Global Competition Law is primarly a practitioner's guide presenting the most salient aspects of the major competition laws country by country, giving an overview of their structure and most charasteristic elements.
Global Competition Law also provides insight into possible future developments in the field.

Global Competition Law

The Japanese Antimonopoly Act prohibits amalgamations (mergers and consolidations, Article 15), corporate divisions (Article 15-2) and joint stock transfer involving a business combination (Article 15-3), stock acquisitions (Article 10), acquisitions of businesses (Article 16) and interlocking directorates (Article 13) if the effect may be such as to substantially restrain competition in a particu …

Concept of concentration

All concentrations required notification under the Antimonopoly Act (AMA) as originally enacted. At that time, the JFTC's Business Combination Guidelines provided that where market share was greater than 25 percent as a result of a merger, then the merger would be carefully scrutinized. However, since 1 January 1999, only mergers exceeding certain thresholds are required to be notified. The Guidelines to Application of the AMA concern the review of business combination (31 May 2004, lastly revised on 17 December 2019), together with the Rules on Applications for Approval, Reporting, Notification, etc. pursuant to Articles 9 to 16 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (1 September 1953, lastly revised in 2018) currently contain the standards for determining the anticompetitive effect of a merger, rather than being limited to determining which concentrations would be selected for careful examination as did their predecessor. In addition, the procedural rules relating to merger control were clarified in the Policies Concerning Procedures of Review of Business Combination (14 June 2011, lastly revised on 17 December 2019). The 2019 amendments to the Guidelines and Policies are mainly designed to address the new competition issues arising from mergers in digital markets.

Context

The Japanese Antimonopoly Act prohibits amalgamations (mergers and consolidations, Article 15), corporate divisions (Article 15-2) and joint stock transfer involving a business combination (Article 15-3), stock acquisitions (Article 10), acquisitions of businesses (Article 16) and interlocking directorates (Article 13) if the effect may be such as to substantially restrain competition in a particular field or if they result from unfair trade practices.

A concentration is said to occur in the case of corporate division, i.e., where one company acts jointly with another to transfer the business of the companies to a new company (joint venture). Division by acquisition, where one company transfers a business to another existing company, likewise constitutes a concentration. On the other hand, an internal division within one company is regarded as merely a change in organizational form and does not constitute a concentration.

With regard to stock acquisitions, if the acquisition results in a combination between the two parties then it is treated as a merger. If the percentage of stock held is more than fifty percent - or more than twenty five percent if the stockholder is the sole leading stockholder - the JFTC will almost certainly find in favor of a concentration. Where the percentage of stock held is less than ten percent or if the stockholder is not among the top three stockholders, the transaction will not constitute a concentration. If the percentage of stock acquired is between these extremes, the JFTC will consider the question of whether a concentration has occurred on a case by case basis, taking into account factors such as whether the ownership of stock is dispersed, whether there is an interlocking directorate and the nature of business relationship between the entities.

Other transactions that are treated as concentrations include the acquisition of all or an important part of the business or fixed operating assets of another company, taking over a lease or important part of the business of another company, taking over the management of another company or entering into a contract that provides for a joint operating profit and loss account with another company.

Acquisitions between a parent company and its subsidiary and mergers between sister companies (where a parent company owns more than 50 percent of a subsidiary's stock), are not subject to the notification requirement.

The Antimonopoly Act sets specific thresholds for each type of concentration. However, roughly speaking, a transaction must be notified where the sum of the total sales in Japan of the corporate group to which anyone of the parties belong exceeds 20 billion yen (EUR 143 million) and the sum of the total sales in Japan of the corporate group to which the other party belongs exceeds 5 billion yen (EUR 35 million).

In order to catch mergers in digital markets, the 2019 amendments to the Policies Concerning Procedures of Review of Business Combination introduced a new size of transaction threshold. The JFTC will now be able to review a merger which does not reach the turnover thresholds where the transaction value exceeds 40 billion yen (EUR 276 million) and the merger is likely to affect the national market.

Thresholds

If the effect of a concentration “may be substantially to restrain competition” in the relevant market, it is prohibited. The Tokyo High Court has defined substantially restraining competition as bringing about “a situation that appears, or at least could appear, in which competition itself is reduced and a certain business entity or a group of business entities is able intentionally and somewhat freely to control the market by influencing prices, quality, quantity and other terms” (4 Kominshu No 14, 497, Tokyo High Court, Sept. 19, 1951). In other words, the prevailing view is that forming and strengthening market control power constitutes substantially restricting competition.

The merger control standards consider the effect of a concentration on “any particular field of trade” (Article 15(1)(i)). A particular field of trade is said to be composed of the same or similar (i.e., substitutable) products or services. Depending on the particular characteristics of the product or service, the relevant geographic scope may be a limited region or extend to the entire nation.

The JFTC issued Guidelines concerning the review of business combination in 2004 explaining the criteria for evaluating whether a concentration is prohibited. The Guidelines set a safe harbor concerning horizontal concentrations. A transaction will not be deemed to substantially restrain competition where the Herfindahl-Herschmann Index (HHI) after the transaction i) does not exceed 1,500, or ii) where it exceeds 1,500, does not reach 2,500 while the increment of HHI is not more than 250, or iii) exceeds 2,500 while the increment of HHI is not more than 150. Furthermore, in light of past cases, the JFTC is of the opinion that if the HHI is not more than 2,500 and the market share of the new entity is not more than 35%, the probability that the transaction will substantially restrain competition is small.

Transactions going beyond the scope of the safe harbor will be assessed according to their possible unilateral and coordinated effects. The Guidelines provide a detailed list of factors to be taken into consideration for this purpose.

The Guidelines also set a safe harbor for conglomerate and vertical transactions. The result of such transactions may not be a substantial restraint of competition where: i) the market share of the new entity is not more than 10% in all of the particular fields of trade where the company group is involved; or ii) the HHI is not more than 2,500 and the market share of the new entity is not more than 25% in all of the particular fields of trade where the company group is involved. Also, in the light of past cases, the JFTC considers that if the HHI is not more than 2,500 and the market share of the new entity is not more than 35%, the probability that the transaction may substantially restrain competition is small.

As the language of Articles 15 through 16 suggests, it is not necessary for a substantial restraint of trade to inevitably result in order for the concentration to be prohibited. The standard is whether the effect “may be” to restrain trade.

Global Competition Law

1058. Concept of concentration

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Les notions juridiques connexes

1058. Concept of concentration

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise