Seoul: South Korea's antitrust watchdog announced its decision to block a Singapore-based private equity fund (PEF) from acquiring the country's largest vehicle rental company, Lotte Rental Co., due to concerns over market competition. The Fair Trade Commission (FTC) stated that the acquisition would significantly restrict competition within the rental market.
According to Yonhap News Agency, Careena Transportation Group Ltd., which is controlled by private equity firm Affinity Equity Partners, has been prevented from purchasing a 63.5 percent stake in Lotte Rental. The FTC emphasized that Affinity already owns SK Rent-a-Car Co., the nation's second-largest rental car operator, raising concerns about market concentration.
The FTC's statement highlighted the risk of substantially restricting competition, including potential price increases within the domestic rental car market, leading to the prohibition of the merger. The proposed transaction would effectively place the two leading rental firms under the same private equity firm's control, thus heightening market concentration.
Lee Byung-geon, a senior FTC official, explained that the decision was driven by concerns that the merger would eliminate effective competition between the companies. He noted the difficulty of a meaningful new competitor emerging in the short term, given the current market dynamics.
The FTC pointed out that the merger would negatively impact both the short-term car rental market, defined as rentals of less than one year, and the long-term rental market, where rental periods exceed one year. As of the end of 2024, the two companies held significant market shares, with 29.3 percent in the short-term rental market on the mainland and 21.3 percent on Jeju Island. In the long-term rental market, their combined share reached 38.3 percent, showing an upward trend.
The commission warned of potential anti-competitive effects, such as increased rental fees, resulting from the elimination of competition between the two leading firms. The FTC's decision serves as a strong warning against private equity firm-led mergers that could rapidly consolidate market power and distort fair competition.
Lotte Group, the owner of Lotte Rental, expressed its respect for the FTC's decision. In a press release, the conglomerate announced plans to consult with Affinity Equity Partners to explore additional proposals that could address the FTC's concerns regarding increased market dominance.