Japan
Answer ... Phase I review: The Japan Fair Trade Commission (JFTC) will conduct a Phase I review up to 30 calendar days from acceptance of the formal filing.
In principle, the Phase I review concludes with a decision either to clear the transaction or to proceed to a Phase II review for further investigation. The JFTC will issue clearance through a written letter confirming that it will not issue a cease-and-desist order if, after the substantive merger review, it finds that the proposed transaction would not substantially restrain competition in the relevant market(s). As discussed in question 3.2, before formal filing, the parties may consult with the JFTC to discuss any potential competition concerns. In principle, it is advisable to engage in intensive discussions with the JFTC on substantive issues during the pre-notification consultation, so that the JFTC can save sufficient time to complete its internal procedure to grant clearance during Phase I.
The parties are prohibited from closing the proposed transaction until the 30-calendar-day waiting period has expired, although the JFTC cannot stop the clock at its own discretion. Technically, the parties may withdraw and refile the formal notification, thus giving the JFTC another 30-day review period in order to avoid the significant burden of a Phase II review.
Phase II review: If the JFTC decides to escalate the case to a Phase II review, it will issue a report request to the parties by the end of Phase I containing extensive and comprehensive questions and document requests (including internal documents and/or data). Upon the issuance of this report request, the JFTC will also publish an announcement on its website to collect comments and opinions from third parties for 30 calendar days.
The Phase II review period ends at the later of:
- 120 calendar days from acceptance of the formal filing; or
- 90 calendar days from the date on which the JFTC recognises that the parties have provided a full response to the report request.
By the end of the Phase II review period, the JFTC must decide whether to clear the case or to prohibit the parties from implementing the transaction. While clearance will be confirmed through a clearance letter, the JFTC will give notice to the parties before the issuance of a cease-and-desist order so that they can submit their opinions and supplemental evidence before it issues its final decision.
Japan
Answer ... As discussed in questions 3.6 and 3.8, the JFTC cannot suspend the Phase I review while the parties make a request to shorten the 30-calendar-day waiting period. It is at the sole discretion of the JFTC as to whether to approve the early termination of the waiting period.
With regard to the Phase II review, the JFTC cannot suspend the review period. However, since the Phase II review lasts until the later of 120 calendar days from acceptance of the formal filing or 90 calendar days from completion of the response to a report request, it is difficult in practice to predict when a Phase II review will close.
Japan
Answer ... There is no simplified review process. As regards shortening the waiting period, please see question 3.8.
Japan
Answer ... It is common practice for the JFTC to cooperate with foreign competition authorities on the merger review. In practice, the JFTC will usually give the parties a heads-up and seek their permission to exchange information with its counterparts in other jurisdictions.
Major recent examples in which the JFTC has liaised with its counterparts in other jurisdictions on merger review include the following:
- Fiscal year 2021 (April 2021-March 2022):
- the US and Singaporean authorities in relation to the acquisition of Siltronic AG by GlobalWafers GmbH; and
- the US and Australian authorities in relation to the acquisition of Slack Technologies, Inc by salesforce.com, inc.
- Fiscal year 2022 (April 2022-March 2023):
- the US, UK and Australian authorities, as well as the European Commission, in relation to the acquisition of Activision Blizzard, Inc by Microsoft Corporation.
Japan
Answer ... The JFTC does not have the statutory power to gather information from the parties, with the following exceptions:
- The JFTC may issue a report request when commencing a Phase II review. Failure to respond to a report request triggers no sanctions, although the Phase II review will not end until the parties fully respond to the report request.
- The JFTC may, if necessary for the performance of its duties, order companies and their employees to appear before the JFTC or require them to submit necessary reports, information or materials. While traditionally this power was seldom exercised in the context of merger reviews, the JFTC has recently become more willing to leverage this power to the extent necessary and appropriate. A criminal fine of up to JPY 3 million may be imposed for failure to comply with the order.
The JFTC may also request the parties to voluntarily submit information and documents during the merger review (including the pre-notification consultation). Failure to respond to the JFTC’s request for voluntary submission triggers no sanctions, although it may result in a considerable delay in the substantive review by the JFTC or, potentially, a prohibition decision.
Japan
Answer ... When issuing a report request, the JFTC will publish the case on its website and invite third parties to provide their comments on the transaction. While a third party can voluntarily inform the JFTC of its concerns regarding a potential M&A transaction, the JFTC sometimes issues an information request to third parties (eg, customers, suppliers or competitors), even during the pre-notification consultation or a Phase I review.
Japan
Answer ... Theoretically speaking, it might be possible to negotiate a local carve-out with the JFTC. However, we are not aware of any cases in which a local carve-out has been successfully implemented in Japan.
Japan
Answer ... The Anti-monopoly Act forbids a transaction that would substantially restrain competition in any particular field of trade (ie, any relevant market). This substantive test does not vary depending on sector.
The JFTC will review the horizontal, vertical and conglomerate effects of the proposed transaction in order to determine whether any substantial restraint on the competition would be caused. The JFTC Merger Guidelines suggest that, although theories of harm may vary among the transaction categories, the following factors should generally be taken into account:
- the market position of the parties and competitors and the market environment;
- competitive pressure from overseas competitors;
- the barriers to new entrants;
- competitive pressure from neighbouring markets;
- competitive pressure from customers;
- overall business capability;
- efficiency;
- the financial condition of the parties; and
- the size of the relevant market.
The JFTC Merger Guidelines provide safe harbour exemptions for each horizontal transaction and vertical/conglomerate transaction. If the following criteria for each transaction are satisfied, the transaction is generally not considered to cause a substantial restraint on competition in the relevant market:
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Horizontal transactions:
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- The Herfindahl-Hirschman Index (HHI) after the transaction is not more than 1,500;
- The HHI after the transaction is more than 1,500 but not more than 2,500 and the increment of the HHI is not more than 250; or
- The HHI after the transaction is more than 2,500 and the increment of the HHI is not more than 150.
- Vertical or conglomerate transactions:
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- The aggregate market share of the parties is not more than 10% in any relevant market; or
- The HHI after the transaction is not more than 2,500 and the aggregate market share of the parties is not more than 25% in any relevant markets.
Further, the JFTC Merger Guidelines suggest that the JFTC is unlikely to find the transaction anti-competitive if:
- the HHI after the transaction is not more than 2,500; and
- the market share of the parties after the transaction is not more than 35%.
Japan
Answer ... No. There is no special test for joint ventures and the substantive test discussed in question 4.8 should also apply to joint ventures.
Japan
Answer ... The Anti-monopoly Act and the JFTC Merger Guidelines do not directly or explicitly address the theories of harm.
However, the JFTC will review the proposed transaction to determine whether it would substantially restrain competition in any particular field of trade (ie, any relevant market). The JFTC Merger Guidelines:
- suggest a framework whereby this substantive test will be conducted from the perspective of unilateral effects and coordinated effects; and
- provide explanatory scenarios in which the theory of harm can be found.
The Anti-monopoly Act and the JFTC Merger Guidelines do not explicitly address non-competition related issues.