Given that the KFTC rarely imposes remedies for a violation of the
merger regulation and the merging parties seldom sue against such
remedies, there are only few judicial precedents relating to merger cases.
This case is significant in that it was the first merger case to receive the
Supreme Court judgment. The ruling represents an important precedent for
future law enforcement relating to mergers.
The main legal issues in this case lied in ① how to evaluate the impact
secondhand pianos have on competition, ② how pianos made by Japanese
and Chinese manufacturers affected competition, ③ criteria for
determining efficiencies generated through merger, ④ whether the failing
firm defense was established, and ⑤ whether the proposed remedies were
appropriate.
The Supreme Court ruling established legal principles relating to
mergers, especially, horizontal mergers. The Supreme Court, in its
judgment, provided basic criteria for defining relevant markets, for
determining the anticompetitive effects of a merger, and for evaluating an
efficiency defense and a failing firm defense.
Especially, the ruling is significant in that the Supreme Court recognized
the former merger review guidelines to be the norm by accepting almost all
of the criteria stated under the former rules. At the same time, the Court
was flexible enough to consider extra factors not stipulated under the
former guidelines to the extent necessary. Such flexibility may have been
exercised based on the Court’s understanding that the former guidelines
were purely illustrative.Relating to foreign competition, the respondent argued that pianos made in
Japan and China could sufficiently suppress market dominance of the merging
parties. However, the KFTC concluded that Japanese and Chinese
manufacturers cannot serve as effective competitors after the merger, and
dismissed such claims.
Relating to probability of hindrance to entry, the KFTC reasoned that
market entry would be de facto difficult given that domestic piano demand
was at standstill, that production facility required a large amount of capital,
and that the merging entity tend to relocate its production base overseas.
The KFTC also rejected the respondent’s claim that secondhand pianos, as a
meaningful adjacent market, could suppress the merging entity’s market
dominanceGiven that both Samick Musical Instruments and Young Chang manufacture
and sell upright, grand and digital pianos, the merger represents a horizontal
integration.