Jurisdiction - Japan
Reports and Analysis
Japan – Merger Control.

14 July, 2014


Legal News & Analysis – Asia Pacific – Japan – Competition & Antitrust


Overview Of Merger Control Activity During The Last 12 Months

Merger control was introduced in Japan by the 1947 Japanese Antimonopoly Act (‘the AMA’) together with Japan’s first competition rules. Merger control is enforced by the Japan Fair Trade Commission (‘the Japan FTC’), which was established as an independent administrative office with broad enforcement powers and is composed of a chairman and four commissioners. The Japan FTC has primary jurisdiction over the enforcement of merger control under the AMA.

According to the latest statistics published by the Japan FTC in June 2013, 349 notifications were made in FY 2012 (1 April 2012 to 31 March 2013), and 340 cases were closed in the Japan FTC’s first stage review process. The other cases have been closed in the second stage review, with remedies in three cases, without any formal prohibition order. The number of notifications is in a steady increase, from 265 in FY 2010, and 275 in FY 2011.

New Developments In Jurisdictional Assessment Or Procedure

Recent Amendments To The Merger Review Regime

Up until the end of June 2011, M&A transactions were usually submitted to the Japan FTC under the voluntary consultation procedure (‘the Prior Consultation’) prior to the formal statutory filing of a proposed transaction under the AMA, pursuant to the Prior Consultation Guidelines. Under the Prior Consultation, the Japan FTC would make up its mind about a particular case at this early stage and would usually keep to that opinion in the formal notification procedure thereafter.

However, the Japan FTC announced in June 2011 that it would abolish the Prior Consultation as of July 2011, and thus it would no longer provide its conclusion on substantive issues at the pre-notification stage. The abolition of the Prior Consultation means that the review of a proposed transaction would only start at the formal notification. 

Informal Dialogues With The Japan FTC

The Japan FTC’s merger regime has the following two stages after formal notification:


  • Phase I. This phase, in which the Japan FTC will review the notification, lasts 30 calendar days (waiting period). The parties must suspend their transaction until the end of this period. At the end of the 30 days, the Japan FTC will either approve the merger (with or without conditions) or open a Phase II review.
  • Phase II. In complex cases, the Japan FTC may request additional information from the parties. The Phase II review will last 90 calendar days from receipt of all additional information.


In practice, however, the Japan FTC generally accepts informal arguments from notifying parties on substantive issues, and in some cases conducts interviews with third parties (for example, competitors and customers of the parties) under an informal approval from notifying parties even before filings of formal notifications. Close communications of this kind between the Japan FTC and notifying parties would generally accelerate the Japan FTC’s review, which in many cases results in early clearance of notified transactions (see below, ‘Simplified procedure and acceleration’), and thus are important from a strategic viewpoint.

Review Of Minority Shareholdings

Minority ownership of over 20% of the issued shares in a company is notifiable regardless of whether the acquirer will take control of the target company. Also, in the Japan FTC’s substantive review, any companies that are in a close relationship with an acquirer or a target shall generally be deemed to be in a ‘joint relationship’. The joint relationship will be determined by taking into account various factors although, according to the Merger Guidelines, a minority shareholding of over 20% and the absence of shareholders with larger shareholding ratios would suffice.

Accordingly, these companies will generally be treated as a totally integrated group for the purpose of the substantive analysis and, for example, the Herfindahl-Hirschman Index will also be calculated based on the sales data of the integrated ‘joint relationship’ group as a whole. 

Simplified Procedure And Acceleration

Although simplified procedures are not available in Japan, it is generally possible to accelerate the review process by way of submitting a written request to the Japan FTC. The Merger Guidelines state that the Japan FTC may shorten the waiting period (30 days) when it is evident that the notified merger may not substantially restrain competition in any relevant market. In practice, prior dialogues between the notifying parties and the Japan FTC would be necessary (see above, ‘Informal dialogues with the Japan FTC’).

