This update was published in October 2021, as part of our quarterly newsletter, Asia Pacific Competition Highlights. Click here to access the full report, which covers the most notable antitrust developments across 11 Asia Pacific jurisdictions.
MAVCOM issues Malaysia's first merger clearance decision
The Malaysian Aviation Commission ("MAVCOM") took into account the failing firm defence for the first in approving the proposed merger between Korean Air and Asiana Airlines ("Anticipated Merger"), and issued its final decision on 9 September 2021. The Malaysian competition law does not apply to commercial activity relating to the local civil aviation industry, which is regulated under the Malaysian Aviation Commission Act.
The Anticipated Merger was submitted by Korean Air pursuant to a voluntary notification and application under the Malaysian Aviation Commission Act 2015. In its assessment, MAVCOM focused on potential anti-competition effects of the Anticipated Merger on a direct flight route between Kota Kinabalu and Seoul, which are served by both parties ("Overlapping Route").
MAVCOM approved the Anticipated Merger for reasons including:
- the Anticipated Merger would not cause a significant lessening of competition effect on the flight routes in which the parties do not overlap;
- while the parties' post-merger market share of the Overlapping Route would be above 65% - 75%, the Anticipated Merger would cause limited unilateral effects as (i) airfares are strictly controlled by the South Korean authorities, (ii) Malaysian passengers have alternative flight options (to the Overlapping Route), (iii) the Overlapping Route has low passenger traffic, and (iv) the civil aviation industry is highly competitive; and
- Asiana Airlines is in such a dire financial situation that it is likely to exit the relevant aviation service market within the near future (i.e., the "failing firm defence").