Fair Trade Commission Grants Conditional Approval for 'KT Skylife-HCN' Merger... 'Prohibition on Subscription Fee Increases Exceeding Inflation Rate'

"Concerns Over Competition Restriction in Digital and 8VSB Pay TV Markets"
Imposition of Compliance Conditions Such as 'Maintaining Number of Channels, Prohibition of Refusal of Group Contracts and Subscription Switching'

[Sejong=Asia Economy Reporter Joo Sang-don] The Korea Fair Trade Commission (KFTC) conditionally approved the corporate merger between satellite broadcaster KT Skylife and Hyundai HCN. However, to address concerns over competition restrictions arising from the merger, seven corrective measures were imposed, including a ban on cable TV subscription fee increases exceeding the inflation rate.

On the 24th, the KFTC announced that after reviewing KT SKY's acquisition of HCN shares, it judged that the merger would restrict competition in the digital and 8VSB pay TV markets and thus granted conditional approval. 8VSB is a frequency transmission method that converts analog broadcasts to digital broadcasts without a separate set-top box.

KT Skylife signed a contract on October 13 last year to acquire 100% of the shares of Hyundai HCN and Hyundai Media, respectively, and reported the corporate merger to the KFTC on November 6 of the same year.

A KFTC official stated, "This merger involves a combination between KT affiliates and Hyundai HCN affiliates, resulting in not only a horizontal merger but also vertical and conglomerate mergers. Among the 10 related markets, we judged that there is a competition restriction in two markets: digital pay TV and 8VSB broadcasting."

Accordingly, the KFTC imposed corrective measures to alleviate competition concerns in the digital pay TV markets of eight broadcasting areas including Gwanak-gu and Dongjak-gu in Seoul, Dongnae-gu and Yeonje-gu in Busan, as well as in the 8VSB pay TV market. The measures include: ▲prohibition of cable TV subscription fee increases exceeding the inflation rate ▲prohibition of refusal or termination of group subscription contracts ▲prohibition of arbitrary reduction of total channel numbers and consumer-preferred channels ▲prohibition of imposing disadvantageous conditions on new or switching subscribers ▲prohibition of refusal to extend or switch subscription contracts ▲prohibition of coercion to switch to high-priced products ▲obligation to post channel composition details and subscription fees on the website and provide prior notice.

The compliance period is until December 31, 2024. Requests for changes to the corrective measures can be made after one year from the completion date of the corporate merger.

Ko Byung-hee, Director of Market Structure Improvement Policy at the KFTC, said, "This measure is significant in that it conditionally approved a merger between broadcasting and telecommunications operators that has been ongoing for several years, supporting broadcasting and telecommunications convergence while preventing potential consumer harm in the process. Going forward, we will conduct prompt reviews so that companies can quickly respond to rapidly changing technology and innovation markets, while strictly addressing harms caused by competition restrictions."