Tatsuo Yamashima and Saori Hanada of Atsumi & Sakai review the merger control regime in Japan

1. Regulatory framework

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 (AMA). The Japan Fair Trade Commission (JFTC) is the competent authority and has exclusive jurisdiction to review and control transactions which meet the merger control review thresholds.

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

Business combinations such as acquisitions of shares, concurrent directorships in several companies, mergers, divestitures, joint share transfers to a holding company, or business assignments are subject to the merger control legislation. Joint ventures may be caught regardless of the type. Any business combination occurring in the same corporate group is exempted from notification.

2. Filing

2.1 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. As to share acquisitions, for example, notification is required where: (i) the aggregate turnover in Japan by all companies in the corporate group to which the acquiring company belongs exceeds ¥20 billion ($163 million); (ii) the aggregate turnover in Japan by the acquired company and its subsidiaries exceeds ¥5 billion; and, (iii) 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.

2.2 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 effect on competition in the market in Japan. In the BHP Billiton v Rio Tinto case, the JFTC launched a second-phase review in 2010 and raised concerns about the deal.

2.3 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 should not be closed for a period of 30 calendar days after acceptance of the filing, which 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. Parties failing to notify transactions which meet the thresholds may be subject to a penalty of up to ¥2 million, although in practice, such penalties are rarely imposed.

2.4 Who is responsible for filing and what, if any filing fee applies? What are the filing requirements and how onerous are these?

The acquiring or accepting company is responsible for filing share acquisitions or business assignments, and all of the relevant parties are responsible for making the filings in mergers, divestitures or joint share transfers. As for joint ventures, it depends on the type of business combination. No filing fees are required.

The designated forms of notification for each type of business combination must be prepared in Japanese and submitted to the JFTC, including a general description of the parties and their status in the market. Completing the forms is onerous and time-consuming.

3. Clearance

3.1 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 acceptance by the JFTC of a notification officially filed. If the JFTC finds no problem during that period, the JFTC will issue a written notice of clearance to the notifying party.

If the JFTC considers the second-phase review necessary, it may request that the notifying party submit further information and reports. The JFTC is required to reach a conclusion within the longer of either 120 days after the receipt of the initial notification or 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 the arrangement with the JFTC in order to avoid a cease-and-desist order being issued due to the expiration of the 90-day period. In the 2014 fiscal year (from April 2014 to March 2015), however, all cases were cleared just one day before expiration of the 90-day period, which seems to be a new trend.
The parties may consult with the JFTC before the official notification regarding possible issues with the transaction.

3.2 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 in order to determine whether the transaction may substantially restrain competition in the relevant market under the Guidelines on the Application of the Anti-Monopoly Act Concerning Review of Business Combinations (Merger Guidelines). The Merger Guidelines provide the safe harbour criteria referring to market shares of the parties and the Herfindahl-Hirschman Index.

The Merger Guidelines provide that improvements in efficiency will be considered in determining the effect of the merger transaction on competition. However, no reference is made to non-competitive factors such as industrial policy and the public interest.

3.3 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. Structural measures such as business assignments, or reduction of voting rights should be considered first, and then measures to promote imports or stimulate market penetration may be considered next.

4. Rights of appeal

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

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

5. Your jurisdiction

5.1 In no more than 200 words outline any merger control regulatory trends in your jurisdiction.

The total number of merger notifications for the 2014 fiscal year was 289, which shows an increase from 264 during the previous fiscal year. An increase in merger notifications involving foreign companies accounts for the majority of this increase.

In the 2014 fiscal year, the JFTC cleared 275 cases without a second-phase review and, among those, the 30-day waiting period, during which the notified transaction may not close, was shortened in 119 cases.

Only three cases transitioned to the second-phase review, all of which were cleared subject to conditions (two cases were filed in the 2014 fiscal year and the other was filed in the 2015 fiscal year). An assignment of business concerning certain products to an independent third party was accepted as a remedy for the above two cases (Zimmer/Biomet). Taking measures for blocking out information exchange between the parties was accepted for the other where Oji Holdings acquired the minority shares of Chuetsu Pulp & Paper. The JFTC coordinated with the US Federal Trade Commission as well as the European Commission in connection with the Zimmer-Biomet merger.

There were no formal prohibition decisions during the 2014 fiscal year.


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Tatsuo Yamashima
Atsumi & Sakai

About the author

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 (up and coming) in relation to competition/antitrust law in Chambers Asia-Pacific and recommended by Who's Who Legal Japan 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 lawyer.


Saori Hanada
Atsumi & Sakai

About the author

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 admitted to the Japan Federation of Bar Associations in 2000. Hanada obtained an LLM from Columbia Law School in 2010 and was admitted to the New York State bar in 2012.