The Fair Trade Commission gave a conditional green light Friday to the proposed integration of Nippon Paper Industries Co. and Daishowa Paper Mfg. Co. The move would create the nation's top paper maker.

Nippon Paper and Daishowa Paper -- the nation's No. 2 and No. 4 firms -- announced a plan in March to integrate their operations under a holding firm in March 2001.

In granting the planned merger its approval, however, the FTC urged the two firms to sell part of their operations to a third party in order to lessen their market dominance.

The proposed integration could impede fair competition in the paper manufacturing and distribution industry, the trade watchdog said, citing the large market share of the business group that would be created through the integration.

The FTC also noted that the proposed integration could also hurt fair competition in the paper distribution sector, as the two firms currently hold stakes in three major paper distributors.

In response, the two firms have told the FTC that they will transfer a part of their manufacturing facilities and sales operations to a third party within three years.

The firms also said they will reduce their stakes in the three paper-distributing firms, FTC officials said.

On the premise that all of these proposed measures are carried out, the FTC judged that the companies' integration would not violate the Anti-Monopoly Law, the officials said.