Merger control together with Japan's first competition rules were introduced in Japan by the 1947 Japanese Antimonopoly Act (AMA). Merger control is enforced by the Japan Fair Trade Commission (JFTC), which was established as an independent administrative office with broad enforcement powers. The JFTC is composed of a chair and four commissioners and has primary jurisdiction over the enforcement of merger control under the AMA.
i Pre-merger notification
Types of regulated mergers and thresholds
Share acquisitions, mergers,2 joint share transfers, business or asset transfers and corporate splits (or demergers) are subject to prior notification under the AMA if they exceed certain thresholds. Mergers and acquisitions (M&A) transactions whose schemes involve more than one of these transactions (e.g., reverse triangular mergers that involve a merger between a target and a subsidiary of an acquirer and an acquisition by the acquirer of shares in the target) are separately analysed at each step of the transaction and may require separate filings for each of the various transactional steps.
Joint ventures are also subject to the notification requirement if they satisfy the thresholds for the type of transactions used to form a joint venture, such as share acquisitions and asset acquisitions. Unlike the regime in the EU, Japanese law does not distinguish between full-function and non-full-function joint ventures. Notification may be also required when a partnership (including a limited liability partnership) formed under Japanese law or under foreign laws acquires shares in another company through partnership. The controlling company of such partnership should file a prior notification if the filing thresholds are otherwise satisfied.3
Generally speaking, no notification is required for transactions that amount to internal reorganisations of companies within a combined business group.4
Domestic turnover, which is defined as the total amount of the price of goods and services supplied in Japan during the latest fiscal year,5 is used as a decisive factor in the calculation of thresholds. The same thresholds will apply to both domestic and foreign companies.
According to the Merger Notification Rules,6 the domestic turnover of a company includes the sales amount accrued through direct importing into Japan regardless of whether the company has a presence in Japan.
To be precise, domestic turnover is the total amount of the following three categories of sales:7
- sales amount derived from the sale of goods (including services) sold to domestic consumers (excluding individuals who are transacting business);
- sales amount derived from the sale of goods (including services) supplied in Japan to business entities or individuals who are transacting business (business entities) (excluding sales of goods where it is known that such goods will be shipped outside Japan at the time of entering into the contract, without any changes made to their nature or characteristics); and
- sales amount derived from the sale of goods (including services) supplied outside Japan to business entities where it is known that such goods will be shipped into Japan at the time of entering into the contract, without any changes made to their nature or characteristics.
In the cases where the calculation of domestic turnover cannot be made in strict compliance with these rules, it is also permitted to use a different method to calculate the amount of the domestic turnover as long as it is in line with the purpose of the above-specified method and in accordance with generally accepted accounting principles.8
Notification thresholds for each type of transaction
Under the AMA, different notification thresholds apply depending on the different types of transactions, namely, share acquisitions, mergers, joint share transfers, business or asset transfers and corporate splits.
For share acquisitions (including joint ventures), the thresholds are based both on domestic turnover and the level of shareholding in the target. First, the aggregate domestic turnover of all corporations within the combined business group of the acquiring corporation must exceed ¥20 billion, and the aggregate domestic turnover of the target corporation and its subsidiaries must exceed ¥5 billion to meet the filing requirement.9 Second, such acquisition must result in the acquirer holding more than 20 or 50 per cent of the total voting rights of all of the shareholders of the target (i.e., an acquisition that increases a shareholding from 19 to 21 per cent is subject to a filing, while an acquisition that increases a shareholding from 21 to 49 per cent does not require one).10 A minority ownership of over 20 per cent will be caught regardless of whether the acquirer will take control of the target company.
