Exclusionary Effects of Internal Transactions of Large Business Groups

Abstract

ABSTRACT Antitrust law in Korea regulates internal transactions by the owner and his family, or ‘Person with Special Interest (PSI)’ of a large business group. Its regulatory grounds, however, are not well-established. This paper analyses internal transactions from the perspective of competition policy, particularly, exclusionary effects. Internal transactions between the upstream- and downstream-affiliates of a business group shrink the size of the upstream market and hence squeeze the profitability of potential entrants. Thus, it may exclude the entrants which, absent the transactions, would enter the market and contribute to consumers. In addition, it may lead to a breach of the fiduciary duty of PSI. We provide some policy implications by analysing the optimal behaviour of PSI.