Appealing and Administrative Adjudication Proceedings107
The respondent filed an appeal to the decision of the KFTC, but the
challenge was dismissed in the administrative adjudication. In the adjudication
proceedings, the KFTC has more clearly explained the legal principles relating
to efficiency defense and failing firm defense as the following.
i) Rulings on Efficiency Defense
The appealant argued that efficiencies generated overseas should be
recognized even if the benefits were not directly reverted to home consumers,
citing that the former Guidelines for M&A Review (the former version prior to
KFTC Notification No. 2007-12 promulgated on December 20, 2007)108 did
not require efficiencies to be reverted to consumers. Relating to such claims,
the KFTC explained that efficiencies would be recognized as the grounds for
exceptions when efficiency generated through merger reduces operational cost
of the merging parties, subsequently triggering price cut, or increase in output,
and ultimately, stimulating competition or improving consumer welfare at
home. The key, here, was whether efficiency generated through merger
improved consumer welfare at home.
The KFTC also concluded that even if efficiencies claimed by the appellant
had been generated, the proposed merger would have created a de facto
monopoly in a given market and its benefits would have been highly likely to
be enjoyed by the respondent instead of encouraging competition and
improving consumer welfare.
Moreover, the KFTC pointed out that in order for efficiency claims to be
recognized in pursuant to Article 7 Paragraph 2 of the MRFTA, the appellant
had to prove that efficiencies generated through merger would be greater than
its anticompetitive effects. However, the appellant only focused on making the
efficiency argument and failed to prove the adverse effects on competition.
ii) Rulings on Failing Firm Defense
107 The KFTC’s Administrative Adjudication at the plenary session on January 5, 2005, No, 2005-002.
108 A substantial part of the guidelines were revised under KFTC Notification No. 2007-12
promulgated on December 20, 2007.