For mergers and joint share transfers,11 the thresholds are based on domestic turnover. The aggregate domestic turnover of the combined business group of one of the merging companies, or of one of the companies intending to conduct the joint share transfer, must exceed ¥20 billion to meet the filing requirement. Furthermore, the aggregate domestic turnover of the combined business group of one other participating company must exceed ¥5 billion.12
For business or asset transfers, the thresholds are based on domestic turnover. The aggregate domestic turnover of all companies within the combined business group of the acquiring company must exceed ¥20 billion to meet the filing requirement. For the transferring company, separate thresholds are applied depending on whether the target business or asset is the whole business or asset of the company or a substantial part of the business or asset thereof. In the former case, a threshold of ¥3 billion of domestic turnover applies to the transferring company; in the latter, the same shall apply to that attributable to the target business or asset.13
For corporate splits, there are a number of relevant thresholds depending upon the structure of the transactions, but the ¥20 billion and ¥5 billion thresholds described above (or lower thresholds) similarly apply.14
In the case of a merger, corporate split or joint share transfer, both companies intending to effect such transactions have to jointly file.15 By contrast, in the case of a share acquisition or business transfer, only the acquiring company is responsible for filing.
There are no filing fees under the AMA.
ii Regulations and guidelines relating to merger control issued in the past year
In accordance with the conclusion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) in March 2018, the Japanese legislator adopted new Commitment Procedures that would allow the JFTC and any company undergoing investigation to resolve an alleged violation of the AMA by mutual consent.16 Before the introduction of the new procedures, it would have taken a while for the JFTC to finally issue an order, mainly because of the substantial amount of evidence required. Commitment Procedures, effective as of December 2018, may incentivise an early resolution of matters being investigated. From a merger control perspective, as suggested in the new Policies for Commitment Procedures,17 a company undergoing investigation (outside the notification procedure) for proposing a merger that would substantially restrain competition may propose concluding the investigation through the Commitment Procedure by adopting certain remedies, such as transferring part of the target business or shares of the target company to a third party.
II YEAR IN REVIEW
During the 2018 fiscal year (from 1 April 2018 to 31 March 2019, hereafter FY 2018), the JFTC brought to close three Phase II cases. Fukuoka Financial Group and The Eighteenth Bank and Nippon Steel & Sumitomo Metal and Sanyo Special Steel were resolved subject to certain conditions. The third, the Oji Holdings Corporation and Mitsubishi Paper Mills case, was cleared with no conditions being imposed.
i Share acquisition by Fukuoka Financial Group of The Eighteenth Bank18
In June 2016, Fukuoka Financial Group Ltd (FFG) filed a notification with the JFTC of its intention to acquire shares of The Eighteenth Bank Ltd (Eighteenth Bank), resulting in it holding, post-acquisition, more than 50 per cent of the latter's stock.
Under the merger control regime in Japan, no special rule applies to the review of mergers that involve financial institutions. In the recent The Daishi Bank and The Hokuetsu Bank case in 2017, the JFTC clarified its position that it would apply the Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination Merger Guidelines (the Merger Guidelines)19 to review the impact of mergers involving financial institutions. The case at hand is notable because the JFTC demonstrated how the 'restraints of trade' were assessed in a merger between regional banks.
In defining geographic markets, the JFTC conducted a survey using consumer questionnaires to assess the scope and distance enterprises located in the Nagasaki prefecture would cover in search of lenders. Concerning commercial loan trades for small- and mid-size enterprises, FFG and Eighteenth Bank would have held, post-merger, a combined market share as high as 75 per cent in certain geographic areas. The JFTC was concerned that the contemplated acquisition would limit consumers' choices in connection with commercial loans, especially as competitive pressure in the same as well as adjacent markets was limited and there was no pressure from new entrants. The parties then proposed the following remedies:
- assign their account receivables of commercial loans, with an aggregated amount of approximately ¥100 billion, to competitors before the acquisition;
- establish a monitoring mechanism to properly monitor and control the lending rates of the parties; and
- submit periodic reports to the JFTC to ensure that the parties adhere to the above remedies.
In August 2018, following an in-depth Phase II review and on the premise that the parties would adhere to the proposed remedies, the JFTC concluded that the notified concentration would not substantially restrain competition in any of the relevant markets.
ii Share Acquisition by Oji Holdings Corporation of Mitsubishi Paper Mills Limited20
Oji Holdings Corporation (Oji) and Mitsubishi Paper Mills Limited (MPM) are both domestic large paper manufacturers. In July 2018, Oji filed a notification with the JFTC of its intent to acquire shares of MPM, whereby Oji would hold, post-acquisition, 33 per cent of MPM's voting rights.
