The Pumibol Adunyadet frigate delivered by Hanwha Ocean to Thailand in 2018. Photo courtesy of Hanwha Ocean
The Korea Fair Trade Commission (FTC) has extended by three years the compliance period for corrective measures imposed on a merger between Hanwha Group’s defense affiliates, citing lingering competition concerns as the combined entity maintains its market dominance.
The FTC said Tuesday that it has decided to extend the compliance period for remedies imposed when it approved the 2023 merger among Hanwha Aerospace (012450.KS), Hanwha Systems (272210.KS), and Hanwha Ocean (042660.KS), formerly Daewoo Shipbuilding & Marine Engineering, by an additional three years beyond the original three-year term. The extension will end in May 2029. A further extension of up to two years is possible if necessary.
The decision follows a condition attached to the original merger approval, under which the FTC would reassess market conditions after three years to determine whether to extend the remedies. After reviewing the market over the past three years, the FTC concluded that competition concerns have not been resolved, as Hanwha Ocean remains the top player in the surface warship and submarine markets, while Hanwha Aerospace or Hanwha Systems continue to hold monopoly or leading positions in eight out of 10 naval component markets.
As a result, Hanwha Aerospace, Hanwha Systems, and Hanwha Ocean must continue to comply with existing remedies for at least three more years, including bans on discriminatory component pricing, refusal to provide technical information, and sharing of competitors’ trade secrets with affiliates. However, the FTC terminated remedies for two other component markets, citing expanded competition driven by new market entrants. No violations of the remedies or other illegal conduct were identified over the past three years. “This marks the first case in which the compliance period for behavioral remedies in a merger review has been extended,” an FTC official said.
Separately, the FTC said an amendment to its notification on fine calculations, which significantly tightens the standards, will take effect Thursday. For cartel cases, the minimum base rate for fines will be raised 20-fold from 0.5% to 10%, while the lower and upper limits of fines for private benefit-seeking and unfair support will be increased to 100% and 300%, respectively. Surcharges on repeat offenders will be expanded to up to 100%, while reductions granted for investigation cooperation or voluntary correction will be scaled back.