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Legislation, triggers and thresholds

Legislation and authority

What legislation applies to the control of mergers?

The Anti-monopoly Law governs business combinations.

The main Japan Fair Trade Commission (JFTC) guidelines for business combinations such as mergers and acquisitions of business or stock (the acquisition of stock of less than 10% is not usually subject to JFTC review) are the Merger Guidelines, introduced in May 31 2004 and amended as necessary to reflect developments in the area.

Business combinations between financial institutions (eg, banks and insurers) are subject to the regulation under the applicable business laws (eg, the Banking Law and the Insurance Business Affairs Law), as well as the Anti-monopoly Law. Moreover, the acquisition of shares in certain companies belonging to a certain industries, such as broadcasting, airlines and Telephone and Telegraph companies, by foreign entities is restricted under the applicable business laws.

What is the relevant authority?

The following business combinations, which may substantially restrain competition in a particular field of trade, are prohibited under the Anti-monopoly Law:

  • the acquisition of stock (ie, voting rights) (the acquisition of stock of less than 10% is not usually subject to Japan Fair Trade Commission (JFTC) review) (Article 10);
  • the interlocking directorates (Article 13);
  • a merger (amalgamation) (Article 15);
  • the acquisition of the entire or an important part of a business or assets for business (Article 16);
  • a company split involving a business combination (Article 15(2)); or
  • a joint stock transfer involving a business combination (Article 15(3)).
  • The JFTC conducts substantive analysis with respect to these business combinations.

If the filing requirements set out under the Anti-monopoly Law are met, a pre-notification will be submitted to the JFTC for its review. Interlocking directorates need not file a pre-notification or post-notification.

The filing requirements (ie, thresholds) set out in the Anti-monopoly Law differ depending on the type of transaction involved; thus, the parties to the business combination must analyse and determine each step of the transaction to identify what type of business combination listed above could be involved in the planned transaction and whether the filing requirements applicable to such business combination may be satisfied. The filing requirements for transactions between domestic companies and those between foreign companies are the same under the Anti-monopoly Law.

Transactions caught and thresholds

Under what circumstances is a transaction caught by the legislation?

If a transaction is categorised into any type of business combination and satisfies filing requirements, it must be notified to the Japan Fair Trade Commission (JFTC) before it is closed.

Even if a transaction categorised into any type of business combination does not satisfy the relevant filing requirements and thus filing is not required, it is possible that the transaction (business combination) may still be prohibited if it substantially restrains competition in the relevant market in Japan.

Do thresholds apply to determine when a transaction is caught by the legislation?

There are no de minimis rules (specific thresholds) for the application of the Anti-monopoly Law. However, the Merger Guidelines provide guidance to identify what type of transactions can be business combinations which will be regulated under the Anti-monopoly Law. For example, the Merger Guidelines provide that a business with a turnover of less than Y100 million and a turnover which represents 5% or less of the total turnover of the transferring company is not usually deemed as “an important business” (only “the acquisition of an important part of a business” is subject to the Anti-monopoly Law).

Informed guidance

Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?

Jurisdictional issues There is no informal guidance with regard to the determination of jurisdictional issues. However, the Japan Fair Trade Commission (JFTC) usually responds to questions whether the contemplated transaction will be required to submit a pre-notification.

Substantial issues A company that plans a business combination may consult with the JFTC in advance before filing a pre-notification. This prior consultation is not mandatory. During that process, the participating companies may consult not only regarding the description of a notification form, but also regarding the substantial issues (eg, the relevant product or geographic markets) and the factors which support that the transaction will not raise any anti-competitive concerns. Thus, the participating companies may provide, and the JFTC may request, information necessary for the JFTC’s formal review, including materials for the substantive analysis.

However, in case where filing is required, the JFTC will not give participating companies its formal views or opinions on the substantive issues during the course of this process. Only through the JFTC's formal review, which starts after the JFTC has formally accepted the filing, will the JFTC inform the companies of its opinion on the substantive issues.

There is no restriction on the timing of filing the pre-notification formally. That means the companies may decide with their discretion when they would like to formally submit the pre-notification at any time during the course of such informal prior consultation.

Informal prior consultation with the JFTC is also available for business combination for which filing is not required. In such case the JFTC provides the party companies with its formal opinion regarding substantive issues without filing.

Please see "Policies Concerning Procedures of Review of Business Combination" (JFTC guidelines, June 14 2011) for more details.


Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?

Foreign-to-foreign mergers are also subject to the Anti-monopoly Law if they are likely to affect competition on the relevant market in Japan.

The same filing requirements (ie, thresholds) are applied to foreign-to-foreign mergers. Although the special local impact test is not applied to foreign-to-foreign mergers, ‘domestic sales’ (ie, sales within and into Japan) are a key factor of the filing requirements.

Joint ventures

What types of joint venture are caught by the legislation?

A joint venture project involving the formation or establishment of a joint venture company is subject to Japan Fair Trade Commission (JFTC) review under the Anti-monopoly Law. The JFTC will review the formation or establishment of a company jointly owned by the parent companies under the Merger Guidelines, taking account of any ancillary agreements. The filing of notification may be required depending on the type of transaction involved and the relevant filing thresholds. Under the Merger Guidelines, there is no distinguish between full-function and non-full function transactions.

A joint venture that does not involve such business combination (eg, an alliance or a joint venture based solely on an agreement) among competitors may be reviewed under Article 3 of the Anti-monopoly Law as an unreasonable restraint of trade. However, filing is not required under the Anti-monopoly Law.

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