Among the relevant markets in which both parties are active, the JFTC identified the following three as potential causes for concern: (1) art paper used for catalogues and labels for drink containers; (2) adhesive base paper for wallpaper (wallpaper-base); and (3) pressboard paper used for electrical insulation by manufacturers of heavy electrical equipment. The combined market share of the parties for each of these markets would be as high as 90 per cent, 65 per cent and 95 per cent respectively.
Following an in-depth Phase II review, the JFTC concluded that, although market concentration post-acquisition would be high, strong competitive pressure from import and adjacent markets and consumers are likely to prevent a substantial restraint of competition and cleared the case without imposing any conditions. Specific reasoning for each of the relevant markets was as follows:
- Art paper: as the customers' demand for high-quality, domestically produced art paper is high, there is no competitive pressure from import markets. However, art paper is substitutable with high-quality coated paper to some extent, and art paper producers are faced with strong competitive pressure from major consumers who procure high-quality coated paper as well, whereby there is intensive competition among major paper manufacturers.
- Wallpaper-base: Although there is not much competitive pressure from imports, new entrants or adjacent markets, such pressure is derived from a competitor with a 30 per cent market share. In addition, the downstream market of customers of wallpaper-base is basically occupied by three major brand makers who actively negotiate with paper manufacturers, and there is competitive pressure from such brand makers.
- Pressboard paper: Oji and MPM are the only two manufacturers of pressboard paper in Japan with a combined market share of 95 per cent. The remaining 5 per cent are taken by imported products, hence competitive pressure from such import markets does exist to some extent. In addition, there is competitive pressure from customers who tend to negotiate the price of pressboard paper for electric transformer for domestic use based on the price of the same for overseas use.
Having established the above factual basis, the JFTC concluded that the notified transaction would not substantially restrain competition in any of the relevant markets – neither by unilateral nor cooperative conduct.
iii Share acquisition by Nippon Steel & Sumitomo Metal of Sanyo Special Steel21
Both Nippon Steel & Sumitomo Metal Corporation (NSSMC) and Sanyo Special Steel Co Ltd (SSS) manufacture and sell steel products. In July 2018, NSSMC filed a notification with the JFTC of its intent to acquire shares of SSS, whereby NSSMC would obtain 51.5 per cent of SSS's voting rights.
In the course of its review, the JFTC pointed out that, among 10 relevant markets in which the parties compete with each other or have transactions with one another, the seamless bearing steel tubes' market would be the one monopolised post-transaction. The JFTC further expressed its concern that there would be no or limited competitive pressure from imports, new entrants, or adjacent or downstream markets. Subsequently, to address the JFTC's concerns the parties proposed the following remedies:
- transfer a part of the ownership of SSS's rolling mill facilities to Kobe Steel, enabling it to manufacture up to 15,000 metric tons of seamless bearing steel tubes per year;
- transfer part of SSS's trading rights to Kobe Steel, enabling it to sell approximately 14,000 metric tons of seamless bearing steel tubes to bearing makers;
- take appropriate measures to segregate competition-sensitive information regarding Kobe Steel from the sales department of both parties; and
- submit periodic reports to the JFTC, ensuring that the parties adhere to the above remedies for a period of five years (in principle) post-transaction.
The JFTC determined that the proposed remedies would effectively create a new competitor holding up to a 25 per cent share in the relevant market, thereby maintaining competition therein. In January 2019, following an in-depth Phase II review and on the premise that the parties would adhere to the proposed remedies, the JFTC concluded that the notified concentration would not substantially restrain competition in the relevant market.
iv Statistics of the JFTC's activity
According to the JFTC, the total number of merger notifications filed in FY 2018 was 321.
