Lee & Ko’s Antitrust and Competition Practice Group conducts mock dawn raid on multinational corporate group
Lee & Ko’s Antitrust and Competition Practice Group conducted a mock dawn raid and comprehensive antitrust risk assessment of a multinational corporate group (“Group A”) under the Monopoly Regulation and Fair Trade Act (“MRFTA”).
During the mock dawn raid, Lee & Ko’s Antitrust and Competition Practice Group used the same methods and procedures as the Korea Fair Trade Commission (“KFTC”) in its investigations and offered additional solutions for deficiencies that were discovered during Group A’s response to the mock dawn raid.
In addition, Lee & Ko’s Antitrust and Competition Practice Group collected materials and conducted interviews with key executives and employees of Group A’s three affiliate companies. Using the information gathered during the mock dawn raid, Lee & Ko’s Antitrust and Competition Practice Group confirmed the compliance of the companies with the MRFTA and provided measures for improving compliance in necessary areas.
The mock dawn raid conducted by Lee & Ko’s Antitrust and Competition Practice Group is invaluable as it helps to prevent executives and employees with limited knowledge and experience on the MRFTA from committing acts during a dawn raid that could be considered obstruction and providing guidance on cooperating with a KFTC investigation while protecting the right to defense. Group A utilized the mock dawn as an opportunity to check and strengthen compliance management in all areas of its business.
Following the recent reorganization of the KFTC in separating its investigation and policy divisions, establishing proper procedures for responding to KFTC dawn raids is of the utmost importance as the investigative function of the KFTC has been strengthened through the reorganization and led to an increase in the number of dawn raids.
Lee & Ko’s Antitrust and Competition Practice Group actively utilizes its extensive expertise in responding to large-scale dawn raids to ensure companies are prepared for dawn raids, and more importantly, thoroughly and comprehensively managing MRFTA related risks.
Aurelius Group Acquires Shares in LSG Sky Chefs Korea Co., Ltd.
Lee & Ko’s Antitrust and Competition Practice Group represented Aurelius Group affiliate, Truffle UK BidCo One Ltd., in filing the merger notification for the acquisition of 80% of the shares of in-flight meals producer and seller LSG Sky Chefs Korea Co., Ltd.
The Aurelius Group has been engaged in global investments (with a focus on Europe), and this acquisition marked its entry into investing in the Korean market as part of a long-term investment strategy, which focuses on acquiring companies with potential for improving and developing operations. As this was a large investment made by Aurelius Group in Korea, the determinations by the Korea Fair Trade Commission (“KFTC”) on the definition of the relevant market and potential restrictions on competition were important issues.
Lee & Ko’s Antitrust and Competition Practice Group effectively explained in the merger filing notification that (i) the market for the investment business and the market for the production and sales of in-flight meals is a conglomerate merger involving products that are non-complementary and cannot be substituted, (ii) the Korean investment market is fragmented with many businesses engaged in fierce competition, and (iii) there are strong competitors in the Korean in-flight meal production and sales market. As a result, the KFTC issued unconditional approval 7 days after the submission of the merger filing notification.
LS-L&F Establishment of JV / LS HOLDINGS
LK’s Antitrust and Competition Practice Group represented LS Corp. in its filing of merger notifications in Korea, China, Vietnam and Poland and in responding to the relevant competition authorities’ review of the proposed establishment of a JV with L&F Co., Ltd to produce precursors, a key component of secondary batteries.
In this case, it was particularly important to quickly and efficiently respond to inquiries made by competition authorities due to the tight timeline between the signing of the JV agreement between the companies and set date for the establishment of the JV. LK’s Antitrust and Competition Practice Group swiftly prepared the merger notification for submission to the KFTC, and conducted an analysis of foreign merger filing obligations, and assisted LS in preparing the merger notifications for submission in Vietnam, China, and Poland. LK’s efforts in explaining the details of the proposed JV, structure of the market for secondary batteries, precursors and anodes, and successful demonstration that the proposed JV does not restrict competition in the relevant markets to the KFTC, resulted in the KFTC’s expedited clearance.
During the KFTC’s review of the proposed JV, LK’s Antitrust and Competition Practice Group successfully asserted (1) the secondary battery industry is rapidly changing as a result of the United States’ Inflation Reduction Act (IRA) and (2) the transaction will create an internal value chain for the production of raw materials for precursors, precursors and anodes for secondary batteries in Korea. The KFTC issued several RFIs on the market definition of precursors and anodes, and on the restriction of competition in those markets, but LK’s Antitrust and Competition Practice Group responded to the RFIs in a swift and effective manner based on its deep and extensive knowledge of the secondary battery industry. Based thereon, LK was able to obtain unconditional clearance in less than two months from the KFTC, despite the issuance of RFIs, and from the Polish competition authority at around the same time.
