Merger Controls First Edition - J Sagar Associates

Anderson, Mōri & Tomotsune Japan
For example, since there is no single provision about reverse triangular mergers in Japan, whether such a structure is required
to be filed in Japan must be analysed and dissected in accordance with the five categories above. However, such an approach
could be too cumbersome for foreign companies and trying to make merger structures in foreign jurisdictions fit into Japanese
ones may not properly reflect the economic reality underlying the mergers. It is therefore proposed that the Antimonopoly
Act should abandon such a structure-based approach and adopt the EU-style which is a more simple and flexible approach
that focuses on the transfer of control.
Second of all, the notification forms need to be substantially revised and updated. The current notification forms are
slightly different from one structure to another but require similar types of information. They include, among others: (i)
descriptions of the parties (such as their name, location of headquarters and main business); (ii) descriptions of parties’
group companies (such as their domestic turnover and amount of gross assets); and (iii) market shares of the parties and
competitors in relevant markets. However, the notification forms do not require detailed information on competition in a
market at all.
Theoretically speaking, the main purpose of a Phase I review should be for the JFTC to decide whether it is necessary to
proceed to more detailed review (i.e., Phase II review). However, the current notification forms are so simple and
formalistic that it seems almost unthinkable that the JFTC could decide whether a Phase II review is necessary solely
based the notification forms. For example, the notifications do not have to include: (i) the reason why the relevant markets
are so defined; (ii) the structure of the relevant market (such as distribution channels and supply chains); and (iii) how
easy or hard it is to enter into the market (the cost of entry). On the other hand, the current forms require relatively detailed
(and seemingly irrelevant) information on affiliated companies. For example, the notification forms require the name,
main business and main business location of companies more than 20% of whose shares are owned by the parties or parties’
group companies, as long as those companies have a turnover in Japan of more than 3 billion yen (before the revision of
the notification forms on July 1, 2011, things were even worse; the parties were required to report companies (with more
than 3 billion yen domestic turnover) more than 10% of whose shares were owned by the parties or parties’ group
companies!). However, information about companies in which the parties hold such a minority shareholding does not
seem to be relevant for antitrust analysis. Thus, when parties have minority shareholding in many companies, merger
filing in Japan could be unnecessarily cumbersome and time-consuming.
Third of all, under the Antimonopoly Act, who is required to notify the JFTC differs from one structure to another. That
is, in cases of share acquisitions, only the acquirer of shares should notify (neither the target nor the seller of the shares
need to); in cases of statutory mergers, both parties should notify; in cases of company splits, under the law, the company
acquiring the part of business of the other company should notify but the JFTC’s practice, interestingly, requires both
parties to report; in cases of statutory joint share transfers, again, both parties shall notify; and in cases of business transfers,
only the transferee should notify (not the transferor). However, such distinctions between legal structures do not seem to
have strong theoretical basis.
Such distinctions may be problematic, not only theoretically but also practically, because under the Antimonopoly Act,
the JFTC has authority to request additional information in Phase I only from the notifying party. Therefore, for example,
in cases of business transfers (in which only a transferee is a notifying party), the JFTC cannot request information from
the transferor of the business. As explained earlier, before the revision of the merger filing procedure on July 1, 2011,
almost all merger reviews were made through a voluntary prior consultation, and since the procedure was of a voluntary
nature, the parties voluntarily submitted information requested by the JFTC. However, after the prior consultation was
abolished on July 1, 2011, all mergers are reviewed under the statutory review procedure. Therefore, the JFTC being
unable to request information from non-notifying parties may cause serious problems. It should be proposed that all parties
to any mergers, regardless of their legal structures, should notify the JFTC and the JFTC should be able to request additional
information from all of them.
Fourth of all, it is not very clear when and how the parties can or should agree with the JFTC on the issue of remedies.
The language of the Antimonopoly Act does not appear to limit the timing for the parties to propose remedies. In reality,
the current notification forms require that the notifying parties propose specific contents of remedies to the JFTC in the
notification forms. No company, however, would dare to propose remedies at the time of the notification!
Before the revision on July 1, 2011, this practice was workable because the parties had generally agreed with the JFTC on
remedies in a prior consultation (that is, well before the notification). As prior consultation was abolished, making the
parties propose remedies in the notification forms does not seem workable.
The New Procedures Policies state that the parties can offer remedies to the JFTC “anytime during the reviewing period”, but
this is immediately followed by the proviso: “provided, however, that the contents of [the remedies] may not be sufficiently
reflected in the contents, etc. of the prior notice [of a cease-and-desist order] depending on the time of its submission”. Therefore,
the parties are likely to be effectively forced to propose remedies in quite early stages of Phase II in order to give the JFTC
sufficient time to consider the proposal, but on the other hand, under the Antimonopoly Act, the period of Phase II is strictly
limited to be within 90 days from the date when the submission of all necessary information is completed, and the parties and
the JFTC cannot agree on the extension of the 90 days at all. Such an inflexible schedule may not work very well, and it should
be proposed that the parties and the JFTC agree on the extension of the review period.
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