There are a few cases that were brought into Phase II review every year, while there were no formal prohibition decisions made by the JFTC. According to the JFTC's statistics, the number of filings and the cases cleared after a Phase II review is as follows:
|FY 2009||FY 2010||FY 2011||FY 2012||FY 2013||FY 2014||FY 2015||FY 2016||FY 2017||FY 2018|
|No. of filings||985||265||275||349||264||289||295||319||306||321|
|No. of cases cleared after Phase II review||0||4||3||5||3||1||3||3||1||3|
III THE MERGER CONTROL REGIME
i Waiting periods and time frames
In terms of time frames, the standard 30-day waiting period will apply, which may be shortened in certain cases (see Section III.ii, below). If the JFTC intends to order necessary measures regarding the notified transaction, it will do so within the 30-day (or shortened) waiting period (which is extremely rare) or, if a Phase II review is opened, within the longer period of either 120 calendar days from the date of receipt of the initial notification or 90 calendar days from the date of the JFTC's receipt of all of the additionally requested information. It should be noted that the JFTC does not have the power to 'stop the clock' in either the Phase I or Phase II review periods. It is, however, possible for the notifying party to 'pull and re-file' the notification during the Phase I period, thereby effectively restarting the clock.
ii Parties' ability to accelerate the review procedure
There is no provision in the law and there are no regulations regarding the ability to accelerate the review process. However, in practice, it may be possible to put pressure on the JFTC by submitting a written request to the JFTC in cases where a filing is made less than 30 calendar days before the planned closing date. The Merger Guidelines state that the JFTC may shorten the waiting period when it is evident that the notified merger may not substantially restrain competition in any relevant market (which means when the JFTC closes its review prior to the expiration of the 30-calendar-day review period).
iii Third-party access to the file and rights to challenge mergers
Access to the file
Generally speaking, no third party has access to the merger notification files. Further, the JFTC does not even disclose the fact of the filing of a merger notification or clearance thereof, except for cases in which a Phase II review is commenced (in which case the JFTC discloses the identity of the companies involved in the notified transactions).22 This means that third parties cannot even confirm whether a merger has actually been notified, unless the case has moved on to Phase II. Apart from the above limited disclosure, although not timely, the JFTC usually discloses details of some major merger notification cases as part of its annual review. Such disclosure is generally subject to obtaining approval for publication from the notifying parties.
Rights to challenge mergers
Interventions by interested parties in JFTC proceedings have not historically been common.
Although third parties may file a lawsuit to ask the court to order the JFTC to issue a cease-and-desist order, the legal path to successfully do so is extremely narrow and does not merit a detailed explanation here. There are two ways for third parties to submit complaints to the JFTC in the course of a merger review: one way is to notify the investigation bureau of the JFTC of a possible breach of the AMA;23 and the other is to submit complaints to the mergers and acquisitions division of the JFTC.
In addition, as stated in the Policies for Merger Review, in the event that a merger review moves on to Phase II, the JFTC will publicly invite opinions and comments from third parties. Public hearings can be held24 if deemed necessary, but they have been extremely rare to date. The JFTC sometimes conducts informal hearings, and market tests by way of questionnaires, with third parties, including competitors, distributors and customers, in the course of its review, as it did in the review of the Fukuoka Financial Group and The Eighteenth Bank case (see Section II).
iv Resolution of authorities' competition concerns, appeals and judicial review
The JFTC can issue a cease-and-desist order when it believes that a proposed transaction has the effect of substantially restraining competition in a particular field of trade (i.e., a relevant market). Prior to issuing a cease-and-desist order, the JFTC will provide, in advance, information about, inter alia, the outline of the contemplated order as well as the underlying facts and the list of supporting evidence to the potential recipients of such order. The JFTC does so to give the potential recipients an opportunity to review and make copies of the evidence (to the extent possible) and to submit opinions as to the possible order.25 With the Commitment Procedures having been introduced, a company under the JFTC's investigation may request the JFTC to close the investigation without issuing any orders by making a proposal to put in place adequate remedies (see Section I.ii).
