For three years following the merger of Korea Railroad Corporation (Korail) and SR, fares on existing KTX routes will be cut 10 percent to match SRT levels. On weekends, the combined seat supply across all routes will increase by more than 17,000, with the number of services rising by more than 25.

SRT routes will also begin accumulating mileage points at the same 5 percent rate as KTX, while discount programs, commuter passes and other services will be integrated to improve consumer benefits.

A KTX-SRT coupled train waits to depart at Seoul Station in Jung-gu, Seoul. [Lim Se-jun]
A KTX-SRT coupled train waits to depart at Seoul Station in Jung-gu, Seoul. [Lim Se-jun]

The Korea Fair Trade Commission said Sunday it has granted final approval for Korail to acquire SR's high-speed rail operations and take over the government's 58.95 percent stake in SR, reflecting the business plan outlined above.

Because the merger involves two state-owned enterprises under sole government control, it technically qualifies as a transaction between specially related parties under the Fair Trade Act and would ordinarily be subject to a simplified review. However, the Fair Trade Commission conducted a full competitive-impact assessment given high-speed rail's status as critical national infrastructure and its broad effect on the public's daily economic life.

The relevant market was defined as the high-speed rail passenger transport market on an origin-and-destination basis. Of the 433 high-speed rail routes operated on a round-trip basis, the commission focused its review of potential competition restrictions — covering fares, seat supply and service quality — on the 155 routes where the two companies overlap.

The commission concluded that the risk of reduced competition after the merger was low, citing the heavy regulatory framework governing the high-speed rail industry under applicable laws and Korail's status as a public enterprise serving public-interest objectives.

High-speed rail fares cannot exceed the ceiling set and publicly announced by the minister of Land, Infrastructure and Transport, and any fare change requires the ministry's acceptance of a formal notification, making arbitrary increases difficult. Changes to service plans affecting seat supply — such as routes and frequency — as well as amendments to rail service terms and conditions are also subject to ministry authorization or notification acceptance, leading the commission to conclude that seat reductions or service quality deterioration were unlikely.

The commission also took into account that Korail is a public enterprise legally required under its charter to pursue the development of the rail industry and the national economy, and to improve the quality of public services.

The Fair Trade Commission and the Ministry of Land, Infrastructure and Transport developed a business plan to strengthen consumer rights during the merger review process. The ministry plans to incorporate the plan into its Basic Plan for High-Speed Rail Integration for implementation.

The two agencies will form a working-level consultative body to jointly monitor compliance with the three-year business plan covering fares, seat supply and service, and will also cooperate on improving service quality and establishing performance indicators.

The Fair Trade Commission said this marks the first time it has conducted a full in-depth review of a merger between state-owned enterprises based on the broader impact on the national economy. The Ministry of Land, Infrastructure and Transport plans to complete the integration of the two companies in September after completing follow-up procedures, including authorization of the business transfer.

As the merger's stated goals are to improve public convenience and enhance rail operational efficiency, the Fair Trade Commission and the ministry plan to closely monitor compliance with the business plan over the next three years.


y2k@heraldcorp.com