The Korea Fair Trade Commission put the brakes on the merger between Lotte Chemical and HD Hyundai Chemical, the first project under the "petrochemical industry restructuring," saying there is a concern it would create an oligopolistic player. The agency told them to fix the merger structure because, if the two combine, their market share in synthetic resins would become overwhelming. In response, Lotte Chemical and HD Hyundai Chemical submitted voluntary remedies, and the Korea Fair Trade Commission (FTC) reached a tentative conclusion to approve the merger with conditions if the remedies are implemented. The Korea Fair Trade Commission (FTC) plans to convene a full commission meeting later to decide final measures.
On the 15th, the Korea Fair Trade Commission (FTC) said it sees concerns that the business reorganization plan to merge the Lotte Chemical Daesan plant in Seosan, South Chungcheong, with HD Hyundai Chemical by Lotte Chemical and HD Hyundai Chemical would substantially restrict competition in the domestic low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA) markets. LDPE is a synthetic resin produced by polymerizing ethylene and is used for paper cup coatings and food containers. EVA is a synthetic resin made by polymerizing ethylene and vinyl acetate monomers and is used for shoe soles and glue guns.
The Korea Fair Trade Commission (FTC)'s view follows the business combination filing submitted in Nov. last year by Lotte Chemical and HD Hyundai Chemical. The filing stated that Lotte Chemical would spin off the Daesan plant as a physical division and merge it with HD Hyundai Chemical, and that Lotte Chemical would acquire additional shares in the merged entity so that Lotte Chemical and HD Hyundai Oilbank would each hold 50% equity of the merged entity.
The Korea Fair Trade Commission (FTC) judged that if the two companies merge and raise LDPE and EVA prices domestically, other competing businesses would find it difficult to supply substitutes in a timely manner. It also projected that, as the companies combine, the number of competitors in the LDPE and EVA markets would decrease, creating side effects that make it easier for businesses to coordinate on prices, quantities, and transaction terms.
In response, Lotte Chemical and HD Hyundai Chemical prepared remedies to address the issue and submitted them to the Korea Fair Trade Commission (FTC). The remedies were not disclosed, but in such cases, corporations typically report to the Korea Fair Trade Commission (FTC) that they will freeze product prices for a set period going forward or sell certain business units. The Korea Fair Trade Commission (FTC) reached a tentative conclusion that the remedies submitted by Lotte Chemical and HD Hyundai Chemical would resolve concerns about competitive restraints arising from the merger. It amounts to conditional approval. The Korea Fair Trade Commission (FTC) plans to convene a full commission meeting next month to decide the final measures on the Lotte Chemical–HD Hyundai Chemical merger.