Failure To Notify

Where there is a failure to notify correctly, the Japan FTC can either (i) issue a criminal fine of up to two million Japanese Yen, (ii) issue a cease-and-desist order to prohibit a merger (even after the parties have implemented the merger), if the merger may substantially restrain competition in the relevant markets, or (iii) file civil proceedings to nullify the merger, within six months of the date the merger is implemented (this is not the case with share acquisitions and business transfers).

In theory, the Japan FTC can take more than one of the above measures, although the Japan FTC does not take this approach in practice.

Implementation Before Clearance

The waiting period is 30 days, irrespective of whether or not Japan FTC’s review moves on to Phase II. If the parties implement a merger during the 30-day waiting period, this is subject to the same penalty as a failure to notify (that is, a criminal fine of up to two million Japanese yen (see above, ‘Failure to notify’).

The waiting period will not be extended even if the Japan FTC’s investigation moves to Phase II, although in practice the parties generally suspend the transaction until the Phase II review is completed. This means that a closing of the transaction would generally be extended to the completion of the Japan FTC’s Phase II review. The only exceptional case which has been publicised so far is an acquisition of shares of Varian, Inc. by AgilentTechnologies, Inc., which was concluded before the Japan FTC’s completion of its Phase II review.

Although it is at least theoretically possible for parties to implement a merger after the 30-day period and before the Japan FTC grants its formal approval (as stated), the Japan FTC can still order a cease-and-desist order requiring the parties to take some measures (for example, structural measures such as the transfer of business or business restructure) even after the completion of notified transactions.

Third-party Access To The File And Rights To Challenge Mergers

(i) Access To The File

Complainants have no right to access the merger notification files. Further, according to the Policy for Merger Review, the Japan FTC will disclose a short summary of the proposed merger only if the review moves on to Phase II. This means that third parties cannot confirm whether a merger has actually been notified, unless such disclosure from the Japan FTC happens (see below, ‘Approach to remedies’).

(ii) Rights To Challenge Mergers

Interventions by interested parties in the Japan FTC proceedings have not historically been common in Japan. This practice has, however, started to change as exemplified by interventions made before the Japan FTC in relation to the proposed BHP Billiton/Rio Tinto joint venture case by Japanese steel manufacturers, as reported by the Japanese press. 

There are two ways for complainants to make a submission to the Japan FTC in the course of a merger review: (i) to notify the investigation bureau of a possible breach of the AMA; and (ii) to notify the mergers and acquisitions divisions. With regard to notifications to the investigation bureau, anyone can submit notifications of a possible breach of the AMA. In addition, actual practice indicates that in some cases complaints have been made with the mergers and acquisitions division, although there is no explicit provision in the AMA for such submissions.

Also, the Policy for Merger Review states that, in case a merger review moves on to Phase II, the Japan FTC will invite opinions and comments from third parties. Public hearings can be held if deemed necessary, but they have been extremely rare to date.

Key Industry Sectors Reviewed And Approach Adopted To market Definition, Barriers To entry, Nature Of International Competition, etc.

Key Industry Sectors

Although the Japan FTC did not specify any specific industry sectors as an enforcement focus, mergers in the retail sector have recently been closely monitored and reviewed in detail in the Phase II reviews.

Illustrative examples thereof are the reviews on: the proposed acquisition of shares of Daiei, Inc. by AEON Co., Ltd.; and the proposed acquisition of shares of BEST Denki by Yamada Denki. In the Daiei/AEON case, the Japan FTC conducted a Phase II review and unconditionally closed the case in July 2013. In this case both AEON and Daiei engaged in the supermarket business, and the Japan FTC defined the geographic range for each store to be an area within a radius of 500 to 3,000 metres of each store (which varies depending on the store location, size, and other factors) and conducted substantive competitive analysis for each of these geographic areas. In the Yamada/BEST case, where both companies were retailers dealing in electrical appliances for consumers, the Japan FTC defined “the area within a ten kilometers radius of each store” as the geographic range, after the Japan FTC interviewed competitors of the notifying parties and confirmed that many of them deemed the area of ten kilometre radius of the store as their sales area. The Japan FTC conducted its Phase II review and closed the case in December 2012 with conditions of divestiture of several stores.

