JAPAN Law and Practice Contributed by: Tsuyoshi Ikeda, Aya Yasui, Takuya Ohata and Kohei Kohara, Ikeda & Someya
acquisition of shares or voting rights of a domestic listed company as a result of which the investment ratio or voting right ratio is 1% or more) or specified acquisitions (ie, the acquisition by a foreign investor of shares or equity of a domestic unlisted company from another foreign investor), and the business oper - ated by the investee falls within a designated industry involving national security, etc, in principle, prior noti - fication must be submitted to the Minister of Finance, etc, via the Bank of Japan within the six months before the intended transaction or activity. These rules are set forth in FEFTA and are separate from the merger control rules. 4.7 Special Consideration for Joint Ventures Generally speaking, there is no special considera - tion for joint ventures under the AMA and the Merger Guidelines. That said, the Merger Guidelines state that when joint venture partners establish a joint venture to integrate only a part of their business, the JFTC will analyse the co-ordinated effects on the remaining businesses of the joint venture partners (the “spillover effect”). With respect to a notification requirement, if the trans - action involves multiple kinds of business combina - tions, each stage of the business combination may constitute a separate business combination subject to a pre-notification (for instance, in triangular merger cases, parties will likely have to file separate notifica - tions for share acquisition and for merger). Likewise, if a joint venture transaction comprises multiple busi - ness combinations subject to pre-notifications, par - ties have to file notifications separately on the basis of each business combination. 5. Decision: Prohibitions and Remedies 5.1 Authorities’ Ability to Prohibit or Interfere With Transactions Under the AMA, the JFTC can file a motion for an urgent injunction order (ie, an injunction against the consummation of the transaction prior to the com - pletion of examination) and issue a cease-and-desist order (prohibition against the consummation of the transaction after completion of the examination).
Regarding an urgent injunction order, the JFTC must show that the business combination would likely sub - stantially restrain competition, and that the consum - mation of a business combination would result in irre - versible damage to competition. The JFTC must file a petition for an urgent injunction order with the Tokyo District Court and prove the existence of a suspected violation of the AMA and the urgent need for such an order. The hearing will be held privately and expedi - tiously; if the court approves the JFTC’s request, it will issue the order. A cease-and-desist order is an administrative action to prohibit a business combination transaction or to order a party to take measures to eliminate the pos - sibility that the transaction would substantially restrict competition after the JFTC completes its review. The order includes business divestitures, stock trans - fers and business transfers to eliminate substantial restraints on competition. The JFTC can issue a cease-and-desist order on its own (without any prior review or approval by a court), either before or after the consummation of a planned business combina - tion. The recipient of a cease-and-desist order issued by the JFTC can file an action seeking cancellation of said order with the Tokyo District Court within six months of the order. In fact, the JFTC has not issued a cease-and-desist order for more than 40 years. In practice, if the JFTC informally indicates its competition concern to par - ties, the parties often propose a remedy, seeking the JFTC’s clearance or voluntarily withdrawing their notifications. Therefore, the JFTC has not faced the need to issue a cease-and-desist order on business combinations. 5.2 Parties’ Ability to Negotiate Remedies The parties in question may discuss remedies with the JFTC at any stage, including during the pre-notifica - tion stage, the Phase I review process and the Phase II review process. If the parties propose a remedy, the JFTC will review the business combination on the premise that the proposed remedy will be imple - mented.
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