Hanwha's takeover of DSME likely to get conditional approval

South Korea's Fair Trade Commission (FTC) on Monday said it is discussing corrective measures with Hanwha Group over fears that the conglomerate's acquisition of Daewoo Shipbuilding & Marine Engineering Co. (DSME) will restrict competition in the defense industry.

The trade watchdog is highly likely to grant conditional approval of the takeover in the name of lifting restrictions on competition in the sector. Following Japan and China, the European Union recently gave its thumbs up to the merger, with only FTC approval standing in the way.

The FTC is focusing on the potential for affiliation and restricted competition related to the defense industry division of Hanwha and the naval vessel unit of DSME. Hanwha produces key components for about 10 types of warships including radar and communication equipment, navigation systems and launch pads, while DSME makes warships as well as merchant ships.

For this reason, the watchdog is looking into the possibility of Hanwha selling parts to DSME at prices lower than those of competitors such as HD Hyundai Co. and HJ Shipbuilding & Construction Co. and Construction or providing more parts-related data to DSME. Late last month, the FTC asked Hanwha to prepare and submit its own corrective measures.

"Intensive reviews are needed on the possibility of Hanwha using its monopoly position to block competitors on the naval vessel market," an FTC source said. "The results of a stakeholder opinion survey showed that quite a few businesses raised concern over this."

Hanwha responded by saying it "actively and most rapidly responded to the FTC request for data," adding, "The globally approved screening process in the country has been delayed, prolonging uncertainty in business and fueling setbacks in national defense."

An FTC source said the watchdog will deal with the matter as soon as possible.

Write to Jae-Fu Kim at hu@hankyung.com