Introduction Of “Global” Market

The Merger Guidelines clarify the category of M&A transactions whose impact on competition should be reviewed. Detailed rules are provided for market definition. Importantly, the Merger Guidelines were amended in 2007 to clarify that the geographic market may be wider than the geographical boundaries of Japan, depending upon the international nature of the relevant business.

This means that it is much more likely that consolidation within certain sectors of the Japanese economy that are faced with competition from foreign imports, for example, will be easier because the widening of the actual geographical market may dilute their national market shares. Following the 2007 amendment to the Merger Guidelines, there have been several cases where the Japan FTC defined the relevant geographical market to extend beyond Japan.

One example involved TDK Corporation’s acquisition from Alps Electric Co, Ltd of fixed assets used for the manufacturing of magnetic heads. The Japan FTC ultimately determined that the proposed acquisition would not substantially restrain competition in any relevant market. This decision was reached on the basis of a number of factors, including the consideration that, post acquisition, TDK would not be able to control prices because of the presence in the relevant market of a number of other significant competitors with excess supply capacity. Significantly, the Japan FTC decided that the relevant market consisted of the global market for magnetic heads. It is understood that the Japan FTC reached this conclusion based on its finding, among others, that magnetic head manufacturers sell their products at the same price regardless of the customers’ geographical location.

It is likely that the Japan FTC will continue to define geographical markets that extend beyond Japan when assessing future transactions, although this depends on the actual conditions of competition.

Key Economic Appraisal Techniques Applied

Economic analysis has not been commonly used in the Japan FTC’s merger review for a long period, with only several exceptions in 2006 and 2007 where cross elasticity has been taken into consideration, but recently the Japan FTC is moving towards more aggressive use of economic analysis in its merger review, and explicitly mentions this in its press releases.

For example, in the Japan FTC’s review of acquisition of shares of BEST Denki Co., Ltd. by YAMADA Denki Co., Ltd, the Japan FTC explicitly mentioned that the results of economic analyses, which were undertaken based on the financial data and POS (point of sales) data of each store, has been taken into consideration in its substantive analysis. In addition, in its review on the proposed acquisition of shares of C&H Co., Ltd. by DAIKEN Corporation, the Japan FTC conducted questionnaire surveys with users and competitors in order to assess substitutability between different types of products, and determined that there was no need to define the relevant market separately for hardwood MDF and softwood MDF, as the Japan FTC confirmed through the surveys that MDF users recognise hardwood MDF and softwood MDF as substitutable.


The Japan FTC currently has its own economist within its merger review department and checks and examines economic analyses which have been produced by notifying parties and complainants.

Approach To Remedies

Behavioural Remedies

In principle, the remedies that the Japan FTC will impose as a condition of clearance of a transaction should be structural, for example the transfer of a business, according to the Japan FTC’s Merger Guidelines. However, in a market featuring a rapidly changing market structure (for example, through technological innovations), there may be cases where it is appropriate to adopt certain types of behavioural measures.

In the acquisition of Cymer by ASML, ASML has proposed that it would take measures against the handling of confidential information, including: (i) directors/employees of Cymer who are responsible for the confidential information of Company X or Company Y will be prohibited from providing the confidential information to directors/employees of ASML and enter into a non-disclosure agreement; and (ii) directors/employees of ASML who are responsible for the confidential information of Company ASML will be prohibited from providing the confidential information to directors/employees of Cymer and enter into a non-disclosure agreement, based on which the Japan FTC cleared the case in its Phase II review.

Timing Of Remedy Proposal

Remedies can be offered by the parties and accepted by the Japan FTC at any time during the Japan FTC’s review period. If a notifying party and the Japan FTC reach an agreement on remedies, the notifying party is generally requested to submit a report of change to incorporate the remedy into the original notification.

