September 25, 2008 / 4:00 AM / 10 years ago

UPDATE 1-EBay gets conditional approval for Gmarket deal

(Adds details, Interpark shares)

SEOUL, Sept 25 (Reuters) - South Korea’s antitrust watchdog said on Thursday it had granted conditional approval for eBay Inc’s (EBAY.O) plan to buy a controlling stake in South Korean online retailer Gmarket Inc GMKT.O.

The approval clears a key hurdle for U.S. online auctioneer eBay, which will emerge as a dominant player in South Korea’s customer-to-customer online market by taking control of its key competitor.

Shares in Gmarket’s current top shareholder Interpark Corp (035080.KQ) jumped as much as 13 percent following the news of approval.

Interpark and its chairman have signed a preliminary agreement to sell their combined 36.4 percent stake in Gmarket to eBay, according to an Interpark spokeswoman. The financial terms of the deal were not disclosed.

Nasdaq-listed Gmarket runs customer-to-customer marketplaces and has more than 10 million registered users in South Korea. It competes with eBay’s South Korean unit, Internet Auction Co.

Yahoo Inc YHOO.O also owns a 10 percent stake in Gmarket, which analysts speculate eBay could also buy out.

South Korea’s Fair Trade Commission (FTC) said the combination of eBay’s local unit and Gmarket was expected to limit market competition and the deal should be subject to several conditions. The two companies have a combined 87.2 percent stake in the South Korean online customer-to-customer market.

They will be banned from raising sales commissions for the next three years and must limit increases in advertising and other fees to below the local inflation rate, the FTC said in a statement.

The regulator also ordered them to come up with measures to protect small-scale sellers in marketplaces that may suffer from higher fees and commissions without free competition.

“Although this deal may not have been approved given the expected impact on market competition, we have taken into account that...a new competitor can emerge any time because Internet-based industry has a low entrance barrier,” the commission said.

By 0313 GMT, Interpark shares traded up 6.81 percent at 4,860 won, leading the Kosdaq market’s .KQ11 0.59 percent gain. (Reporting by Rhee So-eui; Editing by Jonathan Hopfner)

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