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2017 Merger Control Survey: Japan

Sponsored by


Tatsuo Yamashima and Saori Hanada, Atsumi & Sakai


1.1 What is the applicable legislation and who enforces it?

The principle legislation governing merger control in Japan is the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (known as the Anti-Monopoly Act – AMA). The Japan Fair Trade Commission (JFTC) is the competent national government authority and has exclusive jurisdiction to review and control transactions which meet merger control review thresholds.


2.1 What types of mergers and joint ventures (JVs) are caught?


Merger control under the AMA covers a wide range of business combinations such as mergers, divestitures, acquisitions of shares, joint share transfers to a holding company, business assignments and concurrent directorships in multiple companies. The legislation catches joint ventures of any kind. Business combinations within the same corporate group are exempted from the notification requirement.

2.2 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?

The AMA clearly stipulates the notification thresholds applicable to each type of business combination. In the case of share acquisitions, for example, notification is required where all of the following three conditions are met: the aggregate turnover in Japan by all companies in the corporate group to which the acquiring company belongs exceeds ¥20 billion ($180 million); the aggregate turnover in Japan by the acquired company and its subsidiaries exceeds ¥5 billion; and after the share transfer, the ratio of the aggregate number of voting shares held by all companies in the corporate group to which the acquiring company belongs, to the aggregate number of issued voting shares of the acquired company exceeds 20% or 50%.
The JFTC may initiate its review of a business combination regardless of whether the relevant thresholds are met.

2.3 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?

The JFTC has expressed its intention to take aggressive measures against foreign-to-foreign mergers which may have a substantial negative impact on competition in the market in Japan. In the BHP Billiton v Rio Tinto case, for example, the JFTC launched a second-phase review in 2010 and raised concerns about the deal.


3.1 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?

Filing is mandatory for business combinations that meet the thresholds. The notified transaction cannot close until 30 calendar days have passed after the JFTC receives and accepts the filing, although this period may be shortened if the JFTC considers it necessary.
The JFTC may issue a cease-and-desist order against the parties if the transaction may substantially restrain competition in the market. Any party failing to notify the JFTC of transactions which meet the thresholds may be subject to a penalty of up to ¥2 million. In practice, such penalties are rarely imposed.

3.2 Who is responsible for filing and what, if any filing fee applies?

The acquiring company is responsible for filing in the case of share acquisitions or business assignments, and all parties are responsible for filing in mergers, divestitures or joint share transfers. In the case of joint ventures, it depends on the type of business combination. No filing fees apply.

3.3 What are the filing requirements and how onerous are these?

There are designated notification forms for each type of business combination, which must be prepared in Japanese and submitted to the JFTC, together with a general description of the parties and their position in the market. The forms are long and detailed and completing them is reasonably onerous and time-consuming.

3.4 Are pre-notification contacts available, encouraged or required? How long does this process take and what steps does it involve?

Pre-notification contacts are available but not required. After amendment of the AMA in 2010, the pre-consultation system was abolished and an amended system brought in since July 1 2011, with non-mandatory pre-filing consultation and a first and second phase review process. As a result, while the parties to a merger transaction may consult with the JFTC prior to making an official notification, the JFTC will generally only check whether the formality of notification meets the requirements. If the parties request, the JFTC will explain to the parties the possible issues that a specific merger transaction may raise, but they will not express any opinion or decision.


4.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?

At the first-phase review, the JFTC will review the notified transaction during a period of 30 calendar days after the JFTC receives and accepts an officially filed notification. If the JFTC finds no problems during that period, the JFTC will issue a written notice of clearance to the notifying party.
If the JFTC considers a second-phase review to be necessary, it may request that the notifying party submit further information and reports. The JFTC is required to reach a conclusion within 120 days after the receipt of the initial notification, or, if later, 90 days after the submission of any supplemental information requested by the JFTC. In practice, the parties may flexibly schedule the timing of completing the submissions required under the second-phase review by discussing with the JFTC in order to avoid a cease-and-desist order being issued due to expiration of the 90-day period.

4.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?

