South Korea tightens oversight of merger remedies with new monitoring rules

Companies involved in mergers will need approval from the Korea Fair Trade Commission before appointing members of a compliance monitoring committee or setting their compensation. The monitoring committee will be granted authority to demand document submissions from companies and conduct on-site inspections.

The Fair Trade Commission can also seek the removal of a monitoring committee member if it determines that the member's independence or impartiality has been compromised.

The Korea Fair Trade Commission announced Monday that it will hold a public comment period on a proposed revision to its guidelines on remedies for anticompetitive mergers, running from Tuesday through Dec. 1.

The core of the revision is to codify the legal basis and operating requirements for an independent monitoring body — separate from the merging parties — to oversee compliance with imposed remedies. The commission has previously relied on general remedy operating guidelines that apply to all types of violations, but is now moving to establish merger-specific rules.

A range of remedies can be imposed on anticompetitive mergers, including structural measures such as asset divestiture orders and behavioral measures such as orders for the technical separation of data over a set period. The intent is to improve oversight effectiveness by having a dedicated body with the requisite expertise and independence conduct initial compliance checks and report to the commission in cases where implementation takes an extended period.

Under the proposed revision, the commission may require merging parties to establish a monitoring committee or appoint a monitoring trustee when necessary. Committee members must possess the knowledge and experience required for their duties and must be able to operate independently from the merging parties and their related persons. Appointments require commission approval, and the commission may publish members' affiliations, titles and names on its website.

An approval process for member compensation will also be established. Merging parties must set compensation at a reasonable level, taking into account the complexity of duties and workload, and must obtain prior commission approval for the amount and the basis for its calculation. Approval is also required when changing the compensation amount or its calculation basis. Providing any additional economic benefit beyond the approved compensation is prohibited.

The monitoring committee's inspection powers will be clearly defined. The committee may require merging parties to submit regular compliance reports and may receive necessary documents or conduct on-site inspections directly. Merging parties must respond to such requests in good faith. Operating under the commission's guidance and supervision, the committee must report inspection results regularly and respond to requests for supplementary information or additional document submissions.

In addition, committee members must promptly notify the merging parties if a situation arises — or is likely to arise — that could affect their ability to carry out their duties impartially, such as a conflict of interest.

If the commission determines that a member can no longer perform duties independently and impartially, it may demand the member's removal, and the company concerned must act without delay. If inspection reports are found to be insufficient, the commission may order the committee dissolved and reconstituted, or conduct its own compliance review directly.

The revision also allows for the use of a monitoring trustee — either an individual or a legal entity — as an alternative to the collegial monitoring committee. The same rules governing committee members will apply to monitoring trustees.

The commission said it drew on the practices and systems of competition authorities in the United States and the EU in drafting the revision. After reviewing public comments submitted during the notice period, the commission plans to finalize and implement the rules following deliberation and a vote by its full commission. The revised rules will apply to merger filings received after the revised guidelines take effect.