Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

Start by selecting your Topic of interest below. Then choose your Regions and finally refine the exact Subjects you are seeking clarity on to view detailed analysis provided by our carefully selected internationally recognised experts.

4. Results: Answers
Merger Control
1.
Legal and enforcement framework
1.1
Which legislative and regulatory provisions govern merger control in your jurisdiction?
Japan

Answer ... Chapter 4 of the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (Act No 54 of 14 April 1947, as amended) (‘Anti-monopoly Act’) governs merger control in Japan. The Japan Fair Trade Commission (JFTC) has also provided detailed instructions on merger review, as follows:

  • The Guidelines to the Application of the Anti-monopoly Act Concerning Review of Business Combination (31 May 2004, last amended on 17 December 2019) (‘JFTC Merger Guidelines’) primarily set out the approaches to market definition and competitive analysis; and
  • The Policies Concerning Procedures of Review of Business Combination (14 June 2011, last amended on 17 December 2019) (‘JFTC Procedural Policy’) set out the procedural steps of the merger review.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
1.2
Do any special regimes apply in specific sectors (eg, national security, essential public services)?
Japan

Answer ...

  • Banks and insurance companies are prohibited from acquiring a certain amount of voting rights (ie, more than 5% for banks and more than 10% for insurance companies) in another Japanese company, unless:
    • the acquisitions are authorised by the JFTC in advance; or
    • the acquisitions fall within any of the exceptions provided under the Anti-monopoly Act.
  • Under a special law, which is effective from 27 November 2020 to 27 November 2030, the parties to mergers between local banks and mergers between local bus service companies may apply for an exemption from merger review under the Anti-monopoly Act as long as the merger satisfies certain conditions set out in the law. Despite these exemptions, however, such mergers must be approved by the ministers with responsibility for the relevant sector, who must consult with the JFTC during the review.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
1.3
Which body is responsible for enforcing the merger control regime? What powers does it have?
Japan

Answer ... The JFTC is responsible for enforcing the merger control regime.

In the context of merger control, the JFTC has the authority to review M&A transactions and issue a suspension order (ie, a cease-and-desist order) if they are deemed to be anti-competitive. The JFTC can fine the parties for failure to notify and gun-jumping (or pre-clearance implementation), among other things (please see question 7). In relation to this authority, the JFTC may also open an investigation in case of suspicion of a potential gun-jumping violation.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.
Definitions and scope of application
2.1
What types of transactions are subject to the merger control regime?
Japan

Answer ... The following types of transactions are subject to substantive review by the Japan Fair Trade Commission (JFTC):

  • share acquisitions;
  • mergers;
  • company splits (or demergers);
  • joint share transfers (kyoudou kabushiki-iten);
  • the transfer of all or a significant part of business or asset; and
  • interlocking directorates.

The JFTC may prohibit the parties from implementing these types of transactions if they would substantially restrain competition in any particular field of trade (ie, any relevant market), even if mandatory prior notification is not required. As detailed in question 2.6, prior notification is required for these types of transactions (except for interlocking directorates) if the relevant jurisdictional thresholds are met.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.2
How is ‘control’ defined in the applicable laws and regulations?
Japan

Answer ... Under Japanese law, there is no concept of ‘control’ equivalent to that of the merger control regimes in other jurisdictions, such as the EU Merger Regulation. When applying the turnover threshold for prior notification (see question 2.6), it is essential to aggregate the Japanese turnover of a group company. The Japanese merger control regime recognises ‘control’ if Company A (parent company) controls the decisions on the financial or business policies of Company B by, for instance:

  • directly or indirectly holding the majority of voting rights in Company B; or
  • other means, such as board representation, with voting rights of between 40% and 50%.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.3
Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?
Japan

Answer ... Yes. The acquisition of minority interests may be subject to substantive review by the JFTC. The JFTC Merger Guidelines clarify when the JFTC will review the acquisition of shares or interests as follows:

  • The JFTC will review an acquisition if, after the acquisition:
    • the ratio of the target’s voting rights held by the acquiring company group (ie, the acquiring company, its subsidiaries and subsidiaries of its ultimate parent company) would exceed 50%; or
    • the ratio of the target’s voting rights held by the acquiring company group exceeds 20% and the acquiring company group is the target’s sole largest shareholder.
  • The JFTC will not review an acquisition if, after the acquisition:
    • the ratio of the target’s voting rights held by the acquiring company group is not more than 10%; or
    • the acquiring company group is not ranked among the top three shareholders in the target.
  • The JFTC may decide to review such acquisitions on a case-by-case basis, taking into account factors such as:
    • the voting right composition of the target; and
    • the relationship between the acquirer and the target (eg, cross-shareholdings, interlocking directorates, trading relationship, business alliances and technical assistance).

