The Japan Fair Trade Commission (JFTC) has proposed revised merger regulation and guidelines, to further improve transparency and predictability of merger review procedure under the Antimonopoly Act and make Japanese merger regulation more consistent with international standards. The main features of the draft revisions are reform of the pre-notification consultation procedure and revision of the standard for substantive merger reviews.
Reform of the pre-notification consultation procedure
The pre-notification consultation procedure has played an
important role in the Japanese merger review, in particular for
large scale transactions that could raise competition concerns.
Companies valued obtaining informal and non-public views on
contemplated transactions by the JFTC.
However, there has been increasing criticism of pre-notification
consultation by the JFTC. The procedure is not designated by law
and tends to be long, often because of repeated requests for
additional information by the JFTC. Moreover, although the JFTC has
tried to increase transparency by publishing its decisions for
important merger cases, merging parties and the public have argued
that the JFTC's analysis and reasoning for each merger case
were not clear enough. In addition, under the 2009 amendments to
the Antimonopoly Act, a pre-closing notification system was
introduced for share acquisitions, reducing the importance of
pre-notification consultation.
As a result, the JFTC decided to reform the pre-notification
consultation procedure. Under the reformed procedure, the JFTC will
not make a pre-notification substantive analysis on contemplated
mergers. Meanwhile, the JFTC will provide notifying parties, if
they request, the opportunity to discuss procedural issues, such as
the necessity of merger filing and the scope of information to be
submitted in prior to notification.
Revision of the standard for substantive merger review
In order to increase predictability of merger reviews, the JFTC also decided to revise the standard for substantive merger review provided in the merger guidelines.
First, the revised guidelines further clarify how the JFTC
defines geographic market, especially beyond national borders, in
response to the demand from companies to consider international
competition.
Second, the revised guidelines clarify that competitive pressure
from imports may be considered even where there is no existing
imports.
Third, competitive pressure from adjacent market may be recognized
as possibly providing competitive discipline in a relevant market,
where it is likely that products from such adjacent market would be
substituted for relevant products in the near future.
Fourth, the JFTC revised the analysis of failing firms by adding
the example of poor performance of failing divisions, which may be
recognized in merger analysis.
Following the completion of the public comment period on April 4, it is expected that the final version of revised merger regulation and guidelines would be published at the end of June 2011.
The JFTC's March 4 press release and documents can be found here.
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