Rio Tinto-Alcan and You: Offshore Business-Combination Reporting under Korean Competition Law
by Brendon Carr
This morning on the CNBC ticker (I’m obsessive about my awesome portfolio of Eastman Kodak shares), I saw that Australian mining giant Rio Tinto Group agreed to merge with Canadian aluminum mining-and-refinery giant in a blockbuster US$38.1 billion transaction.
These two global enterprises each have substantial Korean operations, so this will be subject to review by the Korea Fair Trade Commission. But did you know Korea also requires certain offshore business combinations to be reported to the KFTC for competition-law review, if their combination may have effects in the Korean market? It’s true. So even if Rio Tinto and Alcan had no direct presence here, their merger agreed in Sydney and Montreal could be reviewed by authorities in Seoul.
Merger control is established under Art. 12 of the Monopoly Regulation and Fair Trade Act.
In an offshore business combination, where the acquiring company (an “Acquiror") together with its group and affiliate companies under common control (basically anyone who consolidates their accounting together) has total worldwide assets or sales turnover greater than W100 billion (about US$107 million), and the acquired company (a “Target") has total worldwide assets or sales turnover greater than W3 billion (a little over US$3 million), then a sales test is used.
If both the Acquiror and Target have sales in the Korean market (this of course includes all products or services exported to Korea) greater than W3 billion (that US$3 million again), then under the MRFTA a business-combination report shall be required.
This report may be filed after the fact of the combination. KFTC may take 30-60 days to review, but with no response the deal is deemed to have passed review.
However, larger companies are scrutinized more carefully. Where assets or turnover of either Acquiror or Target exceed W2 trillion (about US$2.1 billion), MRFTA requires the offshore business-combination report to be approved before the deal may proceed to closing.
Korea is a large economy, but still a relatively small market for many multinationals. Yet the MRFTA’s rules on offshore business-combination review mean that while deals like the Rio Tinto-Alcan merger obviously trigger review, the KFTC has rights over a lot more smaller deals than one would expect.
Comments
Comments Policy: Comments to Korea Law Blog are moderated. This means abusive, or just plain stupid comments will be deleted. So don't be a jerk. It also means there may be some delay from the time you post a comment to the time it shows up here. If your comment wasn't against the policy, it will show up in a little bit.
-
About Korea Law Blog
Korea Law Blog is brought to you by Brendon Carr, an American lawyer working as a foreign legal consultant for more than 10 years in Seoul. (Brendon is not admitted as an attorney in Korea. But you knew that.) -
Contact Details
-
Tel. +82 (0)2 772 2734
Fax +82 (0)2 772 2800
Mobile +82 (0)10 8788 0750 -
Download My FREE Korea Employment Law FAQ
-
Korean Media
-
Blogroll
-