Japanese merger review: JFTC can force companies to submit information

Earlier in 2021, the Japan Fair Trade Commission (JFTC) made an amendment to the procedural rule regarding its requests for information (RFIs) to companies in a merger review: the JFTC merger review officer can now force parties to submit information.

Although the JFTC has not made any high-profile announcements, the new rule could have a significant impact on JFTC’s merger review practice, in particular for parties in a defensive position and trying to limit the amount of information submitted for a merger review.

This amendment of the procedural rule under the Anti-Monopoly Act (the AMA) has been in force since April 2021. Following required designation procedures in the JFTC, officers in the Mergers and Acquisitions Division can now directly issue formal orders compelling transaction parties to submit documents or information. Under the AMA, only a designated JFTC officer can issue formal orders to investigate cases. Previously, such designated personnel would have to be drawn from the Investigation Bureau. The above rule change has now broadened the scope of divisions subject to the designation so that officers of the Economic Affairs Bureau (to which the Mergers and Acquisitions Division belongs) can now be designated to issue formal orders to investigate cases.

In regular practice, the JFTC has requested information from parties for merger reviews on a voluntary basis. This practice is likely to continue after this rule change, provided the parties cooperate with the JFTC’s voluntary requests. However, if the parties are not cooperative with the JFTC’s requests and are reluctant to submit information, the JFTC officers in charge of the merger review can now resort to issuing an obligatory order to submit documents or information.

Internal documents important

As a result, parties’ internal documents – such as materials used at board of directors meeting, and the emails or analysis materials on the effect of planned merger – are potentially more important in Japanese merger reviews. While the EU and the US tend to catch such documents in filing requirements, in Japan these documents have not always been captured in the filing process, with the JFTC requesting what it thinks necessary to review the merger case on a voluntary basis. The JFTC is aware that such internal documents are often crucial in understanding a transaction’s impact on competition, and the rule change means the JFTC can now obligate companies to pass over documents.

Parties will need to be more careful in deciding an engagement strategy with the JFTC. In particular, if the parties take a less cooperative approach to the JFTC’s queries, the risk of the JFTC issuing a compelling order should be taken into consideration.