South Korea Blocks Private Equity Takeover of Leading Car Rental Firm

The Fair Trade Commission announced Monday that it has prohibited a Singapore-based private equity fund from purchasing a controlling stake in Lotte Rental Co., the nation’s biggest car rental provider. The buyer, Careena Transportation Group Ltd., is backed by Affinity Equity Partners, which already controls SK Rent-a-Car, the second-largest player in the market. According to a statement from the commission, the transaction would have sharply reduced competition across the sector.

The regulator said the planned purchase of a 63.5 percent stake in Lotte Rental would effectively unite the top two companies in the industry under one private equity group. Per a statement from the watchdog, this level of consolidation raised concerns that customers could face higher prices and fewer choices if the merger were allowed to proceed.

“It is determined that there is a significant risk of substantially restricting competition, including possible price increases in the domestic rental car market, and therefore imposed a prohibition on the merger,” the Korea Fair Trade Commission said in a statement.

Officials noted that the combined control of the two firms would significantly increase market concentration. The commission added that meaningful competition would likely be difficult to restore once the companies were merged, especially given the limited scale of remaining rivals.

“The decision reflected serious concerns that effective competition would disappear if two companies in direct competition were merged,” Lee Byung-geon, a senior KFTC official, told reporters. He added that it would be difficult for a meaningful new competitor to emerge in the short term.

The watchdog said the impact would be felt in both major segments of the industry. In short-term rentals, defined as contracts lasting less than one year, the two firms together held 29.3 percent of the mainland market and 21.3 percent on Jeju Island as of the end of 2024, according to a statement from the commission. Most other operators in this space are small, limiting their ability to challenge larger companies.

In the long-term rental market, where contracts extend beyond one year, the companies’ combined share has hovered around 30 percent for the past five years and reached 38.3 percent at the end of 2024, per a statement. Regulators said this upward trend underscored the risk of further market dominance if the deal moved forward.

The commission warned that removing direct competition between the industry leaders could lead to anti-competitive behavior, including increased rental fees. It also said the decision sends a message to private equity firms that mergers aimed at rapidly consolidating market power may face regulatory barriers.

According to a statement from the FTC, the ruling is intended to deter deals that distort fair competition by combining leading rivals with the goal of selling them later at higher valuations.

Lotte Group, which owns Lotte Rental, said it respects the regulator’s decision. In a press release, the company said it plans to consult with Affinity Equity Partners to consider alternative proposals that could resolve the commission’s concerns about excessive market concentration.

Source: Korea Biz Wire