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| A Hyundai Heavy Industries dockyard in Ulsan / Courtesy of Hyundai Heavy Industries |
By Nam Hyun-woo
Hyundai Heavy Industries' takeover of Daewoo Shipbuilding & Marine Engineering (DSME) will likely face a more stringent antitrust oversight by the Japanese government amid the intensifying trade row between Seoul and Tokyo, industry analysts said Thursday.
Though the Japanese government has yet to announce its stance on the merger between the world's top two shipbuilders, Hyundai Heavy has decided to delay filing an application with Japan's Fair Trade Commission for an antitrust review, hoping to avoid falling victim to the worsening bilateral ties.
Hyundai Heavy plans to ask the antitrust authorities of Japan, the European Union and Kazakhstan for reviews on the acquisition and is arranging a schedule for the applications. It has already submitted applications to the antitrust authorities of Korea and China.
Since it involves two shipbuilders with high global market shares, the deal is subject to rulings by the antitrust authorities of related countries, because it may undermine the bargaining leverage of shippers and vessel buyers in many countries. If a country opposes the deal, the new entity cannot operate in that country.
An official at the shipbuilder said, "We have been in negotiations with antitrust officials at the EU over the timeframe for the application since April, but have yet to start talks with the Japanese authorities."
Reportedly, Hyundai Heavy's initial plan was to apply for review in China and Japan first and then go to the EU because the two countries' reviews were deemed relatively easy to pass.
One thing in Hyundai Heavy's favor is the difference in the portfolios of each country's shipbuilders. While Korean shipbuilders focus on LNG and container vessels, Chinese and Japanese players concentrate on bulk carriers. Also, Japanese shippers, such as NYK Line and Mitsui OSK Lines, mostly place orders with Japanese shipyards.
However, the rising trade tension has changed the situation as Japan is expediting moves to challenge Korea's shipbuilding industry at the WTO. In a July 28 report, Japan's Ministry of Economy, Trade and Industry said filing a complaint with the WTO over Korea's shipbuilding industry was now its "priority." Japan claims that state-run financial institutions' aid to DSME is a subsidy that goes against WTO agreements.
Along with the Japanese government, Tamotsu Saito, chairman of the Shipbuilders' Association of Japan has already expressed opposition to the acquisition, saying "the birth of this overwhelming shipbuilding group is a threat," and "the antitrust regulators of each country will not just idly watch this."
In separate interviews with Japanese newspapers, he also called for the Japanese government's help over the deal, saying "national efforts are required to protect the nation's shipbuilders."
"We don't expect Japan's antitrust authority to be swayed by the current atmosphere between the two countries," a shipbuilding industry official said. "But it is difficult to rule out the chances of the review being delayed or rejected in the worst case scenario."
The trade tension between Korea and Japan began July 4 after Tokyo imposed restrictions on the export of materials needed to make semiconductors. It is also poised to remove Seoul from its "whitelist" of countries receiving preferential trade treatment.
These measures appear to be in retaliation for last year's Korean Supreme Court rulings here against Japanese firms over compensation for surviving South Korean victims of wartime forced labor.
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