This article was published on May 28, 2025, at 9:48 a.m. on the ChosunBiz RM Report site.
The acquisition of T’way Air by Sonoh International, the largest hotel and resort corporation in the country, is taking longer than expected. The combination of Sonoh International and T’way Air, which spans different industries, requires more time for review due to the horizontal combination of industries and the fact that Sonoh International holds equity in a low-cost carrier.
According to the competition authorities on the 28th, the Fair Trade Commission (FTC) determined that the combination of Sonoh International and T’way Air is a mixed and horizontal combination. The FTC classifies the nature of the business combination into three types based on the industries of the acquiring and target corporations and the equity held by the acquiring company, with different criteria applied for each type. The three types are: ▲ horizontal combination (a combination between companies with competitive relationships within the same market) ▲ vertical combination (a combination between companies at adjacent stages in the production and distribution process) ▲ mixed combination (a combination between companies with no related products).
Sonoh International's main business is the hotel and resort sector. Since the airline passenger transportation business of T’way Air does not overlap, it is categorized as a mixed combination. A review of the equity held by the company also indicates an extension into a horizontal combination, as Sonoh International holds 22% equity in Air Premia, another low-cost carrier.
Recently, Sonoh International signed a contract to sell all of its equity in Air Premia, co-owned with the private equity fund JC Partners, to Tire Bank. However, the horizontal combination review is expected to continue. Currently, only the sales contract has been signed, and the transaction will not be finalized until September, four months later. A FTC official noted, "The timing for the completion of the (Air Premia equity sale) contract is much later than the (business combination review) period," adding, "Sonoh International still owns (the equity in Air Premia)."
When reviewing mixed combinations, the FTC examines potential competition, exclusion of competing businesses, and whether there is an increase in barriers to entry for the respective business. The elimination of potential competition due to a combination could reduce the incentive for monopolistic corporations to set prices low, which may lower consumer welfare. The FTC comprehensively investigates whether anti-competitive practices, such as tying and bundled sales, will exclude competing businesses and whether the minimum capital required for market entry will not increase rapidly due to the combination.
A representative example of a mixed combination occurred in 2006 when Hite Beer merged with Jinro. At that time, the FTC judged that beer and soju belonged to different markets but conditionally approved the merger. They stipulated that the price could only increase within the consumer price inflation rate over five years and required measures to prevent abuses of position, such as tying sales. If the merger review between Sonoh International and T’way Air is approved, it may also be conditional.
Horizontal combinations are types with a high potential for restricting competition, and thus the FTC has more items to review. For those undergoing review, this type of inspection is relatively stricter than other types. When evaluating horizontal combinations, the FTC examines individual effects, cooperative effects, purchasing power enhancement effects, and innovation hindrance effects.
Specifically, it checks whether the combined companies can independently control prices and exclude competition, and whether implicit cooperative behaviors regarding prices, quantities, and transaction conditions become easier between operators. It also examines the potential reduction in purchasing quantities due to enhanced purchasing power in upstream markets such as the materials and supplies market.
In 2015, when the pharmaceutical company Bayer Korea acquired MSD Korea, it was also the result of a FTC horizontal combination review, where rights and assets related to oral contraceptive pills were sold. The FTC concluded that the two combined companies would possess the ability and incentive to raise prices, holding an 82% market share in the oral contraceptive market. Consequently, the merger was approved under the condition that the monopolistic division be sold.
Meanwhile, the complex intertwining of mixed and horizontal combinations has slowed the FTC's review process, causing delays in Sonoh International’s schedule for entering the T’way Air board. According to the original plan, a temporary shareholders’ meeting was scheduled for the 23rd of this month, where the chairman of Daemyung Sono Group, Seo Jun-hyuk, and nine board candidates from Daemyung Sono, the parent company of Sonoh International, were to be appointed as registered executives. However, with the FTC’s business combination review results still pending, T’way Air announced that it would postpone the meeting to the 24th of next month, just two days before the temporary shareholders’ meeting.
Sonoh International submitted its business combination application to the FTC last March, and the review will take a maximum of 120 days from the date of application, excluding the period for document corrections. A Daemyung Sono representative stated, "We are waiting for the FTC's approval regarding the business combination between Sonoh International and T’way Air."