Merger Controls First Edition - J Sagar Associates

Anderson, Mōri & Tomotsune Japan
defined product market under scrutiny but are still considered to be competing with the relevant product) are highly likely
to replace demand for the relevant product in the near future, then such a fact may be considered as a factor stimulating
competition in the relevant market. This additional example is probably intended to be applied to cases where innovation
is very active and currently dominant products are likely to lose the market share. Please refer to the JFTC’s decision on
the Panasonic/Sanyo merger in 2009, holding that the combined market share of the parties in nickel hydride batteries
(almost 100%) was not a problem because lithium-ion batteries would replace nickel hydride batteries in the near future.
New developments in merger review procedure
The New Procedures Policies replaced the JFTC’s Policies Dealing with Prior Consultation Regarding Business
Combination Plans (the “Old Policies”). Under the Old Policies, it was general practice in Japan, if the parties to a merger
thought the JFTC might not clear the merger, to voluntarily consult with the JFTC for its view on the merger well before
filing the notification required under the Antimonopoly Act. This was called “prior consultation”. Of course, as prior
consultation was totally a voluntary procedure, companies were allowed to file a merger notification without it. However,
almost all Japanese companies chose to go through prior consultation.
One advantage of the voluntary prior consultation procedure was that, because of its voluntary nature, companies could
enjoy procedural flexibilities in various aspects.
On the other hand, prior consultation was infamous for taking too long. Under the Old Policies, the initial 30-day review
period (so-called “Phase I”) only started, not from the date of the filing of the prior consultation, but from the date when
the JFTC admitted that it had received all information it believed was necessary for its merger review. Similarly, the JFTC
was supposed to issue a list of questions to the parties within 20 days of the filing of a prior consultation, but since the Old
Policies were not legally binding, in reality, the JFTC sometimes issued multiple rounds of questions even after the initial
20 days. On occasion, the JFTC sometimes asked thousands of detailed (and seemingly barely relevant) questions to the
parties who became inundated by so many that, combined with the JFTC’s very restrictive position in admitting it had
received all necessary information, Phase I did not even start after more than one year. This prolonged Q&A period before
Phase I became dubbed by some practitioners as “Phase Zero”.
Many business people rightfully criticised this practice as unpredictable in terms of the schedule, not transparent enough,
and unfair. Some governmental agencies pressured the JFTC to correct it. More fundamentally, the prior consultation
was viewed to be a “belt-and-suspender” approach because after the clearance of the JFTC at the prior consultation, the
parties were still required to file a statutory notification under the Antimonopoly Act (although it was certain that the
mergers cleared in the prior consultation would be cleared in the statutory review procedure as well).
The New Procedure Policies have completely changed the procedure of the JFTC’s merger review. Under the New
Procedure Policies, the notorious prior consultation was abolished. The JFTC only accepts consultation on how to fill in
statutory notification forms, and will not review substantive competitive issues, which will now be reviewed under the
statutory review procedure.
The biggest advantage of this practice is that the time necessary to obtain the JFTC’s clearance is expected to be
substantially shorter than under the Old Policies. Now, under the statutory review procedure, the JFTC’s review must be
done strictly in accordance with the schedule stipulated under the Antimonopoly Act. More specifically, the initial 30day
Phase I review starts from the date of acceptance of the notification by the JFTC and the JFTC is required to accept
the notification as long as the notification form satisfies the formalistic requirements (such as providing information on
the domestic turnover of parties’ group and market share data in the relevant product and geographic market).
On the other hand, there may be some disadvantages. Since the timeline of the statutory merger review is strictly laid
down by the Antimonopoly Act (Phase I review must be completed within 30-days, and Phase II review must be completed
within the later of either 90 days from the date of the start of Phase II or 120 days from the date of the filing of the
notification), there is little flexibility in terms of the schedule. Perhaps the most troublesome issue is that under the
Antimonopoly Act, the JFTC can issue a cease-and-desist order only before the expiration of, naturally, the Phase II period.
This is so, even when the parties agree on an extension of the review period. In mergers that may raise anticompetitive
concerns, parties propose (sometimes in accordance with a suggestion by the JFTC) certain remedies and try to obtain at
least conditional clearance. However, due to the strict statutory deadline to issue a cease-and-desist order, the JFTC may
not have time to analyse whether the proposed remedies are acceptable, and may flatly block the merger, rather than
conditionally approve it.
In order to avoid such a dilemma, parties may have to withhold some answers from the JFTC in order to avoid the 90-day
period commencing. Particularly in cases of mergers subject to multi-jurisdictional notifications, it could be extremely
difficult to coordinate the schedule of reviews between different competition authorities.
Under the Revised Merger Guidelines, the JFTC will shorten the 30-day waiting period more flexibly than before. Before
the revision of the Merger Guidelines, the waiting period was shortened only if: (i) it was clear that there would be no
substantial restraint of competition; and (ii) there are reasonable grounds to shorten the waiting period, for example, the
target is financially distressed and needs immediate financial assistance and where, in cases of TOB, the payments of the
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