Merger Controls First Edition - J Sagar Associates

Japan
Koya Uemura
Anderson, Mōri & Tomotsune
Overview of merger control activity during the last 12 months
Over the last 12 months, the Japan Fair Trade Commission (the “JFTC”) has gathered a lot of public attention in the area
of merger control. Here are merger review cases worth noting.
The most prominent case (still pending at the JFTC at the time of writing) concerns a merger between Nippon Steel
Corporation, the largest steel company in Japan, and Sumitomo Metal Industries, Ltd., the third largest steel company in
Japan. The combined new company will be by far the largest steel company in Japan, and will have a substantially high
market share (more than 50%) in some of the overlapping product markets. Due to the seemingly high market share,
whether and when the JFTC will, either unconditionally or conditionally, clear this merger is an issue. With sour memories
of the breakdown of the highly-acclaimed merger negotiation between two major Japanese beverage companies, Kirin
and Suntory, in February 2010, Japanese industries, media and even politicians have been welcoming of the merger of
Nippon Steel and Sumitomo and are hoping it will be cleared by the JFTC sooner, rather than later.
The second case that attracted wide public attention was a proposed joint venture between BHP Billiton and Rio Tinto,
two major British-Australian natural resource companies, to integrate their iron ore operations in Western Australia.
Although the request for the JFTC’s review was withdrawn for unknown reasons by the parties before the JFTC’s final
decision, the JFTC recently publicised a statement of its interim analysis (not an official decision) on its Japanese website.
The third case is, although technically not a merger control case under the Japanese Antimonopoly Act, a case of a business
alliance between Google Inc. and Yahoo K.K. under which Google provides Yahoo with a search engine service and search
advertising system. Although the JFTC unconditionally cleared the business alliance after it reviewed the alliance based
on the parties’ voluntary consultation, spurred by public outcry that the JFTC was too quick to clear the case without
sufficient investigations, the JFTC took the bold step of seeking opinions from third parties by posting a special email
address on its website. Newspapers reported that Microsoft and other internet companies submitted objections to the
JFTC. This is the first case in history where the JFTC attempted to gather the public’s opinion on a case it had already
approved.
On the policy side of merger control, on July 1, 2011, the JFTC’s revised Guidelines to the Application of the Antimonopoly
Act Concerning Review of Business Combination (the “Revised Merger Guidelines”) and the JFTC’s new Policies
Concerning Procedures of Review of Business Combination (the “New Procedures Policies”) came into force, as further
explained below.
New developments in jurisdictional assessment or procedure
The Revised Merger Guidelines, like their predecessor, describe how the JFTC analyses the substantive competitive impact
of mergers (in the statutory wording, “substantially restrain competition”). These Guidelines include several important
revisions, which are, among others: (i) explicit reference to the definition of geographic markets across the border; (ii)
explicit reference to competitive constraint from not only actual but also potential imports; and (iii) a more lenient failing
company defence.
(1) Defining Geographic Markets across the Border
In the last couple of years, the JFTC has been under extreme pressure from Japanese industries and other governmental
agencies of Japan. The typical criticism has been that the JFTC is neglecting the reality of international competition
surrounding Japanese companies in that after the burst of the bubble economy in the 1990s, the Japanese economy has not
been growing substantially for the last twenty years and is expected to shrink in the longer term mainly due to the falling
birth rate and the aging population. Further, in spite of a shrinking domestic market, there are too many Japanese companies
competing in the Japanese market, but they are too small to compete with larger rivals in the international market: the
logical solution to this issue is for Japanese companies to merge with each other.
Global Legal Insights ­ Merger Control First Edition
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