Fair Trade Commission Approves Establishment of Credit Rating Joint Venture by Three Major Telecom Companies

The Fair Trade Commission (FTC) has approved the corporate merger for the joint venture personal credit evaluation company involving the three major telecommunications companies, Korea Credit Bureau (KCB), and Seoul Guarantee Insurance.

On the 6th, the FTC reviewed the establishment of a personal credit evaluation company by five companies, including the three telecom firms, and approved it, judging that the entry of a new business operator would promote competition throughout the domestic credit information industry.

The three telecom companies?SK Telecom, KT, and LG Uplus?filed a corporate merger notification to establish a “personal credit evaluation joint venture” together with Korea Credit Bureau (KCB) and SGI Seoul Guarantee. This is the first time the three telecom companies have established a joint venture with equal shares. The joint venture’s equity stakes are 26% each for the three telecom companies, and 11% each for strategic investors KCB and SGI Seoul Guarantee.

Specialized personal credit evaluation business involves collecting and assessing information necessary to judge an individual’s credit by using non-financial information rather than personal credit information related to financial transactions, and providing the results to third parties. Non-financial information refers to payment histories for utilities such as telecommunications, electricity, and gas, as well as online shopping records. For example, having no history of overdue telecom payments is reflected positively in credit evaluations. The three telecom companies plan to provide integrated telecom information to the joint venture to enhance the usability and market value of telecom information in the personal credit evaluation market.

The FTC examined concerns that the establishment of the joint venture might lead the three telecom companies to block telecom information from competitors. The FTC judged that there is little incentive for such blocking, considering the importance of stable risk management, the reluctance to easily switch credit information once introduced, and the characteristics of financial institutions that use multiple credit evaluation companies. Additionally, since the specialized personal credit evaluation market is still in its infancy, competition among various non-financial information sources such as telecom, shopping, SNS, and mobility that complement financial information is expected to be possible.

Furthermore, the FTC also approved the corporate merger for the ERP-based corporate credit inquiry joint venture filed by Douzone Bizon, Shinhan Bank, and Seoul Guarantee Insurance. ERP is an enterprise resource planning system that can utilize not only financial information but also non-financial information such as human resources, accounting, sales, and taxation. The FTC’s review concluded that the ERP corporate information held by Douzone Bizon does not have significant importance in the corporate credit inquiry market. It also stated, “Considering that Korea Credit Data (52%) and NICE (47%) dominate the market, the entry of a new business operator providing differentiated services is expected to have a significant effect in promoting effective competition.”