JAPAN Law and Practice Contributed by: Tsuyoshi Ikeda, Aya Yasui, Hiroko Fukushima and Kohei Kohara, Ikeda & Someya
2.11 Power of Authorities to Investigate a Transaction The JFTC can investigate any transaction, even when it does not meet the notification thresh - olds. The authority is able to require the targets of the investigation to explain why the transac - tion in question would not substantially restrain competition in a relevant market and can request further detailed information if competitors or customers of the parties raise concerns about the transaction. In fact, the JFTC is becoming more proactive in reviewing business combina - tions that do not meet the thresholds. There is no statute of limitations on the JFTC’s authority to investigate. 2.12 Requirement for Clearance Before Implementation The completion of transactions that are sub - ject to a notification requirement must be sus - pended for 30 calendar days of the statutory waiting period (corresponding to the end of the Phase I review period) from the date of accept - ance of said notification. Nevertheless, the JFTC can shorten the waiting period in response to a paper-based request from the notifying party, if it is deemed appropriate to do so. The related parties can theoretically implement transactions after the waiting period ends, even if the succeeding review process (the Phase II review period) has been commenced by the JFTC. In practice, however, they tend not to complete transactions before the Phase II review is completed. If a transaction that has a possibil - ity of restraining competition substantially is to be closed during the Phase II review period, the JFTC can ask the Tokyo District Court to issue an urgent injunction order to restrain the related parties from completing the transaction.
2.13 Penalties for the Implementation of a Transaction Before Clearance If the related parties fail to meet the waiting peri - od requirement noted in 2.12 Requirement for Clearance Before Implementation , they risk a criminal fine of up to JPY2 million, which can be imposed both on the notifying company(ies) and on any representative(s) or employee(s) respon - sible for the failure. Although the JFTC has never imposed such penalties in practice, it did issue a warning in the case of Canon Inc’s acquisition of Toshiba Medi - cal Systems Corporation (TMSC) in 2016 due to possible inconsistency with respect to the notifi - cation system. To be more specific, before filing the notification to the JFTC, Canon acquired a share warrant of TMSC, paying an amount equal to the value of the underlying common shares to Toshiba Corporation, the parent company of TMSC. In addition, a third party other than Can - on and Toshiba was designated as the owner of voting shares of TMSC until Canon exercised the share warrant. The JFTC cautioned that a company that plans to acquire shares of a target company in this way is required to file a notifica - tion prior to implementation. 2.14 Exceptions to Suspensive Effect There is no exception to the suspensive effect; it is not permissible to seek a waiver or derogate from the regulation. Meanwhile, because a notifi - cation can be filed before a definitive agreement is executed, the related company will be able to consummate a tender offer bid, for instance by filing a notification 30 days prior to the consum - mation of the bidding process. Furthermore, the JFTC can shorten the period of suspensive effect in response to a paper-based request from the notifying party when it is appro - priate to do so.
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