It is important to distinguish the cases in which the JFTC may perform a substantive review from those in which prior notification is required (please see question 2.6, which explains that the acquisition of minority interests may trigger prior notification requirements if it satisfies the jurisdictional thresholds).

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.4
Are joint ventures covered by the merger control regime, and if so, in what circumstances?
Japan

Answer ... Yes. The Anti-monopoly Act has no special rules for joint ventures (including the concept of ‘joint control’ or ‘full functionality’), and the JFTC may thus conduct a merger review of joint ventures to the extent that the criteria under the merger control regime are satisfied (please see questions 2.1 and 2.3). The notifiability of joint ventures should also be analysed based on the jurisdictional thresholds discussed in question 2.6.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.5
Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?
Japan

Answer ... Yes. Foreign-to-foreign transactions may be subject to substantive review by the JFTC, although no special rules apply to foreign-to-foreign transactions.

In addition, foreign-to-foreign transactions may trigger prior notification requirements if they satisfy the jurisdictional thresholds described in question 2.6; there is no particular exemption for foreign-to-foreign transactions, including the local effect test.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.6
What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?
Japan

Answer ... The jurisdictional thresholds for prior notification vary depending on the type of transaction, as outlined below. If a proposed transaction scheme involves multiple transactions, notifiability should be analysed at each step of the transaction. For instance, a typical ‘reverse triangular’ merger may require two filings (ie, notifications for share acquisition and merger), although the substance of those filings will overlap considerably.

Share acquisitions: Prior notification is required if:

  • the ratio of voting rights held by the acquiring company group (ie, the acquiring company, its subsidiaries and subsidiaries of its ultimate parent company; please also see question 2.2) in the target after the acquisition newly exceeds 20% or 50%;
  • the total Japanese turnover of the acquiring company group exceeds JPY 20 billion; and
  • the total Japanese turnover of the target and its subsidiaries exceeds JPY 5 billion.

Mergers: Prior notification is required if:

  • the total Japanese turnover of one of the merging company groups exceeds JPY 20 billion; and
  • the total Japanese turnover of the other merging company groups exceeds JPY 5 billion.

Company splits (demergers):

  • Absorption type: Prior notification is required if:
    • the total Japanese turnover of a company group spinning off all of its business exceeds JPY 20 billion and the total Japanese turnover of the other company group (or the absorbing company group) exceeds JPY 5 billion;
    • the total Japanese turnover of a company group spinning off all its business exceeds JPY 5 billion and the total Japanese turnover of the other company group (or the absorbing company group) exceeds JPY 20 billion;
    • a company group spins off a substantial part of its business of which Japanese turnover exceeds JPY 10 billion and the total Japanese turnover of the other company group (or the absorbing company group) exceeds JPY 5 billion; or
    • a company group spins off a substantial part of its business of which the Japanese turnover exceeds JPY 3 billion and the total Japanese turnover of the other company group (or the absorbing company group) exceeds JPY 20 billion.
  • Joint incorporation type: Prior notification is required if:
    • the total Japanese turnover of one of the company groups splitting all of its business exceeds JPY 20 billion and the total Japanese turnover of another company group splitting all of its business exceeds JPY 5 billion;
    • the total Japanese turnover of one of the company groups splitting all of its business exceeds JPY 20 billion and another company group splits a substantial part of its business of which its Japanese turnover exceeds JPY 3 billion;
    • the total Japanese turnover of one of the company groups splitting all of its business exceeds JPY 5 billion and another company group splits a substantial part of its business of which the Japanese turnover exceeds JPY 10 billion; or
    • one of the company groups splits a substantial part of its business of which Japanese turnover exceeds JPY 10 billion and another company group splits all or a part of its business of which Japanese turnover exceeds JPY 3 billion.

