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International cooperation in merger control in Japan

International cooperation in merger control in Japan Abstract This article discusses international cooperation in merger control enforcement under competition law. It describes the framework of merger control in Japan, recent developments in international agreements, merger cases involving international cooperation and the relevant governing authorities’ standard process, including waiver considerations. This article offers three contributions. First, it comments on international cooperation in merger control, including the necessity of confidentiality waivers. Second, it provides basic information for assessing the appropriateness and transparency of merger control policies. Finally, it encourages cooperation between young and advanced competition authorities. The article’s deep understanding of merger activity is based on a detailed analysis of the Japan Fair Trade Commission’s guidelines for international cooperation in merger control. I. INTRODUCTION International merger control cooperation by antitrust agencies is a growing field of modern competition law enforcement. The International Competition Network (ICN) has focused on connecting and networking international antitrust authorities and made available a large volume of documents and recommendations for international merger cooperation (see the document library at the ICN website1). However, there are very few critical, academic approaches to international cooperation in merger control practices. Breinlich et al. surveyed the literature on national and international merger control policy, coordination and interactions between merger and trade policies.2 They concluded that there was little empirical evidence of international aspects of merger policy despite substantial theoretical interest in the topic. International cooperation in merger control has been discussed since the seminal merger case of Boeing/McDonnell-Douglas in 1997.3 The cooperation approach has extended across the entire field of competition law enforcement and technical assistance coordination and reached into the neighbouring legal fields of compliance and trade-related law.4 Many articles, such as those by Maher and Lipsky, analyse international merger control cooperation from the viewpoint of its impact on forthcoming antitrust enforcement and the legitimacy of democratic regimes. However, focusing on the details of merger control cooperation practices is essential to determining its appropriateness and effectiveness. This article considers Japanese merger control cooperation and analyses the grounds for best practices. Fullerton and Alvarez discuss convergence in international merger control.5 They do not provide a specific framework for cooperation, but they raise several points concerning convergence benefits and differences in horizontal merger analysis (the overarching purposes, analysis of competitive effects and roles of market definition and concentration). They also note that the 2010 US Horizontal Merger Guidelines are a positive development as they provide US practitioners with improved transparency. Turner and Kauman consider developments in convergence and divergence in the European Union and the USA.6 They deal with recent issues regarding internal document requests and second request procedures based on the differences between EU and US merger controls. However, procedural issues have not been adequately studied in other regions; for example, if a merger was complex and global, then it would be necessary to notify various authorities from many jurisdictions. Deisenhofer, an official of DG Competition, surveyed international cooperation in the field of business combination mainly in the European Union.7 Deisenhofer shows there was little disagreement (following G.E./Honeywell) between EU and US competition authorities, based on qualitative and statistical analyses.8 The cost of non-cooperation is too high, and the competition authorities of different jurisdictions make good faith efforts and cooperation. This prior research essentially supports the present article. Section II of this article deals with the basics of Japanese merger control and international agreements. Section III explains several recent merger cases involving international cooperation. Section IV describes the actual practices involved in international cooperation in Japan’s merger control. Section V consists of concluding remarks. II. MERGER CONTROL IN JAPAN Few articles deal with merger control in Japan. Arai mentions that merger control policy in Japan is competition-oriented, systematically designed and transparent; however, the direction of the policy is regulatory.9 Vande Walle and Shiraishi explain the basic outline of merger control, using two recent cases to describe trends of the economics-based approach.10 Arai points out that the market share approach to merger control policy was set aside in two important cases that were adopted recently by the Japan Fair Trade Commission (JFTC).11 The JFTC’s current attitude mirrors the growing importance of economic analysis in cases examined in Japan and other regions. Although these studies are useful for understanding Japanese merger control characteristics, there are very few references to international cooperation practices in merger control. Therefore, this article considers international cooperation practices in Japan’s merger control to clarify Japan’s strategy for merger policy and assess its implementation process. First, we will review the basic framework of Japan’s merger control. Chapter IV of the Antimonopoly Act of Japan prohibits mergers and acquisitions that would substantially restrict competition in a goods or service market. Chapter IV of the Antimonopoly Act12 Shareholdings by a company (Article 10) Interlocking directorates (Article 13) Shareholdings by persons other than companies (Article 14) Mergers (Article 15) Joint incorporation-type company split, absorption-type split (Article 15-2) Joint share transfer (Article 15-3) Acquisition of businesses, etc. (Article 16) Market concentration regulations focus on individual products and services and