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.