What is “combination of enterprises”?
- This means the combination of capital, human resources and enterprise organizations, which leads to integration of decision making on business activities while eliminating the independence of the relevant individual enterprises.
- The combination of enterprises is also commonly referred to as M&A, an acronym for mergers and acquisitions. M&A is the most representative type of combination of enterprises and therefore is used as a general term for this.
- The current Monopoly Regulation and Fair Trade Act (the “Fair Trade Act”) classifies the combination of enterprises into the following five categories. (Article 7 (1) of the Fair Trade Act)
Categories of Combination of Enterprises under the Fair Trade Act
|Acquisition or ownership of stocks||Where a company acquires or owns stocks of another company|
|Concurrent holding of an executive position||Where an executive or employee of a large company concurrently holds an executive position in another company|
|Merger||Where a company merges with another company|
|Acquisition of business||Where a company acquires the business of another company|
|Participation in the establishment of a new company||Where a company participates in the establishment of a new company|
Reasons for reviewing the combination of enterprises
- Generally, the combination of enterprises has many merits, including, but not limited to the mitigation of investment risks due to diversification, strategically responding to technology innovation and market changes and reduction of costs based on the scale of economy attained from the combination. In some cases, however, competitors combine their businesses for the purpose of artificially dominating the market.
- In this light, as for combination of enterprises which results in limiting competition in the market, corrective measures are needed to effectively prevent any anticompetitive harm resulting from such combination through thorough review and analysis.
- Reviewing the combination of enterprises is one of the main tasks carried out by competition authorities in most of the world’s developed countries, and in Korea the review procedure for combination of enterprises has been in operation since it was first introduced in 1981 along with the implementation of the Fair Trade Act.