This article is part of a Chronicle. See more from this Chronicle
Cecil Saehoon Chung, Kyoung Yeon Kim, Kyu Hyun Kim, Oct 29, 2014
In March 2009, China’s MOFCOM blocked Coca-Cola’s proposed $2.4 billion acquisition of a leading Chinese juice producer, China Huiyuan Juice Group, without much explanation, prompting some commentators to cry foul and protectionism and others to lament China’s missed opportunity to lay a foundation for its merger analysis under the newly enacted Anti-Monopoly Law of 2008. In 2010, BHP Billiton and Rio Tinto abandoned their production joint venture proposal in the face of antitrust hurdles from various antitrust agencies including the Korea Fair Trade Commission.
Fast-forward to the end of 2013 when the United States and European Union rather unceremoniously cleared Microsoft’s proposed $7 billion-plus acquisition of Nokia’s handset business. Then, in February 2014, Taiwan’s Fair Trade Commission came down with a number of conditions for approving the deal. Shortly thereafter, in April 2014, MOFCOM finally approved the transaction with strings attached. In the meantime, in neighboring Korea, faced with the KFTC’s continuing concerns, Microsoft and Nokia reportedly restructured the transaction in late April 2014 to make it a non-reportable transaction in Korea and promptly consummated it. Unfazed, the KFTC continues its merger investigation of the consummated transaction. As of October 2014, the KFTC is still investigating the already consummated Microsoft’s acquisition of Nokia, and discussing potential post-consummation commitment remedies.
In the meantime, in June 2014, China’s MOFCOM sank the P3 Alliance proposal among three global shipping companies, Denmark’s Moller-Maersk, France’s CMA CGM, and Swiss’ Mediterranean Shipping Company. In contrast, the U.S. Federal Maritime Commission cleared the deal in March and the EC cleared the proposed transaction on June 3, 2014, just two weeks before MOFCOM announced its decision. The parties to the transaction promptly called off the deal. This was the only the second time that MOFCOM had completely blocked a merger transaction since the adoption of China’s antitrust statute in 2008.
Reading the compilation of global deals gone busted or almost derailed above, one could see why some observers have voiced concern that antitrust merger enforcement in some parts of the world is showing signs of protectionism. Lately, China is often implied (but not necessarily named specifically by speakers) at conferences as the prime culprit in not just merger but other antitrust enforcement areas. Given the continuing investigation of the already consummated Microsoft-Nokia transaction, some commentators are already claiming, hinting, or will likely opine that Korea’s merger enforcement also smells and looks like a protectionist merger review program at times.
However, hard numbers—the KFTC’s merger enforcement statistics—do not necessarily support the assertion, at least not yet. China’s MOFCOM has been reviewing merger transactions since the country’s enactment of its first antitrust statute, the Anti-Monopoly Law, in 2008. Korea has had a merger control provision, Article 7 of the Monopoly Regulation and Fair Trade Act, ever since the MRFTA was first enacted in 1980 and became effective in 1981. However, only after its July 2003 adoption of the mandatory “foreign merger” notification program for transactions involving a foreign party with the requisite nexus to Korea did the KFTC really begin the modern era of notification-based merger review. Perhaps it is just a matter of time before a fair number of controversial cases may be criticized as protectionist decisions.
More fundamentally, however, it is not clear whether it is a simple matter to call a jurisdiction’s particular decision a “protectionist decision” simply because the decision blocked a foreign company’s acquisition of a domestic company or another foreign company. After all, each jurisdiction’s antitrust agency’s statutory mandate (if not the only mandate, then still the primary mandate) is to protect competition and consumers within its territorial boundaries. It may just be possible, but easy to forget, that consumers in China, Korea, Taiwan, or any other country are actually quite different from consumers in the United States, European Union (for that matter, consumers in each Member State may be quite unique), Latin America, or anywhere else.
And if it so happens that protecting domestic corporate customers of the foreign merging parties serves to protect the consumers in that particular jurisdiction, then it becomes even more difficult to discern whether the merger enforcement agency is being a protectionist agency. Perhaps, a clarification question should follow. If the term “protectionist” encompasses protecting consumers as opposed to simply protecting domestic industries, then perhaps every single merger enforcement agency may be labeled a protectionist agency. Of course, this is not how the term “protectionist” is supposed to be interpreted. Yet, it shows how the term itself is also susceptible to a self-serving “protectionist” interpretation and misuse.
In this paper, we will review the short but already interesting history of Korean merger control. We offer that what the KFTC does (actually what most jurisdictions do) may not really be any more protectionist than others. Indeed, perhaps it is inherent in merger control although not many people talk about it much. In so doing, we hope to offer an alternative way to explain why antitrust enforcement agencies (or some other or larger parts of the national government) review and decide mergers the way they do, sometimes appearing to be (or indeed they really are, at times) protectionist in the true sense of the word.