prohibit mergers and acquisitions that will substantially restrain competition in a particular field of trade. The rules governing business combinations aim to control the forming, maintaining, or strengthening of market power to raise the price of a product by reducing output. The rules require 30 days prior notification of an impending merger if certain conditions are met to prevent the emergence of an anticompetitive market structure. To review transactions, the JFTC requires merging parties to notify it of a transaction before implementation when the domestic sales volume of merging parties exceeds a certain threshold. Similar to other major competition authorities, the JFTC has adopted a two-phase reviewing procedure. The JFTC clears most transactions at the end of the primary stage, which is usually completed within 30 days of notification. In some cases, however, the JFTC proceeds to a secondary stage for closer scrutiny. The JFTC is open to frequent communication with notifying companies at both stages, even during the consultation period prior to notification. In pre-notification communication, merging companies can propose possible remedies to competitive concerns raised by the JFTC. In the 2016 Japanese fiscal year (April 2016–March 2017), the JFTC received 319 transaction notifications, of which the JFTC reviewed 308 during the primary review stage. Eight of the 319 transactions were withdrawn at that stage. The secondary review was initiated for three transactions. As of this writing, all three transactions remain under review. In the 2017 fiscal year, the JFTC received 306 transaction notifications. Among these notifications, 299 transactions were cleared during the primary review stage, six transactions were withdrawn, and one transaction was cleared following a secondary review. The JFTC initiates a merger review by defining the market, type of products or services, and where the merging parties compete. For each defined market, the JFTC considers whether the merger will substantially restrain competition: the ‘assessment of competition harm’. In the merger review process, there are three applications of ‘theories of harm’. First, the JFTC examines whether safe harbours apply. If they do not apply, then the JFTC examines whether the particular field of trade falls under safe harbours based on a unilateral or coordinated effect. Finally, if necessary, the JFTC examines the remedies proposed by the merging parties. The JFTC has published two guidelines for its merger review policy: ‘Guidelines for the Application of the Antimonopoly Act Concerning the Review of Business Combination’, which expresses the JFTC’s merger review policy,13 and ‘Policies Concerning the Procedures of Review of Business Combination’, which details the JFTC’s review procedures.14 The Mergers and Acquisitions (M&A) Division of the Economic Affairs Bureau oversees merger reviews. The division has dozens of employees, including economists and attorneys, who review information related to proposed mergers. These processes are used in Japan to analyse cooperation in international merger control. The JFTC has begun publishing a quarterly report to increase the transparency of business combination reviews and the possibility of foreseeing the results of an investigation. From November 2017, the report began including information on matters of which the JFTC has been notified but has not yet issued cease-and-desist orders. From March 2017 to September 2017, there were 12 unproblematic notifications based on Article 9 of the merger review regulation (March: 10, April: 24, May: 25, June: 21, July: 5, August: 23, and September: 12). The publication of this report establishes that there have been no problems in these merger control investigations. It is a unique legal system that can be appreciated for the clarity of its merger control. III. INTERNATIONAL COOPERATION IN MERGER CONTROL In this section, we will analyse international cooperation in merger control in terms of three characteristics: international agreements between competition agencies, the history of international merger review cases from 2009 to 2016, and the process of international cooperation, including waivers of confidentiality. International agreements International agreements between the JFTC and other competition authorities are listed in Table 1. These agreements have three classifications: (i) antimonopoly cooperation agreements, (ii) interagency cooperation memorandums or arrangements, and (iii) economic partnership agreements (EPAs). Table 1. International agreements between the JFTC and other competition authorities International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam (Source: Compiled by the authors) Open in new tab Table 1. International agreements between the JFTC and other competition authorities International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam (Source: Compiled by the authors) Open in new tab Each agreement generally contains provisions regarding the notification and exchange of information. For example, the JFTC’s ‘Concluded Memorandum of Cooperation with the Competition Commission of Singapore’ on 22 June 2017 states: ‘Each competition authority will notify the other competition authority with regard to its enforcement activities that the notifying competition authority considers may affect the important interests of the other competition authority’, and ‘Each competition authority will provide the other competition authority with information that is relevant to the enforcement activities of the other competition authority.’15 These agreements are based on official merger control cooperation as well as unofficial communication between the authorities. Each case requires an official consulting channel for security reasons, but informal communication is more in line with the conceptualization of cooperation agreement. International merger review cases Table 2 details the history of international merger review cases from 2009 to 2016. Table 2. History of international merger and acquisition review cases Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A (Source: Compiled by the authors) Open in new tab Table 2. History of international merger and acquisition review cases Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A (Source: Compiled by the authors) Open in new tab In these cases, the JFTC exchanged information or coordinated enforcement activities with entities such as the United States Federal Trade Commission (US FTC), the United States Department of Justice (USDOJ), and the European Commission. In 2009, the JFTC examined the Panasonic Corporation’s acquisition of Sanyo Electric Co., Ltd.’s shares, alongside 10 other competition authorities, including the US FTC and the European Commission. There were many common factors in this case, although each competition authority defined each country (or region) as a geographical product market (such as ‘all regions of Japan’ or ‘European Economic Area’). The JFTC exchanged information and coordinated enforcement activities with the other competition authorities. Concerning mergers between high-tech manufacturers in 2011, the JFTC exchanged information and coordinated enforcement activities on the cases that involved integration among central processing unit (CPU) and hard disc drive (HDD) manufacturers. In these cases, the JFTC defined the geographical market as worldwide. The last case concerned the proposed acquisition of KLA-Tencor Corporation shares by Lam Research Corporation in 2016. This case represented a vertical merger between Lam, a leading supplier of semiconductor fabrication equipment, and KLA, a leading supplier of metrology and inspection equipment. The JFTC examined this case while exchanging information with the USDOJ. The merging parties abandoned their plan after the JFTC informed them that the proposed business integration would substantially restrain competition in the fields of production and sales of semiconductor fabrication equipment due to the potential for Lam to foreclose competition by denying timely access to KLA’s metrology, inspection equipment, and related services. Process of international cooperation Three controversial issues arise in the process of international cooperation. The first concerns confidentiality waivers. This section briefly outlines the release of confidentiality waivers and highlights problems with confidentiality legislation. The second issue is identifying appropriate actors for information exchange. It is necessary to identify the partner organization and the appropriate counterpart as soon as possible to realize a smooth exchange of information with the entity that examines a business combination. The third problem is the timing of the information exchange. There are differences among various jurisdictions’ systems and practices of business combination examination as well as their timing for making second requests and remedies. However, finding the best approach for national authorities and business combination parties to agree on timing would be highly desirable. The first issue of confidentiality waivers is as follows. When the JFTC plans to exchange information and coordinate enforcement activities with other competition authorities, it obtains confidentiality waivers from the merging parties. Confidentiality waivers are covered by Article 39 of the Antimonopoly Act, which prohibits the chairman, commissioners, and staff members of the JFTC from divulging information to others or making surreptitious use of enterprise secrets. Regarding this article, the phrase ‘secrets of enterprises’ means information that satisfies the following three conditions: (i) it is not known publicly, (ii) the enterprise hopes it will remain secret and (iii) there is an objective, rational reason for the information to remain secret. Confidentiality waivers are concerned with the second condition: the enterprise hopes the information will remain secret. It is important for the JFTC to obtain confidentiality waivers so that it can respect Article 39 of the Antimonopoly Act. National law provisions that work as information gateways allow competition authorities to exchange confidential information without obtaining waivers. In Japan, Article 43-2 of the Antimonopoly Act corresponds to these provisions. There are also so-called ‘second generation agreements’, which are similar agreements between competition authorities. For example, the ‘USA and Australia Mutual Antitrust Enforcement Assistance Agreement’, which concluded in 1999, contains such a provision. There are three critical issues concerning the use of confidentiality waivers. First, using confidentiality waivers means that merging or third parties consent to providing competition authorities with confidential information that will enable them to discuss and exchange information that would otherwise be protected by confidentiality rules. Second, generally speaking, merging parties have the ability and incentive to promote cooperation with competition authorities because they hope to obtain these authorities’ clearance as soon as possible. Thus, merging parties can influence the timing of investigations. For example, it is preferable for all competition authorities to be notified concurrently to coordinate enforcement effectively. It is easier to obtain waivers in cases concerning mergers than those over cartels because competition authorities and merging parties generally cooperate. Merging parties may need to negotiate remedy proposals with multiple jurisdictions, such as the JFTC and other competition authorities. Third, obtaining waivers results in competition authorities being able to engage in more informed, detailed discussions on substantive assessment and possible remedies; exchange confidential information, such as documents or statements, allowing agencies to obtain timely information; or promote cooperation on remedy design and implementation, helping to avoid inconsistent outcomes. Nonetheless, it is possible for competition authorities to cooperate without waivers. The first step to international cooperation is identifying the counterpart agencies. The JFTC generally collects this information from merging parties, press releases, and news sources, such as newspapers and internet media. The merging parties often inform the JFTC which jurisdictions they have notified. The next step is for the JFTC to contact