Concerns Over Restricted Competition in the Cross-Border Direct Purchase Market
The Korea Fair Trade Commission has given final approval for the establishment of a joint venture between Shinsegae and China's Alibaba Group. However, to prevent potential platform dominance resulting from a superior market position after the merger, the approval is conditional on prohibiting the sharing of domestic consumer information.
On September 18, the Fair Trade Commission announced, "We are granting conditional approval for the business combination in which Apollo Korea, an affiliate of Shinsegae, will acquire a 50% stake in Grand Opus Holding, an affiliate of China's Alibaba Group."
This pertains to the business combination where Grand Opus Holding, the joint venture between Korea's major retail group Shinsegae and China's Alibaba, will own 100% of the shares in both Gmarket and Aliexpress Korea.
In Korea's online cross-border direct purchase market, Aliexpress holds the top position with a 37.1% market share, while Gmarket ranks fourth with 3.9%. After this merger, their combined market share will reach 41%.
The Fair Trade Commission determined that, following this business combination, Gmarket and Alibaba could leverage their superior position to raise costs for competitors, increase entry barriers, and weaken efforts in personal information protection and data security, all of which could significantly restrict competition.
In particular, the Commission found considerable concern regarding competition restrictions due to the combination of information assets (data), given the purpose of this business combination and the unique characteristics of platform mergers.
Accordingly, the Fair Trade Commission has required that Gmarket and Alibaba technically separate domestic consumer data and prohibit the use of each other's consumer data in the domestic online cross-border direct purchase market.
Additionally, outside the cross-border direct purchase market, consumers must be given the choice regarding data usage, and the companies are required to maintain current standards of personal information protection and data security, as stipulated in the corrective order.
This corrective order will be valid for three years, and to oversee its implementation, a compliance monitoring committee of up to six members will be established and operated.
The Fair Trade Commission stated, "This is the first case in which we have thoroughly examined the competitive restrictions of data consolidation, which is becoming increasingly important in the digital market, and designed corrective measures accordingly."
The Commission further explained, "During this era of digital transformation, we will strive to encourage innovative investment in the market and, in particular, to protect consumer welfare in online platform markets that are closely connected to people's daily lives."
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