South Korea Extends Antitrust Restrictions on Hanwha from DSME Acquisition
South Korea’s antitrust regulators have taken the unusual step of extending a series of restrictions imposed on several of Hanwha’s companies as a condition for the 2023 acquisition of Daewoo Shipbuilding and Marine Engineering. At the time, the Korea Fair Trade Commission expressed concerns that Hanwha’s combination of the shipbuilding operation and its military component systems could create an unfair advantage or monopolistic elements, especially in naval shipbuilding.
The FTC said the combination in 2023 would give the companies potentially a market share exceeding 60 percent for surface vessels and submarines. Hanwha Aerospace and Hanwha Systems were and continue to be leaders in supplying key components used in naval ships, both being built at DSME (now Hanwha Ocean) as well as the rival shipbuilders. The FTC said the DSME acquisition raised the potential for discriminatory pricing and information sharing that could disadvantage competitors in bidding for future projects.
The commission announced on April 28 that it has completed a three-year review since the completion of the merger and that it finds many of the same conditions remain in the market. It found that the market issues have not corrected themselves since the completion of the merger.
For the first time in the history of its regulation over mergers, the FTC determined to extend the prohibitions for an additional three years till May 2, 2029. It further said that it would conduct another review and could determine to extend the restrictions for an additional two years if the conditions for market dominance continue.
Hanwha accepted in 2023 measures that were designed to prevent discriminatory offers on quoted prices for ship components, a ban on unfair refusals of requests for technical information on ship components, and a ban on the sharing of competitors’ trade secrets.
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The commission said that the advantage remained for bidding on shipbuilding contracts as well as in eight areas of components supplied by Hanwha. The restrictions are being continued for each of the elements. The commission, however, found that the measures were no longer required for systems used to identify friend or foe for ships and the integrated machinery control system market for ships. The restrictions are being allowed to expire for these two segments as new competitors have emerged in these segments.
The decision comes as Hanwha continues to move aggressively to expand its market share in key segments, from military shipbuilding to components. The company is also expanding these segments internationally with its announced investment in Austal and its investments in the United States, including the acquisition of the Philly Shipyard. Hanwha has highlighted the market opportunities both domestically and internationally as it works to integrate its capabilities in shipbuilding with its expertise in electronics and key component systems.