When the JFTC issues a cease-and-desist order, the parties to the transaction can appeal to the Tokyo District Court for annulment of the JFTC order.
v Effect of regulatory review
The JFTC frequently holds consultations with sector-specific regulators concerning general issues as to the relationship between the JFTC's competition policy and sector-specific public and industrial policies. In this regard, it is generally understood that the JFTC considers relevant public and industrial policy issues when ruling on a given transaction, without prejudice to the independence of its competition policy review and merger review. Among the various government ministries, the Ministry of Economy, Trade and Industry has been active in advocating competition policy, but depending on the specifics of each case, other ministries may also be involved.
vi Substantive review
The Merger Guidelines set out the various factors that may be taken into account by the JFTC when assessing the impact of notified transactions on the competitive situation. Specifically, the Merger Guidelines provide an analysis of the substantive test for each type of transaction (e.g., horizontal, vertical and conglomerate M&A transactions). One of the important parts of the substantive test analysis is the use of 'safe harbours' measured by the Herfindahl-Herschman Index (HHI) for each of the above three categories (see Section III.vii). It is also suggested in the Merger Guidelines that, both before and after the transaction, the JFTC will closely analyse market conditions from various viewpoints, including whether the transaction may facilitate concentration between market players, to ultimately determine the notified transaction's actual impact on competition.
The detailed method to define the 'particular field of trade' (i.e., relevant market) is also provided in the Merger Guidelines. Importantly, the Merger Guidelines indicate that the geographic market may be wider than the geographical boundaries of Japan, depending upon the international nature of the relevant business. There have been several JFTC cases where the JFTC defined the relevant geographical market to extend beyond Japan.
vii Safe harbours
In the safe harbour analysis, if any of the following conditions is satisfied, the JFTC is likely to consider that the notified transaction does not substantially restrain competition in a relevant market:
- horizontal transactions:
- the HHI after the notified transaction is not more than 1,500;
- the HHI after the notified transaction exceeds 1,500, but is not more than 2,500, and the increased HHI (delta) is not more than 250; or
- the HHI after the notified transaction exceeds 2,500 and the delta is not more than 150; and
- vertical and conglomerate transactions:
- the merging parties' market share after the notified transaction is not more than 10 per cent; or
- the merging parties' market share after the notified transaction is not more than 25 per cent and the HHI after the notified transaction is not more than 2,500.26
In addition to the safe harbour above, the JFTC is highly unlikely to conclude that transactions falling within the following threshold would substantially restrain competition in any particular market: the HHI after the notified transaction is not more than 2,500, and the merging parties' market share is not more than 35 per cent.
If the notified transaction does not satisfy the requirements for any of the above, the JFTC will likely conduct a more in-depth analysis of the unilateral and coordinated effects of the notified transactions.
In the Canon and Toshiba Medical case in 2016, the JFTC approved Canon's acquisition of shares in Toshiba Medical, Toshiba Corporation's (Toshiba) medical equipment unit. However, the JFTC also issued a statement warning that the structure of the deal could be deemed to circumvent the law, including the prior notification obligation under the AMA because the parties had provided that Toshiba could receive the payment of the transaction price of ¥665.5 billion before the JFTC's clearance. Specifically, Canon acquired an equity warrant for which common shares in Toshiba Medical were the underlying securities. In return for that equity warrant, Canon paid to Toshiba an amount virtually equivalent to the consideration for common shares. Further, shares with voting rights in Toshiba Medical were acquired and held by an independent third-party owner up until the time Canon exercised the equity warrant. The JFTC found that the transaction structure formed part of a scheme that was aimed at Canon ultimately acquiring shares in Toshiba Medical.
The JFTC held that since there is no public precedent of its position as to such a transaction structure, it would not impose any sanctions in this case, but warned that similar transaction schemes will be considered to be in violation of the AMA in the future.
IV OTHER STRATEGIC CONSIDERATIONS
i Coordination with other jurisdictions
Cooperation between the JFTC and foreign competition authorities
In principle, the JFTC is entitled to exchange information with competition authorities of other jurisdictions based on the conditions set out in the AMA.27 In addition, the Japanese government has entered into bilateral agreements concerning cooperation on competition law with the United States, the European Union and Canada, and multinational economic partnership agreements with competition-related provisions, including TPP-11. Furthermore, the JFTC has entered into inter-agency bilateral cooperation memoranda with various competition authorities.28 It has also propounded the establishment of an international cooperative framework for merger review at the 11th ICN Annual Conference in 2012, which has since been in effect. Under these agreements and frameworks, there have been various levels of information exchange and discussions carried out between the participating authorities.