the counterpart agencies. The JFTC generally contacts counterparts through a case team, liaison officers, such as from the ICN framework, bilateral or multilateral relations, or the international affairs division. The third step is for the JFTC to communicate with the counterpart agencies. The JFTC generally does so through emails and teleconferences. Sometimes, cases can take a long time to resolve because the time differences between agencies can impede information exchange and coordinated enforcement activities. International cooperation comprises bi- and multi-lateral frameworks. Bilateral examples include governmental cooperation agreements, the competition chapter of the Free Trade Area or EPA, and memorandums of understanding (MOUs) between competition agencies. Multilateral frameworks consist of notifications based on the recommendation of the Organisation for Economic Cooperation and Development (OECD) for international cooperation or the ICN’s framework for merger review cooperation. These bi- and multi-lateral international cooperation frameworks can help to accelerate the identification of information exchange partners. The counterparts identified in this way are important for communication when a specific case occurs and on a daily basis. Every country recognizes that competition authorities are essential to the voluntary provision and exchange of information and opinions from both sides. The third issue is the timing of the information exchange. The time constraints that apply to business combination reviews vary in different jurisdictions. The merger parties planning business combinations must deal with this issue. In fact, business combination parties must plan and implement a notification strategy in anticipation of possible indications from national authorities and the possible timing of such indications. Some jurisdictions, like Japan, have a rigid business combination examination schedule following notification. There are also places, such as the EU, where examination starts when the necessary materials have been aligned with the parties. Business combination examinations must be conducted in secrecy. However, hearings may be required for examinations, and examinations may have to be made public for the public interest. Therefore, it may be possible to adjust the timing of disclosures through interactions with the business combination party. Adjusting timings may be difficult if business combination review deadlines differ. Likewise, typically, remedies are pre-planned with certain jurisdictions in mind. In other jurisdictions, a remedy may not suffice. In that case, the parties may dislike the ‘cascading’ nature of the remedies as they proceed successively. Thus, parties may seek to coordinate between national authorities. Nonetheless, different remedies are inevitable because the effects of business combinations can differ depending on the jurisdiction. However, if timing problems are avoided, it is possible to exchange information early, reducing the burden on the parties and effecting an appropriate business combination. Problems and handling in reality Cooperation in merger review is voluntary. Aggressiveness toward cooperation differs in each jurisdiction in terms of competition authority and the individuals involved in a given case. Even if the agencies’ cooperation progresses smoothly, the available information may differ depending on the timing of the notification and the phases of the review. A competition authority that has already been notified or is proceeding with further examination may provide information unilaterally. For authorities that have enough information, little new evidence is obtained through the information exchange. In such a case, cooperation may be a burden for competition authorities that are providing information. Information provided by competitors and third parties may improve review efficiency. Despite the relative ease of obtaining waivers from the parties, it may be difficult to acquire similar permission from competitors and third parties. It is not realistic for competitors and third parties to provide opinions and information individually to competition authorities; therefore, useful information may not be shared efficiently. Information exchange is useful when competition authorities determine whether a merger is anticompetitive and which problem-solving measures are necessary. However, it does not apply to the effectiveness of remedies. Each country’s competition authorities must monitor whether parties comply with the remedies. The parties must commit separately to the competition authorities that judged the merger to be anticompetitive. Each authority is required to implement substantive remedies that are appropriate to the circumstances of the parties concerned and that the exchange of views are conducted to the extent necessary. Based on these facts, the authorities’ success depends on two important points: early communication and taking a case-by-case approach. Early contact and communication, even before merger notification, is preferred during investigations. It is beneficial because it enables the identification of counterpart agencies as soon as possible. Communication with other agencies may be beneficial when: deciding whether to open an in-depth (second-phase) investigation, discussing remedies with merging parties, determining to prohibit or challenge a merger, and anticipating the closing of an investigation. The extent of cooperation may vary with specific cases or counterpart agencies. For example, in some cases, the agency might only be able to exchange general information, such as the review schedule, market definition, or theory of harm. However, there are cases in which investigation tools, remedy design, and implementation can be coordinated, and confidential information can be exchanged based on waivers. Because each case is unique, it is important to identify and contact counterpart agencies as soon as possible. The strategic use of international cooperation in business combination examination also should be considered. In the case of a notification of a certain jurisdiction, business combination party may have reasons for seeking cooperation