Choose the type of information you seek
- Merger Control Regime
- Merger Screening
- Merger Filing
1.1 Membership of Supranational Organization
1.1.1 Is the jurisdiction a member of/party to a supranational jurisdiction?
1.1.2 Is the jurisdiction itself a supranational jurisdiction?
1.1.3 If the answer to Section 1.1.1 and/or 1.1.2 above is in the affirmative, what are the implications hereof?
2. Nature of merger control regime
2.1 Mandatory or voluntary
2.1.1 Is filing mandatory or voluntary?
2.2 Suspensory effect
2.2.1 Must completion of the transaction await clearance by the relevant authorities?
The parties cannot close the transaction until the expiration of the 30 days waiting period from the date of acceptance of the notification by the Japan Fair Trade Commission. There is no suspension obligation during the extended review period (Phase II).
1. What type of transactions are caught by the merger control regime?
1.1.1 Type of transactions that are caught by the merger control rules?
Different thresholds apply depending on the kind of transaction in question. However, the categorization is based on structures used in the Japanese Companies Act and it may not always prima facie be clear what category a transaction falls into.
The competition authority generally takes a formalistic approach and looks at the contractual format to break down the structure of the transaction. For example, a transaction that could be understood as a global transfer of business could be interpreted as a combination of multiple share acquisitions.
The following types of transactions are caught by the merger control rules:
- Share acquisitions if as a consequence of the acquisition, the acquirer’s holding of voting rights in the target exceeds either 20% or 50%;
- asset acquisitions, i.e. transfer of all or a substantial part of the business of another company, transfer of all or a substantial part of the fixed assets of another company, leasing of all or significant part of the businesses of another company, delegation of management regarding all or significant part of the businesses of another company, and contractual arrangements to share the profits and losses of another company;
- statutory mergers and demergers, and
- the interlocking of directorships.
Whereas the law on merger control applies to the interlocking of directorships, they are not subject to filing.
1.2 Joint ventures
1.2.1 What types of joint ventures are caught by the merger control rules?
There is no concept of joint control and the general jurisdictional thresholds apply to joint ventures as well.
1.3 Definition of "control"
1.3.1 How are the concepts of "control" and "change of control" defined?
The transaction is subject to review by the Fair Trade Commission if a joint relationship between the parties is formed, maintained, or strengthened by the transaction.
1.4 Minority shareholdings
1.4.1 Are minority and other interests less than control caught by the merger control rules?
Yes. In the following cases, a joint relationship is formed, maintained or strengthened by partial share acquisitions:
- if the holding rate of the voting rights (the rate of shares possessed by the acquiring company group to the total voting rights of the acquired company, hereinafter the same shall apply) exceeds 50%;
- if the holding rate of the voting rights exceeds 20% and the acquiring company group is the sole leading holder;
- if the holding rate of the voting rights exceeds 10% and the acquiring company group is ranked among the top 3 holders (in this case, the joint relationship is judged to be formed, maintained, or strengthened under the comprehensive consideration with other factors).
2. Establishing jurisdiction for notification of mergers
2.3 General thresholds
Merger filing is needed if:
- the turnover of the acquirer exceeded JPY 20,000,000,000 in Japan in the last financial year, and the turnover of the target exceeded JPY 5,000,000,000 in Japan in the last financial year.
In asset acquisitions, merger filing is needed if:
- the turnover of the acquirer exceeded JPY 20,000,000,000 in Japan in the last financial year, and the assets being acquired generated a turnover exceeding JPY 3,000,000,000 in Japan in the last financial year.
Statutory merger or demerger
Merger filing is needed if:
- the turnover of one of the undertakings concerned exceeded JPY 20,000,000,000 in Japan in the last financial year, and the turnover of at least one of the other undertakings concerned exceeded JPY 5,000,000,000 in Japan in the last financial year.
There are more detailed rules for statutory demergers.
Joint share transfer
When two or more companies create a new common holding company, merger filing is needed if:
- the turnover of one of the undertakings concerned exceeded JYP 20,000,000,000 in Japan in the last financial year, and the turnover of at least one of the other undertakings concerned exceeded 5,000,000,000 in Japan in the last financial year.
The Fair Trade Commission may, if necessary for the performance of its duties, order public offices, juridical persons formed by special laws and regulations, entrepreneurs or organizations of entrepreneurs, or their personnel to appear before the commission or require them to submit necessary reports, information or materials (Article 40 of the Antimonopoly Act).
2.4 Other national thresholds for ex ante merger control (e.g. sector-specific rules)
Banks are prohibited from acquiring more than 5% of the voting rights of another Japanese business.
Insurance companies are prohibited from acquiring more than 10% of the voting rights of another Japanese business.
Exceptions apply to both industries and the limits are subject to exemption by the competition authority.
2.4.2 Are any such schemes mandatory or voluntary?
2.5 Foreign-to-foreign mergers
2.5.1 Do any exemptions, special thresholds etc. apply to foreign-to-foreign mergers, i.e. where none of the undertakings concerned is domiciled in the jurisdiction?
Foreign-to-foreign transactions are caught by the Japanese merger rules.
In case of M&A by foreign companies, notification thresholds are defined by domestic sales in Japan.
3. Calculation and allocation of turnover, asset value, transaction value etc.
3.1 Relevant turnover
3.1.1 How is turnover defined (e.g. is income from other sources than "ordinary activities to be included, and how are rebates, taxes, internal turnover etc. treated)?
Turnover is defined to include both direct and indirect sales in and into Japan made by the company’s group in the last financial year, exclusive of intra-group sales.
3.1.2 Identification and link to any official rules, guidance etc. on how to calculate turnover?
For further guidance, please see the website of the Japanese Fair Trade Commission:
3.3 Relevant undertakings for the calculation of turnover
3.3.1 The undertakings whose turnover is taken into account?
Turnover is calculated on consolidated group basis; specifically, for the acquirer that means the acquirer including group companies, and for the target that means the target entity(ies) and their subsidiaries, not including the entities remaining with the seller.
3.3.2 Shall the turnover of the existing seller be included in the target's group turnover?
The seller’s turnover is not included in the target’s group turnover.
3.8 Currency conversion
3.8.1 The exchange rate applied and applicable exchange rate date for conversion of the value of turnover and assets of undertakings in other jurisdictions?
The exchange rate used by the undertaking in its audited annual report must be used.
1. Practical information
1.2 Deadlines for filing
1.2.3 What are the sanctions for not filing a notifiable transaction?
Failure to notify a transaction, giving incorrect/misleading information in a notification, or failure to observe waiting periods is sanctionable by a fine of not more than JPY 2,000,000.
Implementation of a prohibited transaction and failure to comply with a cease and desist order after it has become final and binding is sanctionable by imprisonment with labor for up to 2 years or fine of up to JPY 3,000,000 for a natural person; and s fine of up to JPY 300,000,000 for a legal person
Non-penal fine of up to JPY 500,000 is applied to any person who has violated a cease and desist order.
and last updated on 18-01-2021 by
Legal Cross Border has itself provided all input about merger control in Japan. This information has been gathered and validated by our in-house lawyers to guarantee the highest quality outcome. This said, we are currently looking for a local partner to cover Merger Control Japan - please contact us if you would like to be our new partner.