LK’s Antitrust and Competition Practice Group has also successfully assisted LS in responding to merger clearance reviews that took place in Poland, China and Vietnam. Although the foreign authorities raised several questions regarding the structure of the transaction, details of the industry, and whether the transaction can raise any anti-competitive effect in their jurisdiction, LK prepared the responses that adequately addressed the competition authorities’ inquiries. Especially, despite the Vietnamese Competition Commission has newly been established and there were less staff reviewing merger notifications than usual, LK’s swift assistance of the parties and smooth collaboration with other global law firms enabled LS to receive clearance on an earlier time than estimated.
Through LK’s deep understanding and industry expertise, exceptional response capabilities in merger reviews, and ability to collaborate with other global law firms, LK will continue to strive to assist its clients for their merger filings, in large scale global transactions.
Overruling of Corrective Orders Against Naver and Gmarket for Breaching Personal Information Protection Regulations
In January 2021, the Personal Information Protection Commission (PIPC) issued corrective orders and imposed administrative fines against Naver Corp. (Naver) and Gmarket Inc. (Gmarket) due to the continuous increase in electronic commerce fraud cases, such as the misuse of open market seller accounts. The orders were issued based on the grounds that the sellers did not take sufficient security measures when accessing the system. The PIPC considered the third-party sellers on Naver and Gmarket as personal information handlers of Naver and Gmarket, and held Naver and Gmarket responsible for their management and supervision of personal information handlers.
Lee & Ko, on behalf of Naver and Gmarket, filed a lawsuit to cancel the corrective orders. Lee & Ko presented various evidence from different angles to prove that the sellers were independent personal information controllers who received personal information from Naver and Gmarket, rather than personal information handlers of Naver and Gmarket, and argued that the orders were illegal and unfair.
The district court accepted the arguments of Naver and Gmarket and canceled the corrective orders imposed by the PIPC.
This case was the first case that clarified the scope of personal information handlers and holds significant value as a precedent in terms of the role and responsibilities of platform service providers in relation to e-commerce businesses, including open markets. The case is currently ongoing at the appellate court, and Lee & Ko continues to represent Naver and Gmarket.
Legal advice with respect to a dispute relating to a potential insurance claim arising from the losses caused by a defective tunnel construction in the Busan-Masan Double Track Private Investment Project.
In March 2020, during the construction of the double track as part of the Busan-Masan Double Track Private Investment Project, the segment of the underground tunnel that passes underneath a river was damaged, which led to the leakage of underground water and soil into the tunnel. Since the occurrence of this accident, repairs are being undertaken to date, which are expected to result in repair/recovery costs amounting approximately to USD300 million and loss of profit up to USD100 million due to the delay of construction (KRW400 billion)
With respect to the construction, client has subscribed to Construction All Risk (“CAR”) Insurance, and presently there is a dispute regarding insurance proceeds payment between the client and the co-insurers relating to the accident, which is likely to develop into a legal dispute. The legal issues that may be addressed in the prospective lawsuit are the subject of the insured interest, cause of the accident and whether the accident falls under a covered risk, obligation to explain the policy and whether the exclusions may apply to the accident due to the defective design and/or construction. Especially, the lawsuit will require interpretations of the exclusions under the special conditions that reflect the special characteristics of the linear construction, e.g., warranty concerning sections clause and special conditions concerning the construction of tunnels, galleries, subsurface structures or installations under CAR policy.
Considering the lack of relevant of precedents relating to construction insurance in Korea, our team is providing comprehensive strategic advice regarding insurance claims to be made in the future, as well as advice on interpretation of the policies which include a wide jurisdictional research. This case will be an important precedent and is expected to involve legal disputes in various insurance topics over the next several years.
Advising on acquisition financing relating to MBK Partners and UCK Partners’ acquisition of Osstem Implant
Lee & Ko advised a group of lenders (with NH Investment & Securities acing as the mandated lead arranger) on one of the most notable acquisition financing deals in recent years, which involved MBK-UCK consortium acquiring a controlling stake in Osstem Implant Co., Ltd. (the largest dental manufacturer in Korea) through Dentistry Investment Co., Ltd. (a special purpose company set up by the consortium). The financing for this acquisition was structured to consist of (i) KRW1,700,000,000,000 bridge facility and (ii) KRW1,200,000,000,000 permanent facilities (KRW1,100,000,000,000 senior facility and KRW100,000,000,000 mezzanine facility).
The acquisition aspect of the deal entailed two tender offers and a sale and purchase with the largest shareholder of the target company. The unprecedented size of the tender offers, especially amidst heated debates about whether or not Korea should adopt mandatory bid rules to ensure protection of general investors during M&A activities involving a listed company, was, in itself, enough to attract substantial market attention and scrutiny.