Joint share transfers (kyoudou kabushiki-iten): A joint share transfer is a particular type of M&A transaction under the Companies Act whereby two or more companies newly establish a holding company in common. Prior notification for the joint share transfer is required if:

  • the total Japanese turnover of one of the transferor company groups exceeds JPY 20 billion; and
  • the total Japanese turnover of another transferor company group exceeds JPY 5 billion.

Business and asset transfer: Prior notification is required if:

  • the total Japanese turnover of the transferee company group exceeds JPY 20 billion; and
  • any of the following threshold is met:
    • the transferee acquires all of the transferor’s business of which Japanese turnover exceeds JPY 3 billion;
    • the transferee acquires a substantial part of the transferor’s business of which the Japanese turnover exceeds JPY 3 billion; or
    • the transferee acquires all or a substantial part of the transferor’s assets of which the Japanese turnover exceeds JPY 3 billion.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
2.7
Are any types of transactions exempt from the merger control regime?
Japan

Answer ... Yes. Intra-group transactions are exempt from the merger control regime.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.
Notification
3.1
Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?
Japan

Answer ... Notification is mandatory. As an exception, intra-group transactions are exempt from prior notification requirements.

The Japan Fair Trade Commission (JFTC) has the authority to review any transactions regardless of whether the jurisdictional thresholds are satisfied. The JFTC recently investigated some transactions that did not meet the jurisdictional thresholds (see question 9.1).

In the recent amendment to the JFTC Procedural Policy, the JFTC explicitly recommends that the parties voluntarily consult with the JFTC before the implementation of the proposed transaction if:

  • the proposed transaction does not trigger mandatory prior notification solely on the grounds that the Japanese turnover of the target does not satisfy the turnover thresholds (see question 2.6); and
  • the following criteria are met:
    • the transaction value exceeds JPY 40 billion; and
    • the proposed transaction has a local nexus in the Japanese market by considering that:
      • the business base or R&D base of the target is located in Japan;
      • the target conducts sales activities targeting Japanese consumers by, for instance, providing a website or a brochure in Japanese; or
      • the total Japanese turnover of the target and its subsidiaries exceeds JPY 100 million.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.2
Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?
Japan

Answer ... Yes. The parties may consult with the JFTC informally and in advance of formal notification. Except for simple and straightforward transactions, it is common to engage in discussions with the JFTC on substantive elements – such as market definition, competitive analysis and remedies – before formal filing. The parties are also encouraged to submit the draft notification form before formal submission for a formality check by the JFTC so that the formal filing will be accepted as scheduled.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.3
Who is responsible for filing the notification?
Japan

Answer ... The responsible party may differ depending on the type of transaction:

  • For share acquisitions and business and asset transfers, the acquirer is responsible for filing the notification.
  • For mergers and company splits, all parties involving the merger or the company split are jointly responsible for filing the notification.
  • For joint share transfers, all transferors are jointly responsible for filing the notification.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.4
Are there any filing fees, and if so, what are they?
Japan

Answer ... No filing fees are payable.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.5
What information must be provided in the notification? What supporting documents must be provided?
Japan

Answer ... The JFTC provides the prescribed notification forms for each type of notifiable transaction discussed in question 2.6. Each notification form requires similar information and supporting documents, except for insignificant variations arising from the nature of each transaction. The notification form has no designated section in which the filing parties can set out the substantive arguments for the transaction, including the market definition and competitive analysis. In practice, separately from the notification form, the parties voluntarily submit an explanatory paper that lays out their views and analysis on the competition issues during the pre-notification consultation process.

With regard to share acquisitions, for instance, the notification form requires the following information and supporting documents:

  • Information required in the notification form:
    • the purpose, reason, background and scheme of the transaction;
    • information on the acquirer and the company group of its ultimate parent company (eg, identity, financial information, domestic sales and major business);
    • information on the target and its subsidiaries (eg, identity, financial information, domestic sales and major business); and
    • the market share information of the relevant markets where horizontal or vertical relations are found between the parties.
  • Supporting documents to be attached to the notification form:
    • a copy of the definitive agreement of the proposed share acquisition;
    • the business report, balance sheet and profit and loss statement of the acquirer for the latest fiscal year;
    • a copy of the shareholder resolution of the acquirer for approval of the proposed transaction, if such shareholder approval is required;
    • the annual report prepared by the ultimate parent company of the acquirer; and
    • a power of attorney of the filing party.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.6
Is there a deadline for filing the notification?
Japan

