KFTC's Stricter Merger Review: Lotte Rental Lessons

Significant changes are being observed in Korea's merger review environment. In 2025, the number of merger reviews conducted by the Korea Fair Trade Commission (KFTC) decreased by approximately 12.5% compared to the previous year, yet the total value of reviewed mergers increased by about 11.4%. Notably, the number of cases escalated to an in-depth review (Phase 2 review) due to competition concerns steadily rose from 25 in 2023 to 34 in 2025. This is a clear signal that the KFTC is not merely processing a large volume of M&A transactions but is scrutinizing the impact of large-scale M&As on market competition with greater depth and rigor.

The recent prohibition of the joint acquisition by Lotte Rental and Affinity stands as the pinnacle of this policy shift. This case indicates that companies must go beyond merely fulfilling legal requirements when formulating M&A strategies; they need to conduct in-depth analyses of potential competition restrictions and prepare proactive countermeasures.

KFTC's Intensified Review Trend and Statistical Evidence

The KFTC's intensified merger review is clearly demonstrated through the numbers. While the total number of reviewed cases decreased in 2025, the increase in review value signifies active large-scale M&A activities. Concurrently, the consecutive three-year increase in in-depth reviews due to competition concerns shows that the KFTC is concentrating more on evaluating the market impact of individual M&A transactions.

Some market experts analyze this phenomenon as proof that the KFTC is examining competition concerns regarding large M&As more deeply. In the past, competition concerns were often resolved through conditional approvals, but now, the KFTC is interpreted as not hesitating to take strong measures, including outright prohibition.

The Monopoly Regulation and Fair Trade Act and Business Combinations

The KFTC's merger review is based on the 「Monopoly Regulation and Fair Trade Act」. Article 7 (Restriction on Business Combinations) of the Fair Trade Act prohibits "acts that substantially restrict competition in a particular market" due to business combinations. The core here is whether an act "substantially restricts competition."

Furthermore, Article 11 (Reporting of Business Combinations) of the Fair Trade Act imposes a reporting obligation to the KFTC for business combinations exceeding a certain scale. If competition restriction is acknowledged, the KFTC can order corrective measures, impose administrative fines, or even prohibit the business combination itself, pursuant to Article 14 (Measures against Violations of Business Combination Restrictions). In simple terms, if a business combination risks exacerbating market monopolization or oligopoly and harming consumer welfare, the KFTC can actively intervene to prevent it.

The SK Rental Case: A Glimpse into the KFTC's Resolve

The KFTC's stance on competition restriction review was already evident in past cases. During the 2019 merger review when SK Rental acquired AJ Networks' car rental business division, the KFTC approved the business combination on the condition that SK Rental implement remedial measures to address competition concerns.

At that time, the KFTC required specific remedial measures, such as ordering SK Rental to divest its car rental business divisions in certain regions, including Busan. This case, while not prohibiting the business combination itself, clearly demonstrated the KFTC's active willingness to intervene to protect market competition. In this way, the KFTC closely monitors the potential for business combinations to deepen monopolization in industries with high market concentration.

Specific Implications of the Lotte Rental Prohibition

Against this backdrop, the prohibited joint acquisition by Lotte Rental and Affinity is a significant case symbolizing the KFTC's strengthened review stance. Although the detailed reasons for this prohibition decision have not been disclosed, the car rental market is already considered a highly concentrated sector, with a few large enterprises holding significant market shares.

If a leading company like Lotte Rental further strengthens its market dominance through additional acquisitions, it could reduce the competitive space for rivals, potentially leading to restricted consumer choice or price increases in the long run. The KFTC is analyzed to have made the prohibition decision after thoroughly reviewing these potential anti-competitive effects. This sends a strong message to the market that the KFTC can prohibit a business combination entirely when it determines there are serious competition concerns that cannot be resolved through conditional approval.

Changes in Corporate M&A Strategy and Countermeasures

The KFTC's strengthened review stance demands fundamental changes in companies' M&A strategy formulation. Companies must now thoroughly analyze the impact of M&As on the market competition environment, going beyond mere external growth. A more cautious approach is particularly necessary in specific industry sectors with high competition concerns.

Companies pursuing M&A should conduct in-depth preliminary reviews, including ▲defining the relevant market and analyzing its concentration, ▲assessing the potential for competition restriction, and ▲exploring ways to resolve competition restriction through remedial measures (e.g., divestiture of business divisions, transfer of assets). An anonymous legal professional commented that the KFTC's strengthened review stance would prevent the deepening of monopolies by large corporations, ensure growth opportunities for small and medium-sized enterprises (SMEs) and nascent companies, and ultimately enhance the vitality of the entire market in the long term. Conversely, another economic expert expressed concerns that it could temporarily dampen M&A activity and increase investment uncertainty for companies.

Implications and Outlook

The KFTC's trend of intensifying merger reviews and the Lotte Rental prohibition case present a significant turning point for the M&A market. Companies must formulate M&A strategies that consider long-term market competition and consumer welfare, rather than short-term gains. This will become an essential element not just for compliance with legal regulations, but also for corporate social responsibility and sustainable growth.

Ultimately, these efforts by the KFTC are expected to foster healthy market competition, encourage innovation, and protect consumer rights. It is time for companies to adapt to the changed environment by refining their M&A strategies and, if necessary, considering proactive remedial measures.

Frequently Asked Questions

Q. Why has the KFTC's merger review become stricter?

The KFTC is strengthening its review standards due to concerns that large-scale business combinations could harm market competition, deepen monopolies, and reduce consumer welfare. This reflects a commitment to protect the competitive environment, especially in highly concentrated industries.

Q. What are the key factors considered during merger review?

The most important factor is whether the business combination "substantially restricts competition in a particular market." This is determined by comprehensively evaluating market share, the number of competitors, entry barriers, and the potential impact on consumers.

Q. What should companies preparing for M&A consider?

Companies preparing for M&A should, based on an understanding of the Fair Trade Act, meticulously analyze the potential anti-competitive effects of the combination with the target company. It is crucial to proactively review potential remedial measures that the KFTC might impose and prepare response strategies.

Q. What is the impact of the KFTC's stricter review on the domestic M&A market?

In the short term, it may increase uncertainty for companies pursuing M&As and potentially deter some large-scale transactions. However, in the long term, it is expected to have a positive effect by fostering a healthy competitive environment, preventing the deepening of monopolies by a few companies, and increasing the overall vitality of the market.