Hite Beer’s Takeover of Jinro Ltd. Comes up as a Main Issue

The Hite Beer Consortium, selected as the preferred bidder for Jinro Ltd., contracted a Memorandum Of Understanding (MOU) to take over the corporation on April 8.

Hite Beer stated, “We will complete a thorough investigation within four weeks,” adding, “We will also submit a pre-examination bill for business combination to the Fair Trade Commission (FTC) by the middle of next week.”

When it receives an examination bill for business combination, the FTC announces the result of its examination within 30 days, but since it can additionally prolong its investigation term to 90 days, it may take up to four months to come to a conclusion.

Soju and Beer: Are They Alternative Goods or Complementary Goods?-

‘Are there many cases that local consumers drink soju with beer? (complementary goods) Or do they drink only soju or beer, not together (alternative goods)?

It seems that the first barrier of Hite beer taking over Jinro is to conclude a relationship between soju and beer, and whether we should regard the relationship as one between alternative goods or complementary goods.

Alternative goods mean products or services, which can be used instead of something due to increased prices. Such relations as beef and meat, and green tea and coffee, belong to alternative goods. In contrast, complementary goods mean something that gives more satisfaction when used together. Coffee and sugar are typically grouped into that category.

If soju and beer are classified into alternative goods in competition, the FTC will decide whether Hite Beer is in monopoly and oligopoly, after separating the beer and soju markets. On the other hand, if complementary goods, it will regard beer and soju markets as a single market. If the FTC views beer and soju as alternative goods, Hite Beer will take an advantage, but if decided as complementary goods, it will be unfavorable to it.

An official of the FTC said, “We should exactly understand the relationship between the soju and beer markets in order to confirm the extent of its power over market.”

The FTC will finally conclude whether Hite Beer is in a monopoly and oligopoly situation from considering whether consumers can be damaged by its power over the market, and international competitiveness following the opening of the market after establishing market’s range.

Business Sector Claims Vary According to Their Interests-

Doosan, CJ, and the Daehan Electric Wire Consortium, picked as preliminary bidder following Hite Beer Consortium, the preferred bidder, insisted that the FTC should strictly judge whether Hite Beer is in monopoly and oligopoly by putting beer and soju markets together.

They claimed that if a large beer company dominates the soju market, it will cause a bad effect due to its monopoly and oligopoly of the market to consumers.

On the other hand, Hite Beer retorted, “Soju and beer markets are totally different,” adding, “It will not be big enough to worry about the expansion of market power by taking over Jinro Ltd.”

Jin-Suk Huh jameshuh@donga.com