with other authorities to schedule business integration. The authorities may also explain to the parties of the business combination their reasons for taking time to conclude an internationally consistent review. They must also explain the remedy. International cooperation may be used to comment on the need for international consistency. Also, authorities may differ in policy and conclusions (as in the cases described above in Section I). In such cases, the authority can explain that it is making a borderline decision between international cooperation and domestic competition policy. International cooperation may help to highlight and explain the authorities’ actions. Not only promoting but also strategically positioning international cooperation serve to increase utility value. Technical assistance in merger control Another important factor remains concerning international cooperation in merger examination: technical cooperation in the context of merger examination. The JFTC has provided technical cooperation, particularly to countries in East and Southeast Asia. Technical cooperation is celebrated in the competition chapter or EPA. For example, the Japan–Mongolian Economic Partnership Agreement,16 which was signed and put into effect recently, contains the following clauses. Chapter 11 Competition Article 11.2 Cooperation on Controlling Anticompetitive Activities The Parties shall, in accordance with their relevant laws and regulations, cooperate, and assist each other to control anticompetitive activities within their relevant, available resources. The details and procedures of the implementation of cooperation under this Article shall be specified in the Implementing Agreement. Similar language is present in more than 10 EPAs between Japan and countries such as Vietnam and Indonesia.17 By establishing such a framework, the JFTC carries out competition cooperation with a variety of competition authorities. An important issue in this cooperation is technical support, and one of the pillars of technical support is the sharing of knowledge and experience of the practice of business combination review. Teaching the philosophical and theoretical underpinnings of business combination examination as well as case studies of Japanese examinations are part of the technical support of business combination examination within the framework of such international cooperation, especially in recent years. Technical assistance has become practical; it now includes discussions of the merits and limitations of the methods of business combination examination, which are based on concrete cases from the destination country. In fact, technical support has become a routine form of exchanging experiences and opinions on common issues. This situation can be explained in several specific cases. For example, a local seminar on technical assistance projects using the Japan-ASEAN Integration Fund was held in Bandung, Indonesia, in 2017. It was attended by both of the authors and participants from the competition authorities of major Association of Southeast Asian Nations (ASEAN) countries. Lectures were given on theoretical and practical aspects of business combination examination, a report based on examples from each attendee was presented, and question and answer sessions followed. Discussions deepened the relationships between the officials from the countries represented. Moreover, sharing a list of participant names secured a means of continuing communication in the future. Such seminars are held several times a year, advancing technical support on the methods and tasks of business combination examination. IV. FUTURE FRAMEWORK OF COOPERATION We will now evaluate the practice of international merger control cooperation between the JFTC and another authority based on the guidelines that were prepared by the ICN Merger Working Group in May 2015. The ‘Practical Guide to International Enforcement Cooperation in Mergers’ (the ‘Guide’) draws on the experiences of the ICN Merger Working Group’s member agencies and non-governmental advisers.18 The Guide describes five overarching principles: i) Help to promote consistent outcomes; ii) Increase investigative efficiency by reducing unnecessary duplication of work, delays, and burdens for parties and agencies; iii) Reduce gaps in the information available to agencies and lead to more informed agency decision-making and enhanced analytical robustness; iv) Help to promote convergence, both in the analysis of specific cases as well as more generally, in relation to principles applicable to all mergers; and v) Increase familiarity between agencies and the mutual understanding of their merger review processes, which in turn may help foster trust and aid future cooperation. The Guide also presents several real-world examples that are highly applicable to practice. An excerpt from the Guide is shown below in the frame. The Guide is the most significant of our collected reference documents. As researchers and philosophers planning a future competition policy, we determine the relevance of real cooperation circumstances and future plans for authority cooperation by comparing them to the Guide. (i) It is possible to experience varying degrees of cooperation with different agencies regarding the same transaction and have differences in the process due to different levels of tolerance for cooperation. This first statement appears in Practical Example 1 of the Guide. There are examples of cooperation among the various authorities of the European Commission. In fact, in recent international business combinations, many authorities have had to notify the authorities in order to examine a transaction’s competitive impact on their jurisdiction. While there are differences in the degree of cooperation among those authorities, cooperation should be initiated as soon as possible, and the process should be transparent. It is valid for the substantive review and remedies to differ from one jurisdiction to another, and such differences may reflect distinctions among legislative or policy objectives. Such diversity, at least in the short term, may be unavoidable. However, delays should be avoided whenever possible as should ambiguity in the