South Korea: Hite Brewery will be barred from raising beer prices

Hite Brewery Co. and Jinro Ltd. will be barred from raising their beer and soju prices above the level of consumer price gains for the next five years, South Korea's antitrust regulator said on October 27, according to Asia Pulse. The measures by the Fair Trade Commission (FTC) are to prevent the market domination enjoyed by the two companies from hurting consumers and competitors.

The watchdog had conditionally allowed Hite to take over the management of Jinro in July. Hite and Jinro are the number one manufacturers of beer and soju in South Korea. The beermaker holds a roughly 57% market share, while Jinro's portion of the soju market stands at around 55 per cent.

"There were prolonged discussions on the merits of the government intervening in price setting, and it has been determined that such a move is needed to preempt any moves to raise prices," said Lee Byung-ju, the head of the FTC's antitrust bureau.

He added that this price cap had already been announced in July when the two companies were allowed to merge and that the final guidelines will be sent to Hite within the month. The cap will go into effect from the date that the company receives the orders. Lee also said that if Hite and Jinro fail to follow the new rules, they could face fines and administrative actions.

The official, however, said the ceiling does not apply to new brands of beer and soju that the companies may release, although once they are marketed the same rules will be applied so any price hikes will have to stay below the rise in consumer prices.

He said the rules will not apply to wine or any other alcoholic beverage besides beer and soju produced by either company.

In addition, Hite and Jinro will be required to submit a detailed plan to the FTC for approval, pledging they will not use their dominant market positions to hurt rivals, and adhere to it for the next five years.

The two firms are also required to submit a report on their shipments to wholesalers every six months to the corporate regulatory authority so it can keep track of any sharp increases in sales that could be construed as distorting the market.

Hite and its consortium partners signed a 3.42-trillion-won (US$3.27 billion) agreement with Jinro on June 3 after being selected as the primary negotiation partner for the takeover in early April.

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