of nominally free services l  When it is difficult to calculate the market share based on sales, as services are provided nominally free, the market share is calculated using alternative variables such as number of users and frequency in the use of the service.

l  For business combinations between businesses that provide free services, the restriction on competition may be evaluated by focusing on harms unrelated to pricing such as decline in the quality of service.

Evaluation of restrictions in competition in conglomerate mergers l  Business combinations have the potential to engage in the tying or bundling of new products. Therefore, the Review Guidelines introduces a new criterion to assess the effects of excluding competitors and increasing barriers to entry when a business combination engages in these strategies.


  1. Use of direct evidence and examples for determining restrictions on competition

l  Past examples in the same or similar markets of business combinations or new market entry causing changes in the market

l  Results of economic analysis that conclude the possibility of increases in price without an analysis of market concentration [upward pricing pressure analysis, merger simulation, among others]

l  Examples of prior responses by companies during past business combinations

l  Opinions of experts and interested third parties


  1. Added examples of increased efficiencies that consider the unique characteristics of the digital economy
l  The increase in service users from the business combination that may increase the benefits for existing users

l  The use of additional data obtained from business combinations may be used to create innovative services or reduce the costs of the production or distribution process

l  Business combinations may broaden the range of services available to users and increase consumer benefits

l  For business combinations involving innovative digital tech startups, the exit of existing input capital may result in creating new startups and entry into the market that could activate the startup ecosystem



  1. Modification of subjects for simplified merger reviews


Amendment Contents of Amendment
New subjects of general merger review l  For conglomerate mergers involving online platforms, the following are not subject to simplified merger review: (i) businesses providing goods or services to an average of more than 5 million people per month in the immediately preceding fiscal year of the date of the merger filing; or (ii) businesses continuing to possess and utilize personnel or facilities for research that spent more than KRW 30 billion on facilities or personnel for research, or research activities during the immediately preceding fiscal year of the date of the merger filing.
New subjects of simplified merger review (For reference, as part of the proposed amendments to the Review Guidelines, investments involving an existing Private Equity Fund will qualify for a simplified review). l  The following actions by a private equity fund (PEF) are eligible for simplified merger review: (i) new limited partner (LP) participating in an existing PEF by making an additional investment; (ii) a current LP in a PEF acquiring another LP’s stake; or (iii) a current LP in the PEF making an additional investment.

During the advance administrative notice period, the KFTC will collect opinions from interested parties and is expected to finalize and implement the proposed amendments to the Review Guidelines through resolution at a KFTC plenary session thereafter. As the KFTC has established the factors to be considered in its review of business combinations involving online platforms in the proposed amendments to the Review Guidelines, adoption of these proposed amendment is likely to result in the KFTC’s closer examination of the effect on competition for business combinations involving online platforms. Thus, companies considering business combinations in the online platform sector should be mindful of these proposed amendments to the Review Guidelines and consider potential impact on a merger filing and review process.


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