The Japanese Fair Trade Commission (the JFTC) has adopted new rules that should streamline Japan’s review process for both domestic and global transactions. The new rules will end the JFTC’s practice of holding “preconsultations” with companies pursuing mergers or acquisitions that would impact competition in Japan. The JFTC adopted the new rules on June 14, 2011, and they will become effective on July 1, 2011.
Under the prior rules and practice, M&A parties were typically required to consult with the JFTC prior to submitting any official notification of their transaction—in effect, obtaining informal approval of the transaction prior to any filing. However, this preconsultation process was unpredictable and could often take considerable time, with the timing of JFTC approval not known until after the preconsultation was completed. This was particularly problematic for deals done outside of Japan, where filings in Japan had to be coordinated with other global filings.
Under the JFTC’s new rules, parties will first notify the JFTC of the terms of their transaction through an official submission that does not require any consultation with the JFTC. The JFTC will then have 30 days to review the submission and decide if a more in-depth review is necessary. After 30 days, if no further request is made by the JFTC, consent will be deemed to have been granted. Consultations with the JFTC will only be required if the 30-day period is extended for a more in-depth review.
These new rules will further align the policies of the JFTC with merger-control authorities in both the United States and the European Union. In addition, it is hoped that this will streamline the Japanese approval process for the great majority of transactions that require notification.
However, there are concerns that this new policy will prolong the review period for transactions that may materially impact competition in Japan. Under the prior procedures, parties may be able to shape the JFTC’s impression of a transaction during the preconsultation period, thereby reducing the amount of time the JFTC takes to make its decision. Under the new procedures, however, the parties will not be able to have any consultations with the JFTC until after the initial 30-day period expires.