JAPAN Law and Practice Contributed by: Tsuyoshi Ikeda, Aya Yasui, Takuya Ohata and Kohei Kohara, Ikeda & Someya
4.4 Competition Concerns The JFTC examines all kinds of competition concerns that may impose a substantial restriction on com - petition in the relevant market, including unilateral effects, co-ordinated effects, conglomerate or port - folio effects, vertical concerns and the elimination of potential competition. Traditionally, unilateral and co-ordinated conduct pos - sibly arising from horizontal business combinations has represented a large portion of the JFTC’s concern, since a horizontal business combination would basi - cally reduce the number of competitors in the relevant market and thus potentially have a direct negative impact on competition. However, this does not mean that the JFTC has com - petition concerns only in horizontal business com - binations. Actually, the JFTC has also conducted numerous investigations of other competition concern matters, and there are some cases in which it has con - ditionally approved vertical business combinations as long as the parties undertook remedies. Furthermore, in some cases, the JFTC has assessed conglomerate or portfolio effects and other kinds of anti-competitive effects. 4.5 Economic Efficiencies In examining competition concerns, the JFTC takes economic efficiencies into consideration. However, as the Merger Guidelines state, the JFTC considers that the improvement in efficiency must be an inherent outcome of the business combination and must be passed on to consumers through lower product pric - es, improved quality and so on. Therefore, the JFTC tends to consider improvement in efficiency alone as being unlikely to justify the transaction. 4.6 Non-Competition Issues In principle, the JFTC considers only competition issues in the process of examination. Although it may consider non-competition issues in some cases, such as industrial policy and other issues of public interest, the JFTC is not bound by these kinds of concerns. When a foreign investor (non-resident individual, cor - poration established under foreign laws and regula - tions, etc) makes direct inward investments (eg, the
• the market share of the parties after the combina - tion is not more than 10% in all the relevant mar - kets in which the parties are active; and • the HHI is not more than 2,500, and the market share of the parties after the business combination is not more than 25% in all the relevant markets in which the parties are active. As with the horizontal business combination described in the foregoing, even if a vertical or conglomerate business combination does not fall within the safe harbour standards described previously, it does not immediately mean that said business combination would likely substantially restrain competition. In addition, if the HHI after the business combination is 2,500 or less, and the market share of the parties’ group after the business combination is 35% or less, the possibility that a business combination may sub - stantially restrain competition is generally considered to be small. It should be noted that the latest version of the Merger Guidelines states that, even if the business combina - tion satisfies the safe harbour standards, if one of the parties has a potentially strong competitive power due to its assets (including important data and intellectual property rights) or for any other reason, the JFTC will conduct a further review of the matter. 4.3 Reliance on Case Law Regarding merger review, the JFTC basically defines the relevant market in accordance with its previous review cases, some of which are not disclosed to the public. However, if there are significant changes to the premise of the definition of the relevant market (such as innovation or the development of an adja - cent product market), the JFTC may take them into consideration. Essentially, the JFTC does not depend on the deci - sions of competition authorities in other jurisdictions, such as the EU Commission, US Federal Trade Com - mission and US Department of Justice. Nevertheless, if the JFTC has no previous case in the field of the transaction, it may use these authorities’ decisions as references to define the relevant market.
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