The Korea Fair Trade Commission said on the 20th it will grant conditional approval to Daesan No. 1, a petrochemical restructuring project. Mergers between companies above a certain size must undergo review by the Korea Fair Trade Commission (FTC) because of concerns about the emergence of a monopolistic operator, and the merger was conditionally approved because Daesan No. 1 would create an operator with 50% of production capacity. The Korea Fair Trade Commission (FTC) decided to impose corrective measures on Daesan No. 1, including keeping the domestic product price increase rate below the export price increase rate for five years and restricting personnel appointments for executives and employees.
Daesan No. 1 involves Lotte Chemical hiving off the Daesan plant into a separate company, merging it with HD Hyundai Chemical, and Lotte Chemical additionally acquiring shares in the merged entity. Ultimately, Lotte Chemical and HD Hyundai Oilbank will each hold 50% equity in the merged entity. Accordingly, the merged entity will produce low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA). LDPE and EVA are both types of synthetic resins; LDPE is used for paper cup coatings and food containers, while EVA is used for shoe soles and glue guns.
The Korea Fair Trade Commission (FTC) concluded that the tie-up would reduce competition among operators in the domestic LDPE and EVA markets. There are currently four operators in this market (HD Hyundai, Lotte, Hanwha, and LG), but a merger would reduce that to three. Based on production capacity, the HD Hyundai Oilbank–Lotte Chemical merged entity would account for 50% of the entire market. The fact that LDPE and EVA allow easy identification of rivals' production capacity and international prices, and that products are similar across companies, was also considered. Jeon Seong-bok, Director General of the Korea Fair Trade Commission's Corporate Merger Review Bureau, said, "In a market environment like this, the reduction in the number of competing operators raises the risk of coordination among operators on prices and other matters."
In response, the Korea Fair Trade Commission (FTC) decided to cap the rate of change in domestic LDPE and EVA prices for the next five years. For example, if the export price rises compared with the previous three months, the domestic price increase rate must be kept at or below the export price increase rate. Conversely, when lowering export prices, the rate of decrease must not exceed the domestic price decrease rate. The commission also banned the sharing of competitively sensitive information—such as prices, volumes, costs, and inventory levels—between the parties for five years. It additionally prohibited concurrent executive or employee positions between HD Hyundai Chemical and Lotte Chemical. Jeon, the Director General, said, "After five years, we will review whether these corrective measures need to be extended."