Corporate Counsel - March 2010 (Sample Issue)

RECENT DEVELOPMENT IN
JAPANESE ANTITRUST PRACTICE

TACKLING PROBLEMS ASSOCIATED WITH GLOBALIZATION

AS THE first antitrust regulator established in an Asian country, the Japan Fair Trade Commission (“JFTC”) is one of the most active antitrust regulators in Asia. Companies that have business relating to Japan must be aware of potential antitrust risk in Japan.

Japanese antitrust practice has recently drastically changed its focus to the international arena. Many international acquisition transactions will now trigger a filing requirement in Japan as a result of an important amendment to the Japanese Anti-Monopoly Act (“AMA”). Multinational companies should also be aware of newly introduced surcharges for exclusionary monopolies, as well as an increase in international antitrust cases that are being investigated by the JFTC. This article discusses recent developments in Japanese antitrust practice, especially focusing on international issues.

vant market. In order to avoid adversely affecting the schedule for an acquisition because of a detailed examination, especially when there is a competitive concern about the transaction, it is prudent to consider prior consultation with the JFTC, which may result in preliminary approval of the transaction.

Tsuyoshi Ikeda at Mori Hamada & Matsumoto in Tokyo

RECENT AMENDMENT OF JAPANESE
ANTIMONOPOLY ACT
New merger filing requirement

On June 3, 2009, the Japanese Diet passed an amendment to the AMA. This amendment is the first revision since the last fundamental amendment in 2005 and aims to harmonize the law with the globalization of business activities.

One of the most important changes made by this amendment is the substantial change to the JFTC filing requirements in connection with mergers and acquisitions. It should be noted that the filing requirements discussed here only relate to whether a filing with the JFTC is required, and do not relate to whether a contemplated acquisition transaction would cause substantive competition concerns. The AMA prohibits the implementation of an acquisition transaction that would substantially restrict competition in the relevant market, even if the transaction does not trigger a filing requirement.

Domestic turnover

The introduction of a new definition of “domestic turnover” for purposes of the filing requirement thresholds will make a significant difference in merger filing practice, especially for non-Japanese entities. Prior to the amendment, the threshold for Japanese companies was the amount of gross assets in Japan, and the threshold for non-Japanese companies was the amount of Japanese domestic turnover.

The amended law will apply a single standard -- a new concept of “domestic turnover” -- to both Japanese and non-Japanese companies. Prior to the amendment, “domestic turnover” as applied to non-Japanese companies only comprised sales from offices (of a non-Japanese company or of a local direct subsidiary of the company) located in Japan.

It will now be the case that “domestic turnover” under the amended law will include the turnover of all entities within the corporate group (as discussed below) regardless of the location of the offices selling goods or services to consumers located in Japan. This change of the meaning of “domestic turnover” will capture acquisitions of non-Japanese companies for purposes of the filing requirements on the same basis as Japanese companies.

General overview of filing system For acquisitions that meet the thresholds provided under the AMA, a filing must be made with the JFTC before implementation of the acquisition, and the acquisition may not be completed for at least 30 days after the filing. In response to the filing, the JFTC may decide to conduct a detailed examination if it finds that the planned acquisition restrains, or would have a probability of restraining, competition in the rele-

Introduction of “corporate group” principle Under the AMA, different sales thresholds apply to different types of acquisitions. For certain types of acquisitions, such as mergers and stock acquisitions, the amended AMA provides that the sales threshold is determined based on the “corporate group” rather than focusing only on the company that is the party to the acquisition. For this purpose, a “corporate group” comprises the ultimate parent company (i.e. the top-tier parent company of the party to the acquisition that is not owned as a subsidiary of any other company) and all subsidiaries that are directly or indirectly owned by the ultimate parent company. Given the fact that many multi-national companies have a large “corporate group”, there will likely be many more acquisitions that will trigger a filing requirement under the amended AMA.