Answer ... There is no filing deadline. However, the parties cannot close a transaction subject to the mandatory prior notification until the expiry of a 30-calendar-day waiting period, which begins to run upon acceptance of the formal filing. The JFTC may shorten the waiting period at its sole discretion upon the parties’ request; there is no way for the JFTC to ‘stop the clock’, however.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.7
Can a transaction be notified prior to signing a definitive agreement?
Japan

Answer ... Yes, although the filing parties must submit a draft definitive agreement as a substitute for the executed definitive agreement (which is a supporting document to the notification); the JFTC will accept a draft definitive agreement as the supporting document as long as a copy of the executed version is submitted upon signing.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.8
Are the parties required to delay closing of the transaction until clearance is granted?
Japan

Answer ... Yes, the mandatory prior filing is suspensory. As discussed in question 3.6, if a transaction triggers mandatory prior filing, the parties cannot close the transaction until a 30-calendar-day waiting period has expired.

Even if the JFTC issues clearance before the end of the waiting period, the waiting period will not automatically expire. If the parties wish to close the transaction before the end of the waiting period, in addition to clearance, a request to shorten the waiting period should be submitted and approved by the JFTC.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
3.9
Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?
Japan

Answer ... The JFTC will maintain the confidentiality of the notification (including the fact that the notification has been filed), except in the following circumstances:

  • The JFTC publicly announces the initiation of Phase II review on the notified case in order to seek comments from third parties. Under the Anti-monopoly Act, the JFTC may also issue an information request to third parties to collect their comments or opinions on an as-needed basis (see also question 8.1).
  • The JFTC publishes quarterly on its website a list of cleared transactions which includes the following basic information on cases:
    • the filing date;
    • the names of the parties;
    • the main business of the parties;
    • the type of transaction (eg, share acquisition, merger);
    • the ratio of voting rights acquired in case of share acquisitions (more than 20% or 50%);
    • the clearance date; and
    • whether the waiting period has been shortened.
  • The JFTC also publishes an annual report in which it highlights the major transactions together with conclusions and summaries of the competition assessment. Prior to publication, the JFTC gives the filing parties the chance to review a draft case summary and request the exclusion any business secrets.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.
Review process
4.1
What is the review process and what is the timetable for that process?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.2
Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.3
Is there a simplified review process? If so, in what circumstances will it apply?
Japan

Answer ... There is no simplified review process. As regards shortening the waiting period, please see question 3.8.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.4
To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.5
What information-gathering powers does the authority have during the review process?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.6
Is there an opportunity for third parties to participate in the review process?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.7
In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.8
What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?
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:

  • Horizontal transactions:
    • 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:
    • 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%.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.9
Does a different substantive test apply to joint ventures?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
4.10
What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?
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.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
5.
Remedies
5.1
Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?
Japan

Answer ... Yes. The parties may negotiate remedies with the Japan Fair Trade Commission (JFTC) at any stage of the merger review (including the pre-notification consultation).

The JFTC Merger Guidelines provide that the structural remedies, such as divestiture of a business, are the most effective remedies; although behavioural remedies may be accepted if appropriate. The JFTC will review the remedy proposal from the parties to alleviate competitive issues on a case-by-case basis; and in practice, there are a number of cases in which the JFTC accepts behavioural remedies rather than structural remedies. In general, the JFTC requires regular reporting for monitoring purposes (please see question 7.3).

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
5.2
What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?
Japan

Answer ... The parties may propose remedies at any time during the merger review (including the pre-notification consultation).

The remedies agreed with the JFTC must be provided in the notification form. If the remedies are proposed after formal filing, the parties must submit an amendment report to incorporate the remedies into the notification form.

