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Lotte Rent-a-Car Seoul Station branch (Photo provided by Lotte Rental) |
[Alpha Biz= Paul Lee] South Korea’s Fair Trade Commission (FTC) has rejected Affinity Equity Partners’ proposed acquisition of a 63.5% stake in Lotte Rental, citing the elimination of effective competition in the short-term car rental market, according to investment banking sources on January 31.
The FTC’s decision reflects concerns that if Affinity—already the owner of SK Rent-a-Car since August 2024—were to also operate Lotte Rental, the market could become overly concentrated, undermining price competition and harming consumers.
An FTC official said that approving the merger would “exacerbate polarization in the short-term rental market into one overwhelmingly dominant large company and many small, financially weak players,” adding that “the disappearance of competition among large firms could lead to significant side effects such as price increases.”
Market participants estimate that if Affinity were to acquire Lotte Rental following its purchase of SK Rent-a-Car, the Herfindahl–Hirschman Index (HHI) would surge from below 1,500 to above 2,000. The HHI, used by U.S. authorities such as the Department of Justice and the Federal Reserve to assess market concentration, classifies markets with an index below 1,500 as unconcentrated, while levels above 2,000 indicate excessive concentration and heightened risks of competition restriction.
The FTC’s rejection is expected to deal a blow to both Affinity and the Lotte Group. Lotte had planned to use proceeds from the sale of its Lotte Rental stake to strengthen the financial structures of Hotel Lotte and Busan Lotte Hotel and to enhance overall business competitiveness. With the transaction blocked, the group now faces renewed challenges in securing liquidity.
Affinity, for its part, said it is reviewing the FTC’s rationale for the decision but indicated that it has no intention of abandoning its bid for Lotte Rental.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