The JFTC has a good track record of closely working with other competition authorities. It is reported that the JFTC exchanged information with various authorities, including its counterparts in the United States, the European Union and Chile, for example, in the recent review of the Broadcom and Brocade case in 2017 and the merger of the container shipping business of Nippon Yusen, Kawasaki Kisen Kaisha and Mitsui O.S.K. Lines in 2017.
Coordination among attorneys from various jurisdictions
As explained in Section IV.ii, below, because the JFTC abolished the voluntary consultation procedure (prior consultation procedure) in 2011, the substantive review of a proposed transaction only begins at the formal notification stage. In addition, as explained in Section III.i, above, each of the Phase I and Phase II review periods cannot be extended even in cases where parties submit a remedy proposal to the JFTC; nor can the JFTC stop the clock. This might cause difficulties, especially in global merger notifications where the management of the filing schedule is important to avoid conflicting remedies or prohibition decisions at the end of the merger review procedure in various jurisdictions. Thus, coordination among Japanese and foreign attorneys is of even greater importance following the abolition of the prior consultation procedure.
ii Pre-filing consultation with the JFTC
Upon the abolition of the prior consultation procedure in 2011, the JFTC no longer provides its formal opinion at the pre-notification stage, and the review officially starts at the formal notification stage.
In practice, the JFTC is flexible about having informal discussions with potential notifying parties upon request or voluntary submission of relevant materials before the formal filings. Interestingly, in almost all of the recent cases that the JFTC has cleared after Phase II review, including Fukuoka Financial Group and The Eighteenth Bank, Oji Holdings Corporation and Mitsubishi Paper Mills and Nippon Steel & Sumitomo Metal and Sanyo Special Steel, the JFTC made specific notes in its announcements that the parties had submitted supporting documents and opinions to the JFTC on a voluntary basis before officially filing the notifications. It is understood that parties to complicated mergers make use of that informal procedure to try and alleviate any potential concerns early. The JFTC is receptive to such informal prior communications.
iii Special situations
Failing company doctrine
The Merger Guidelines recognise the 'failing company doctrine'. They state that the effect of a horizontal merger would not be substantial if a party to the merger has recorded continuous and significant ordinary losses, has excess debt or is unable to obtain financing for working capital, and it is obvious that the party would be highly likely to go bankrupt and exit the market in the near future without the merger, and so it is difficult to find any business operator that could rescue the party with a merger that would have less impact on competition than the business operator that is the other party to the merger.
Minority ownership interests
It should be noted that minority ownership of over 20 per cent of the voting rights in a company is a notifiable event regardless of whether the acquirer will take control of the target company (see Section I.i). In addition, under certain circumstances even minority acquisition may be subject to a Phase II review, such as in Oji Holdings Corporation and Mitsubishi Paper Mills. Moreover, in the JFTC's substantive review, any companies that are in a 'close relationship' with an acquirer or a target may be deemed to be in a 'joint relationship'. Accordingly, these companies could be treated as an integrated group for the purpose of the substantive analysis. For example, the HHI would also be calculated based on the sales data of the integrated group as a whole. In Idemitsu and Showa Shell in 2016, the JFTC made clear that its review assumed that these parties would be completely integrated as one group after the acquisition, although, at the time, Idemitsu only intended to have a minority shareholding in Showa Shell. The joint relationship will be determined by taking into account various factors even though, according to the Merger Guidelines, a minority holding of voting rights of over 20 per cent and the absence of holders of voting rights with the same or higher holding ratios of voting rights would suffice to find such relationship.
iv Transactions below the notification thresholds
It is important to note that, under the AMA, the JFTC can theoretically review any M&A transactions under the substantive test, regardless of whether the filing thresholds described above are met. The JFTC has actually investigated transactions that had not been notified in the past, including foreign-to-foreign transactions. To mitigate the risk of an investigation, even parties to a concentration that is below the threshold level may opt to consult with the JFTC and file notification on a voluntary basis. In practice, The JFTC applies the same rules and guidelines to review such voluntary notifications.