The JFTC Merger Guidelines provide that, in principle, the remedies should be completed before implementation of the proposed transaction. If it is not feasible to complete the remedies before closing, the JFTC will review the remedy proposal if it contains:

  • detailed steps towards completion of the remedies; and
  • an appropriate and definitive deadline for completion.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
5.3
To what extent have remedies been imposed in foreign-to-foreign transactions?
Japan

Answer ... If a foreign-to-foreign transaction would substantially restrain competition in the Japanese market, remedies may be required to address such competitive issues. For instance, in fiscal year 2020, the JFTC issued conditional clearance to the acquisition of Fitbit, Inc by Google LLC with behavioural remedies.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
6.
Appeal
6.1
Can the parties appeal the authority’s decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?
Japan

Answer ... If the Japan Fair Trade Commission (JFTC) issues a cease-and-desist order, the parties may appeal to the Tokyo District Court for revocation of the order. The formal appeal to challenge the JFTC’s decision must be filed, unless justifiable reasons exist, within:

  • six months of the date on which the parties become aware of the order; and
  • one year of the date on which such order was issued.

If the Tokyo District Court upholds the JFTC’s decision, the parties may appeal to the Tokyo High Court and subsequently to the Supreme Court.

The JFTC’s decision will be fully reviewed during the appeal procedure, although the Supreme Court principally reviews cases on points of law only.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
6.2
Can third parties appeal the authority’s decision, and if so, in what circumstances?
Japan

Answer ... The Anti-monopoly Act does not clarify whether third parties have standing to sue against a decision issued by the JFTC in the context of merger control.

Under the Administrative Case Litigation Act, which principally governs administrative litigation, an action for revocation of an original administrative disposition may be filed only by a person with a legal interest in seeking revocation of the administrative disposition. We are not aware of any cases in which a court has decided whether a third party is entitled to challenge the JFTC’s decision in relation to merger control.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
7.
Penalties and sanctions
7.1
If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?
Japan

Answer ... In case of failure to notify, a criminal fine of up to JPY 2 million may be imposed both on the parties that are obliged to notify and on any representative or employee responsible for the failure. We are not aware of any cases in which such criminal fines have actually been imposed.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
7.2
If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?
Japan

Answer ... In case of failure to comply with the 30-calendar-day waiting period, a criminal fine of up to JPY 2 million may be imposed both on the parties that are obliged to notify and on any representative or employee responsible for the failure.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
7.3
How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?
Japan

Answer ... The Japan Fair Trade Commission (JFTC) ordinarily requires the parties to submit regular reports to the JFTC to monitor whether they are complying with remedies (please see question 5.1). It is not common practice to appoint a monitoring trustee in Japan.

If the parties fail to comply with the remedies, a cease-and-desist order may be issued; and if the parties do not comply with the final and binding cease-and-desist order, the following penalties may be imposed:

  • imprisonment with work for up to two years or a criminal fine of up to JPY 3 million for natural persons; and
  • a criminal fine of up to JPY 300 million for legal persons.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
8.
Trends and predictions
8.1
How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
Japan

Answer ... In fiscal year 2022 (ie, April 2022-March 2023), the Japan Fair Trade Commission (JFTC) accepted a total of 306 merger filings – a figure which appears to have returned to pre-pandemic levels. Of those cases:

  • 299 were cleared in the Phase I review;
  • seven were withdrawn by the parties; and
  • none was escalated to Phase II review.

The JFTC accepted 28 filings for foreign-to-foreign transactions. Of those cases in which the JFTC completed its review in fiscal year 2022, one case was cleared conditionally with remedies and the remainder were cleared unconditionally.

Digital markets: The JFTC has recently focused its efforts on tackling competition issues in digital markets. In its policy statement published in June 2022, the JFTC highlighted four points to strengthen merger control enforcement:

  • Third-party opinions: While thus far the JFTC has publicly sought third-party comments only in Phase II cases, it has announced that it now intends to seek comments from the third parties even before the initiation of a Phase II review if necessary. In relation to this policy change, in June 2022 the JFTC invited public comments on two cases not yet subject to Phase II review:
    • the acquisition of Mandiant, Inc by Google LLC; and
    • the acquisition of Activision Blizzard, Inc by Microsoft Corporation.
  • Investigative authority: As mentioned in question 4.5, the JFTC is no longer reluctant to exercise its statutory investigative authority to require the parties to submit information in merger reviews to the extent necessary and appropriate. A criminal fine of up to JPY 3 million may be imposed for failure to respond to an order.
  • Internal document review: The JFTC has re-emphasised its intention to request internal documents even in the preliminary stages of the merger review process. According to the JFTC’s official guidance on the submission of internal documents in merger reviews, the JFTC may request internal documents including:
    • board minutes and its attached materials;
    • internal assessments of the transaction; and
    • emails of officers and employees involved in the transaction.
  • Economic analysis: The JFTC recently established a new office specialising in economic analysis and revealed its ambition to introduce economic analysis more proactively than before. The JFTC also published guidelines for the submission of economic analysis reports and data for economic analysis, providing practical guidance on the principles and structures of economic analysis reports and the points to be considered when communicating with the JFTC’s economic analyst team.

