South Korea's corporate regulator said Saturday that it is not considering easing mergers and acquisition (M&A) rules that have been blamed for hindering restructuring in some business sectors.
"Current rules take full account of various considerations when allowing M&A that goes beyond calculating excessive market share," said Kim Byung-bae, vice chairman of the Free Trade Commission (FTC).
He stressed that because the FTC looks at a wide range of conditions such as denial of market access to newcomers, and competition from overseas markets, before allowing or rejecting mergers, there is a degree of built-in flexibility in the decision-making process.
"There seems to be a misunderstanding in the business community on the way the FTC makes decisions," the official said.
The remarks by the senior official comes as the country's petrochemical leaders voice complaints about FTC rules that they claim effectively bar mergers and acquisitions. The country's petrochemical sector is feeling pressure from over capacity that is eating into earnings.
Some financial institutions have also said that FTC guidelines were making it hard for them to expand through mergers and acquisitions that they claim are necessary to compete with large foreign banks, investment banks and securities firms.
Kim, however, said that the FTC is moving to use the Herfindahl-Hirschman Index (HHI) as a reference to evaluate M&A requests.
The HHI is a measure of the size of firms in relation to the industry, and is used in the United States as a indicator of the level of competition within a business area. It could give anti-trust authorities an indication of possible dangers of market domination by a large company.