V OUTLOOK and CONCLUSIONS
The Merger Review Rules and the Policies for Merger Review (both amended in 2011) primarily concern the procedural aspects of merger reviews by the JFTC, while some clarifications were made to the substance of the JFTC's review policies. Since these amendments, the scope of disclosure, which the JFTC has made in relation to its review of Phase II cases and as part of its annual review about recent major cases, seems to have expanded. For example, in JXHD and TG and Idemitsu and Showa Shell in 2016, the JFTC disclosed specific details of the economic analysis it conducted, thereby giving greater transparency to its review. Although these disclosures have generally been welcomed by practitioners, when compared to the practice of other leading competition authorities, there is still a relative lack of available information as to the JFTC's decisional practice (e.g., few decisions are published), and there are some areas where further clarification or improvements seem necessary (e.g., as to market definition for multi-sided platforms). It is hoped that the JFTC will take action, for example, through the publication of more decisions and of new or updated guidelines in the near future.
1 Yusuke Nakano, Takeshi Suzuki and Kiyoko Yagami are partners at Anderson Mōri & Tomotsune.
2 The JFTC uses the term 'merger' in its English translation of the AMA to describe what is called an 'amalgamation' in many other jurisdictions.
3 Article 10, Paragraph 5 of the AMA.
4 A combined business group consists of all of the subsidiaries of the ultimate parent company. A company will generally be considered to be part of a combined business group not only when more than 50 per cent of the voting rights of a company are held by another company, but also, if its financial and business policies are 'controlled' by another company. The Merger Notification Rules specify detailed thresholds for 'control' to exist, which might be found even in cases where the ratio of beneficially owned voting rights is even slightly higher than, 40 per cent. The concept of 'control' to decide which companies are to be included in the combined business group is in line with the concept of 'control' used to define group companies under the Ordinance for the Enforcement of Companies Act. This concept of 'control' generally (there are still some differences) aligns Japanese merger control with the merger rules of other jurisdictions, especially the EU rules as to the identification of the undertaking concerned.
5 Article 10, Paragraph 2 of the AMA.
6 The Rules on Applications for Approval, Reporting, Notification, etc., pursuant to Articles 9 to 16 of the AMA (as amended).
7 Article 2, Paragraph 1 of the Merger Notification Rules.
8 Article 2, Paragraph 2 of the Merger Notification Rules.
9 Article 10, Paragraph 2 of the AMA.
10 Article 16, Paragraph 3 of the Implementation Rules of the AMA.
11 Under Japanese law, 'joint share transfer' refers to a specific structure stipulated by the Companies Act of Japan that involves two or more companies transferring their shares into a new holding company in exchange for shares of that holding company.
12 Article 15, Paragraph 2 and Article 15-3, Paragraph 2 of the AMA.
13 Article 16, Paragraph 2 of the AMA.
14 Article 15-2, Paragraphs 2 and 3 of the AMA.
15 Article 5, Paragraph 2; Article 5-2, Paragraph 3; and Article 5-3, Paragraph 2 of the Merger Notification Rules.
16 JFTC press release of 29 June 2018, whose English translation is available at www.jftc.go.jp/en/pressreleases/yearly-2018/June/180629.html. The law came into effect in December 2018.
17 The Policies for Commitment Procedures (26 September 2018).
18 JFTC press release of 24 August 2018, whose abbreviated version is available in English at: www.jftc.go.jp/en/pressreleases/yearly-2018/August/180824.pdf.
19 The Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (31 May 2004, as amended).
20 JFTC press release of 25 December 2018, whose abbreviated version is available in English at:
21 JFTC press release of 18 January 2019, whose abbreviated version is available in English at:
22 Policies Concerning Procedures of Review of Business Combination (14 June 2011; Policies for Merger Review, as amended).
23 Article 45, Paragraph 1 of the AMA.
24 Article 42 of the AMA.
25 Article 9 of the Rules on the Procedures of Hearing of Opinions.
26 Part IV, 1(3) and Part V, 1(3) of the Merger Guidelines. In practice, if a transaction satisfies the safe harbour conditions in (a) and (b), the JFTC does not conduct any further substantive review of the transaction.
27 Article 43-2 of the AMA.