South Korea Extends Remedies on Hanwha Defense Merger Up to 5 Years, Citing Ongoing Monopoly Concerns

South Korea’s Fair Trade Commission said April 28 it will extend, for up to five years, the period for corrective measures imposed as a condition for approving the business combination involving Hanwha Aerospace, Hanwha Systems and Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering). The FTC said it will extend the measures for three years and, if needed, add up to two more years.

The FTC approved the combination in May 2023 after a full-commission meeting and ordered the companies to comply with remedies for three years. The measures ban: unfairly discriminatory price quotes for naval vessel parts; unjustified refusals to provide technical information on naval parts when Hanwha Ocean’s rivals request it through the Defense Acquisition Program Administration; and providing Hanwha affiliates with trade secrets obtained from competitors.

After reviewing market competition and changes in relevant laws and systems, the FTC concluded the risk of reduced competition had not been resolved and decided at a full-commission meeting on April 15 to extend the remedies.

The FTC cited market conditions over the past three years, saying Hanwha Ocean has remained the leading supplier in both the surface-ship market (67.3%) and the submarine market (64.8%). It also said Hanwha Aerospace and Hanwha Systems remain monopolists or dominant No. 1 suppliers in eight of 10 naval parts markets.

Because rival shipbuilders have difficulty sourcing the relevant parts from suppliers other than these companies, the FTC said concerns remain about foreclosure effects stemming from discriminatory price quotes and information sharing.

The FTC said, however, that competition concerns tied to the combination have been resolved in the markets for ship identification friend-or-foe equipment and ship integrated engine control systems, citing new entrants and changes in the companies’ market shares and rankings.

“We will closely track and monitor changes in competition and the regulatory environment not only at the time of the business combination but also when the extended deadline arrives,” the FTC said, adding it will decide then whether to extend the remedies further.