As a practical matter, the Japan FTC will disclose a short summary of the proposed merger only after the review moves to Phase II, and thus third parties remain unaware that a merger has been notified unless the Japan FTC makes such a disclosure. Therefore, some notifying parties may prefer to offer remedies in the early stage of merger review, in order to avoid any disclosure of the fact of filing of notification or the relevant transaction itself.

In addition to this, each of the Phase I and Phase II review periods cannot be extended, even in cases where parties submit a remedy proposal to the Japan FTC, nor can the Japan FTC “stop the clock”, and this might cause difficulties especially in global merger notifications where the management of the filing schedule is important to avoid conflicting remedies or prohibition decisions at the end of the merger review procedure in various jurisdictions. Coordination among Japanese and foreign attorneys is therefore of great importance, and informal dialogues between Japanese attorneys and the Japan FTC (see above, ‘Informal dialogues with the Japan FTC’) would also be important to prompt and support the Japan FTC’s discussions and coordinations with foreign competition authorities.

Penalties Against Breaches Of Remedies

Compliance with remedies is not monitored by the Japan FTC or other entities, as the AMA does not have any provision which grants the Japan FTC the power to monitor notifying parties or instruct them to take specific measures in order to comply with the approved remedies. The Japan FTC can, however, penalise the parties for breaches of the offered remedies that have been incorporated into the original notification, should such breach causes a substantial impediment of competition in any of the relevant markets.


Key Policy Developments

Cooperation Between The Japan FTC And Foreign Competition Authorities

The Japan FTC has entered into bilateral cooperation agreements with the competition authorities of each of the United States, the European Union and Canada. Under these agreements, various levels of information exchanges and discussions can be made between the participating authorities. The Japan FTC is entitled to exchange information with other authorities as well, based on the conditions set out in the AMA and waivers submitted by notifying parties.

Among the cases for which the Japan FTC recently published the results of its review, the Japan FTC and foreign competition authorities had launched investigations and the Japan FTC exchanged information with the US Federal Trade Commission in the Agilent case. Further, the Japan FTC worked with the Australian Competition & Consumer Commission, the European Commission, the German Federal Cartel Office and the Korean Fair Trade Commission in the BHP Billiton/Rio Tinto joint venture case. Moreover, in the Panasonic/Sanyo case, ten competition authorities reviewed the transaction and the Japan FTC cleared the case after working with authorities in the US and the EU.

Regulation On Foreign-To-Foreign Mergers

The amendment to the AMA effective as of January 2010 has made foreign-to-foreign mergers, between undertakings which have no Japanese subsidiary or branch office in Japan but which have substantial domestic turnover in Japan, notifiable as long as the relevant notification threshold is met. It appears from the Japan FTC’s stance in the case of BHP Billiton’s attempt to take over Rio Tinto through a hostile bid (see above, ‘Third-party access to the file and rights to challenge mergers’) that the Japan FTC will not hesitate to fully investigate foreign-to-foreign mergers that may have a substantial impact on competition in Japan by cooperating and exchanging information with foreign competition authorities.

Reform Proposals

The Cabinet Office published a Bill for the amendment of the AMA with the aim of abolishing the current administrative hearing procedure in favour of a more detailed judicial appeal procedure. This bill passed in December 2013 and will probably take effect as from April 2015.

The outline of the Bill included the following proposed changes: (i) repeal of the Japan FTC’s administrative hearing procedure for appeals of Japan FTC orders, to be replaced by an enhanced hearing procedure prior to the issuance of orders; and (ii) the introduction of a system in which addressees of the Japan FTC’s orders can appeal to the Tokyo District Court, then to the Tokyo High Court, and finally to the Supreme Court, thereby giving addressees three different levels of judicial appeal. 

Accordingly, appeals against the Japan FTC’s cease-and-desist orders will be dealt with by the Tokyo District Court, instead of through the Japan FTC’s administrative hearing procedure. Practitioners generally expect that this will introduce more transparent and fair appeal procedures.


Morrison Foerster


For further information, please contact:


Kentaro Hirayama, Morrison Foerster

[email protected]


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