JAPAN Law and Practice Contributed by: Tsuyoshi Ikeda, Aya Yasui, Hiroko Fukushima and Kohei Kohara, Ikeda & Someya
bination that falls below the thresholds of the safe harbour. 4.2 Markets Affected by a Transaction The JFTC defines relevant markets that are affected by a business combination from the perspective of the scope of the product and the geography, considering the substitutability for customers and, if necessary, suppliers. The JFTC uses the factors described in the Merger Guidelines to define a “relevant market”. The Merger Guidelines clearly state that the geo - graphic market may extend beyond the borders of Japan, depending on the international nature of the relevant business. In fact, in some cases, the JFTC has defined the global market as the relevant market. Another feature of the Merger Guidelines is that they establish safe harbours for three categories of business combination: horizontal, vertical and conglomerate (each category is subject to a spe - cific safe harbour). The JFTC believes that there is usually little or no likelihood of substantially restricting competition, and therefore no need to conduct a detailed examination of the business combination when it meets the requirements of a safe harbour. In such a case, the JFTC does not generally conduct the examination described in 4.1 Substantive Test . The safe harbour standards for horizontal busi - ness combinations are as follows: • the HHI after the business combination is not more than 1,500; • the HHI after the business combination is more than 1,500 but not more than 2,500, while the increment of HHI is not more than 250; and
• the HHI after the business combination is more than 2,500, while the increment of HHI is not more than 150. If a horizontal business combination exceeds the safe harbour standards, the JFTC will examine whether it would substantially restrict com - petition in a relevant market through the test described in 4.1 Substantive Test . In addition, the Merger Guidelines clarify that, in light of past cases, if the HHI after the busi - ness combination is 2,500 or less and the market share of the business group after the business combination is 35% or less, the risk of substan - tially restricting competition is generally consid - ered to be small. The safe harbour standards for vertical or con - glomerate business combinations are as follows: • the market share of the parties after the combination is not more than 10% in all the relevant markets in which the parties are active; and • the HHI is not more than 2,500, and the market share of the parties after the busi - ness 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 substan - tially restrain competition. In addition, if the HHI after the business combi - nation is 2,500 or less, and the market share of the parties’ group after the business combina -
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