Being a leading law firm in banking & finance, Lee & Ko’s team of lawyers took control of all legal, commercial and practical issues arising from the deal by, inter alia, providing its invaluable input and insight on structuring the financing aspect of the deal, negotiating key terms of financing, documenting the outcome of negotiations and arranging for the signing and closing, while also taking on the additional role of advising on tender offer processes to NH Investment & Securities.
While working under time and other deal constraints was challenging, Lee & Ko’s team of lawyers have been successful in tapping into its abundant resources based on its unrivalled and time-tested legal expertise, experience and know-how in bringing this deal to a successful closing. Through this deal, Lee & Ko was able to demonstrate, once again, its exceptional capacity to tailor its advice and services to the specific, most ideal, deal structure for any given deal (including financing for the acquisition via tender offers), thereby highlighting its versatility and adaptability as legal advisor.
This transaction was led by Yeo Kyoon Yoon, Myoung Chul Kwak and Eui Yeon Jo, and assisted by Minsun Hwang.
Legal advice on the legislation process for a law regulating actuaries.
Despite the actuaries’ significant role in designing and pricing insurance policies, premiums and pension plans and assessing accounting transparency, currently there is no statutory regulatory framework regulating actuaries, unlike other professionals such as attorneys, accountants or patent attorneys. As actuaries are widely employed in insurance companies, public pension agencies and other financial institutions, adopting a comprehensive regime regulating actuaries is nothing short of necessary.
Lee & Ko’s insurance practice group has a deep roster of insurance professionals who have long participated in the legislation and revision processes for the Insurance Business Act over the past few decades. The group also has capabilities to deploy various attorneys, former civil servants and former national assemblymen with experience in the executive/legislative agencies, the Regulation Reform Committee and the national assembly to offer the clients solutions-driven advice and obtain optimal results on their behalf.
Advising clients on the enactment of a new law is a much more challenging task than advising on the revision of an existing law. Lee & Ko’s unmatched competence and vast experience in the field has received a wide recognition in the field, leading to the appointment to advise on the legislation process for a potential law regulating actuaries. Lee & Ko’s Insurance and Reinsurance Practice Group worked intimately with the firm’s legislative consulting team, harnessing a collective expertise of leading attorneys and experienced professionals to meet the client’s needs.
Successfully defended the South Korean government in a KRW 991.7 billion ISDS claim filed by the U.S.-based hedge fund Elliot
Representing the South Korean government against the U.S.-based hedge fund Elliot Investment Management, Lee & Ko secured a remarkable victory in the investor-state dispute settlement arbitration, which resulted in the tribunal granting only 7% of the KRW 991.7 billion total claim amount.
This was a dispute concerning the merger between Samsung C&T Corp. and Cheil Industries Inc. in 2015 whereby Elliot claimed it could have earned long-term profits from its shareholding in Samsung C&T, but instead suffered losses due to the alleged illegal intervention by the South Korean government. Elliot claimed that the South Korean government pressured the National Pension Service to vote in favour of the merger between Samsung C&T and Cheil Industries, which resulted in damages, and sought to recover compensation for KRW 991.7 billion.
This case received considerable media coverage over the years, not least for the multitude of civil and criminal proceedings connected with this case, with both parties engaging in intense legal battle for more than five years since 2018. Lee & Ko successfully defended the case by applying extensive knowledge and experience in ISDS matters, conducting a thorough and in-depth analysis of a vast volume of materials, collaborating closely with foreign law firms, and developing compelling arguments for some of the most critical issues.
Advised CJ CGV on Capital Increase worth KRW 1 Trillion
On June 20, 2023, CJ CGV held a board of directors meeting and resolved a paid-in capital increase worth KRW 570 billion through a public offering of forfeited shares after a rights offering. CJ Corporation, which is the largest shareholder of CJ CGV, plans to participate in the rights offering (approximately KRW 60 billion worth of shares), and lead managers, which are Korea Investment & Securities, Samsung Securities and Shinhan Securities, plan to acquire the remaining shares after the public offering. In addition to the above, CJ CGV will allocate approximately KRW 450 billion worth of shares to CJ Corporation, and CJ Corporation will make an in-kind contribution of the 100% stake in CJ OliveNetworks.
Through this project, CJ CGV, by using a significant portion of the proceeds derived from the fundraising (KRW 380 billion) for the repayment of debt, will not only improve the debt-to-equity ratio from 912% to 297.7%, but will also improve the total equity to a significant degree, from KRW 356.6 billion to KRW 1146.6 billion. The capital increase will be completed by payment being made around September 14 and the issuance of new shares around September 27. Lee & Ko provided detailed advice on various complex issues arising from the simultaneous capital increase through public offering after a rights offering and a capital increase through third-party allotment by in-kind contribution.