The JFTC reviews notified transactions for substantial restraint of competition in the relevant market under the Guidelines on the Application of the Anti-Monopoly Act Concerning Review of Business Combinations (Merger Guidelines), which among other criteria set out the safe harbour criteria with reference to the market shares of the parties and the Herfindahl-Hirschman Index (HHI).
Specifically, the Merger Guidelines stipulate that improvements in efficiency are to be considered in determining the effect of merger transactions on competition. No specific reference is made to non-competition factors such as industrial policy or the public interest.

4.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.

The JFTC considers proposed remedies on a case-by-case basis in accordance with the Merger Guidelines, which requires that structural measures such as business assignments or reduction of voting rights be considered first, and then measures to promote imports or stimulate market penetration may be considered next.


5.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?

The 2013 amendment to the Anti-Monopoly Act came into effect in April 2015. It abolished the JFTC hearing system and allows the addressee of a cease-and-desist order to appeal the order to the Tokyo District Court, which has exclusive jurisdiction over appeals against JFTC orders. In practice, merger control decisions are rarely appealed in Japan because almost all cases have been cleared or voluntarily retracted during the JFTC review.


6.1 Outline any merger control regulatory trends in your jurisdiction.

There were a total of 295 merger notifications during the 2015 fiscal year (April 1, 2015 to March 31, 2016), roughly the same level as the 289 in the 2014 fiscal year. The number of notifications involving foreign firms also shows a slight increase from 48 in the 2014 fiscal year to 53 in the 2015 fiscal year.
In the 2015 fiscal year, the JFTC cleared 281 cases without a second-phase review. Of those cases, the 30-day waiting period, during which the notified transaction may not close, was shortened in 145 cases, versus 119 cases for the previous fiscal year. Only six cases transitioned to a second-phase review in the 2015 fiscal year.
In the 2015 fiscal year, the JFTC cleared four cases after second-phase review, of which one case was cleared with the condition that one of the parties implement a remedial measure. This was the case of NXP Semiconductors' merger with Freescale Semiconductor, which was cleared on the condition that the NXP group sells its Radio Frequency Power Transistor business to an independent third party. The other three cases were cleared unconditionally. It may also be worth noting the case of Osaka Steel Co's acquisition of shares (more than 50% of voting rights) in Tokyo Kohtetsu Co. Osaka Steel Co is a subsidiary of Nippon Steel & Sumitomo Metal Corporation (NSSMC), Japan's largest steel producer. The JFTC cleared the acquisition in the 2015 fiscal year, taking into consideration competitive pressures not only from competitors outside the NSSMC group but also from other companies within the group. There were no cease-and-desist orders issued in the 2015 fiscal year.

About the author



Tatsuo Yamashima

Partner, Atsumi & Sakai

Tokyo, Japan

T: +813 5501 2297

E: tatsuo.yamashima@aplaw.jp

W: www.aplaw.jp

Tatsuo Yamashima is a partner at Atsumi & Sakai, working primarily in the field of antitrust and competition law, compliance, employment and human resources and other corporate legal affairs. He has assisted and represented many Japanese and foreign companies with antitrust and merger cases involving the JFTC, as well as authorities in many foreign jurisdictions. In particular, he has significant experience with leniency applications for the JFTC. Yamashima is ranked as a leading individual in relation to competition/antitrust law in Chambers Asia-Pacific 2016 and recommended by Who’s Who Legal Japan 2016 in relation to competition law. He is a graduate of the University of Tokyo (BA, 2002; LLM, 2004) and is admitted to the bar in Japan. He worked in Brussels in the competition law group of a leading global firm in 2011 as a visiting foreign attorney.

About the author



Saori Hanada

Partner, Atsumi & Sakai

Tokyo, Japan

T: +813 5501 1137

E: saori.hanada@aplaw.jp

W: www.aplaw.jp

Saori Hanada is a partner at Atsumi & Sakai, working in the field of antitrust and competition law, employment law and other corporate legal affairs. She has advised major retailers on various unfair trade practice issues and represented Japanese and foreign companies in international cartel cases and merger cases. She was recommended by Who's Who Legal Japan 2016 in relation to M&A and governance. She was admitted to the Japan Federation of Bar Associations in 2000. Ms Hanada obtained an LLM from Columbia Law School in 2010 and was admitted to the New York State bar in 2012.