Hanwha-Daewoo Shipbuilding Merger Conditionally Approved... "Prohibition of Information Discrimination"

Fair Trade Commission Approves Hanwha-Daewoo Shipbuilding Merger with Conditions for Corrective Measures

The Fair Trade Commission (FTC) has decided to approve the merger and acquisition (M&A) between Hanwha and Daewoo Shipbuilding & Marine Engineering (DSME) with conditions, including a prohibition on discriminatory information practices against other competitors during bidding. The approval came four months after Hanwha applied for the corporate merger with the FTC.

On the 27th, the FTC announced that it would approve the merger in which Hanwha (including Hanwha Aerospace, Hanwha Systems, and three other affiliates) acquires 49.3% of DSME's shares, subject to corrective measures for three years. The corrective measures include prohibiting unfair discriminatory pricing of estimates for shipborne equipment, unjust refusal to provide technical information on shipborne equipment to competitors when requested through the Defense Acquisition Program Administration (DAPA), and the provision of trade secrets obtained from competitors to affiliated companies.

Following a plenary session review, the FTC judged that the merger between DSME, the dominant player in the submarine market with a 97.8% market share, and Hanwha, the leading company in 10 out of 13 ship parts markets with market shares ranging from 64.9% to 100%, raises concerns about competition restrictions.

The FTC identified concerns about competition restrictions in the ‘government procurement (separate ordering)’ market, where DAPA directly purchases defense parts from suppliers. During the bidding process, DAPA places significant importance on close cooperation between parts suppliers and shipbuilders, evaluating factors such as the system integration suitability between installed equipment and ships, and the stable supply capability of parts. The FTC concluded that after the merger, the combined company could substantially restrict bidding competition by providing discriminatory information or estimates to affiliated companies compared to competitors, or by sharing trade secrets with affiliates.

DAPA’s bid selection is decided by very narrow score margins. Therefore, the richer the pre-provided information, the higher the likelihood of being finally selected in the bidding. The merged company is expected to gain a favorable position in preparing proposals by providing ship parts information exclusively to its affiliates, unlike competitors. Furthermore, the FTC noted that the merged company might offer higher estimate prices to other parts suppliers, causing them to either withdraw from bidding or submit higher bids.

This content was produced with the assistance of AI translation services.