Green guidelines: On 31 March 2023, the JFTC published guidelines on how corporate actions can facilitate the achievement of a green society. Although the guidelines do not specifically address how mergers and acquisitions can contribute towards this goal, discussions are ongoing as to how the JFTC will evaluate the unique characteristics of mergers and acquisitions from the perspective of environmental protection in the course of its merger filing reviews. Examples of the factors that the JFTC will consider from the perspective of environmental protection when conducting merger filing reviews include the following:

  • Definition of a particular field of trade (ie, relevant market): A particular field of trade denotes the scope for determining whether a business combination could restrain competition (in terms of both product range and geographic range). A particular field of trade is defined, in principle, in terms of:
    • substitutability for users; and
    • where necessary, substitutability for suppliers.
  • The JFTC may define a particular field of trade separately or in an overlapping manner for environmentally friendly products, even if they are substitutable for similar products in terms of their quality and performance, taking into account users who do not see those products as mutually substitutable due to their increased awareness of environmental issues.
  • Consideration of efficiency: According to the guidelines, efficiency improvements are assessed based on the following factors:
    • They should be an effect specific to the business combination;
    • They should be feasible; and
    • They should enhance the interests of users.
  • Based on this, the JFTC may consider whether a business combination aimed at the achievement of a green society is likely to generate pro-competitive effects, such as the promotion of innovation or the creation of new products.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
9.
Tips and traps
9.1
What are your top tips for smooth merger clearance and what potential sticking points would you highlight?
Japan

Answer ... It is essential for the parties to utilise pre-notification consultation in order to complete the merger review smoothly and efficiently. As discussed in question 4.1, the Japan Fair Trade Commission (JFTC) cannot stop the clock on the 30-calendar-day Phase I review period and therefore will have no choice but to proceed to a Phase II review if it cannot complete its review within this period. It can be an alternative option for the parties to withdraw and refile the notification; although it will remain uncertain whether the JFTC can issue a formal decision by the end of Phase I. Even if the proposed transaction contains no substantive competition issues, the case team must complete the internal review and the approval process can take a certain amount of time. Thus, in order to avoid the unnecessary risk of a Phase II review, it is advisable to engage the JFTC sufficiently in advance of the formal filing for a clearer view on the Phase I review.

The JFTC is currently paying particular attention to the digital market. Although the Japanese merger control regime has not introduced a transaction-size threshold, such as that which applies in Germany and Austria, the JFTC has the authority to investigate and, if necessary, prohibit a transaction even if it does not satisfy the mandatory filing thresholds. In this respect, the JFTC has actively reviewed non-reportable transactions in the digital sector including foreign-to-foreign transactions, such as:

  • the acquisition of Nuance Communications, Inc by Microsoft Corporation;
  • the acquisition of MGM Holdings, Inc by Amazon.com, Inc;
  • the acquisition of Pring Inc by Google International LLC; and
  • the acquisition of Paidy Inc by PayPal Holdings, Inc.

In cases where the JFTC finds substantial competition concerns, given the 2022 policy statement, it might possibly issue an internal document request or consider conducting an economic analysis. This latest trend seems to suggest that it would be prudent to analyse whether a proposed transaction merits a voluntary consultation with the JFTC when drawing up the transaction timeline; if so, it would be advisable to discuss with local competition law specialists the substantive arguments for the deal and the strategy for merger review.

In summary, given the active attitude of the JFTC towards merger review, it has become increasingly important for the parties to carefully analyse the transaction timeline and their strategic approach to merger review.

For more information about this answer please contact: Ryoichi Kaneko from Anderson Mori & Tomotsune
Contributors
Topic
Merger Control