Disclosure of unusual reason for criticism of delay in combined review despite approval from 7 overseas countries
Raising the issue of vertical integration of defense industries and warships, “suggesting and discussing solutions”
Possibility of approval conditional on corrective… Hanwha refuted, “There was no proposal or consultation”
The Fair Trade Commission announced on the 3rd that the business combination between Hanwha and Daewoo Shipbuilding & Marine Engineering might limit competition in the warship market. It is said that if Hanhwa exclusively provides technical information such as its weapon system to Daewoo Shipbuilding & Marine Engineering, competitors may be at a disadvantage in the warship bidding competition. The Korea Fair Trade Commission (KFTC) held an unusual briefing and disclosed the progress of the review following criticism that only the business combination review was delayed.
The main issue that the Fair Trade Commission looks into in the corporate merger review between Hanwha and Daewoo Shipbuilding & Marine Engineering is the issue of vertical integration between Hanwha’s strategic arms (defense) division and Daewoo Shipbuilding’s warship division. The FTC believes that Hanwha, which has a high share of strategic weapons and other weapon systems, may use its monopoly position to limit competition in the warship market.
Technology such as strategic weapon systems accounts for regarding 80% of warship bidding. For example, the more information on parts, such as the installation location of weapons in the warship, the required voltage, and the repulsive force, the more technically complete the warship can be made, but only Hanwha, the manufacturer, can know this information.
An official from the Fair Trade Commission said, “In technology evaluation, even subtle differences can give a big difference.
The Fair Trade Commission is discussing with Hanwha on corrective measures that can address concerns regarding competition restrictions. An official from the Fair Trade Commission said, “We started discussions with Hanwha on a corrective plan at the end of last month that might resolve concerns regarding restrictions on competition.”
Looking at the review process so far, it is expected that the Fair Trade Commission will conditionally approve the business combination between Hanwha and Daewoo Shipbuilding. An official from the Fair Trade Commission said, “Since this is an ongoing matter, it is difficult to say that any corrective measures are expected to be imposed.” .
The business combination between Hanwha and Daewoo Shipbuilding & Marine Engineering is left to the judgment of the Korea Fair Trade Commission. On the 31st of last month, when even the European Commission, the European Union’s competition authority, approved the business combination between Hanwha and Daewoo Shipbuilding, all seven foreign competition authorities judged that the combination of the two companies was unlikely to restrict competition in their respective countries.
The review of the business combination will be completed as soon as the Fair Trade Commission and Hanwha discuss corrective measures. If the two sides discuss corrective measures, the Fair Trade Commission will approve the acquisition of Daewoo Shipbuilding by Hanwha on the premise of implementing the corrective measures through a plenary meeting.
Six companies, including Hanwha Aerospace, received reports on December 19 and 26 following signing a contract to acquire a 49.3 percent stake in Daewoo Shipbuilding on December 16 last year.
Hanwha issued a statement in relation to the FTC briefing that day and said, “Until now, the FTC has not received any specific proposals for corrective measures to address concerns regarding competition restrictions, and it is not true that we are discussing this.” He added, “We cannot help but seriously consider the seriousness of the situation in the reality that uncertainty in corporate management is prolonged due to the delay in domestic review of business combination approval approved by the international community.” I am concerned that it will not disrupt the national defense due to the specific nature of the business.”