schedule and requests for obscure evidence and data. If uncertainty arises in a separate jurisdiction, it can place a heavy burden on the business combination party. (ii) Benefits of early identification of other reviewing agencies and early contact. The second statement comes from the JFTC merger cooperation enforcement. This recommendation is the same as the result of our research analysis in the sub-Section ‘Process of international cooperation’. It may seem simple at first glance. However, when exchanging information across jurisdictions, identifying appropriate partners is imperative but time-consuming. For this reason, it is necessary to find opportunities to promote cooperation and exchange information. (iii) Successful cooperation is necessary when agency investigations are in different phases of review. It is the future goal of the competition authority in the early stage. This process is too advanced to be implemented by the competition authority in the early stage. The JFTC takes a systematic approach to cooperating with authorities through close communication. The hurdle of international cooperation is rather high for authorities where competition law enforcement has just begun. For example, there may be few staff members who are fluent enough in other languages to exchange opinions, and their positions may not be high-ranking enough. In such a jurisdiction, awareness of competition law and policy may be limited, and business combination examination itself may be challenging. Therefore, international cooperation in business combination examination with competition authorities in jurisdictions with little antitrust law experience is difficult. To respond to such circumstances, the competition authority with more history and resources should conduct a suggestive model of business combination examination in cooperation with the less experienced authorities. In addition to the difficulty of reviewing a business combination in an agency’s own jurisdiction, it is an additional burden to attend to the needs of the cooperating authorities. If possible, appropriate cooperation should be carried out with the help of international organizations and the ICN rather than engaging with only one jurisdiction. (iv) Successful cooperation without the use of waivers is possible and practically feasible. This type of cooperation is realistic and feasible, based on our analysis of actual cooperation enforcement. This part of the Guide indicates that procedural issues are important but can be reduced by solid substantive examination. Procedural issues are too time-consuming when it comes to determining which measures are needed. Therefore, it is important to research and explore the possibility of following procedures beforehand. It is a significant contribution to a jurisdiction’s examination process if case information from a previous procedure can be disclosed. For this reason, information disclosure and further research on cases utilizing examination procedures should be encouraged in jurisdictions with a history of competition law and resources. (v) While joint interagency investigations can avoid unnecessary duplication of work for parties, it is required that the authorities in each country maintain autonomy and independence with impartial merger control implementation. Our research on international merger control cooperation supports this principle. Each competition authority needs to make its decision based on its own analysis. A critical examination of the involvement of competition authorities in international cooperation can be conducted after their independence is assured. Business combinations are, in principle, a form of free commerce. If there is a high probability of a business combination will result in an anticompetitive situation, then it is necessary to address that risk. Therefore, the business combination examining authority should perform the examination to achieve a suitable post-transaction situation without establishing a conflicting relationship with the business combination party. Merger review officials in every country must keep in mind the necessity of conducting appropriate, rational examinations. International cooperation in this context should benefit the parties to the notified transaction. However, the goal is to balance all stakeholders, including the parties, competitors and consumers, and level the playing field in the jurisdiction. It may be possible to adjust the applicable time frames upon the request of the parties. However, the parties should be aware from the beginning that such adjustments may prove difficult. Common issues should be aired so that they complement the discussions. Opinions from different angles should also be considered. When preparing each conclusion, there should be multifaceted conversations. In summary, it is essential to talk from an early stage about promoting a competition authority’s international cooperation with business combination parties and communicate that conclusions may take different forms. (vi) The goal for all authorities is to cooperate in the negotiation of remedies so that they lead to efficient, effective outcomes for the agencies and the merging parties. This statement appears in Practical Example 6 of the Guide. The JFTC and other authorities rely on this principle as they oversee cases. This goal can be achieved as case reviews proceed. The case study on remedies is not clear-cut. For example, the measures taken by the Chinese authorities differed in several cases with the JFTC. Much of the content of the international exchange of opinions cannot be disclosed due to confidentiality. However, it can be stated that the best remedy was considered in both jurisdictions so as not to restrict competition substantially; as a result, the required remedy changed. It appears that there was a lot of interaction with the parties, and it was a very long, time-consuming case. It will be seen as a case of remedy in many international cooperation projects in the future. Although it is desirable to disclose as much appropriate information as possible, for the time being, it is important to accumulate cases steadily. (vii) It is beneficial to cooperate in the implementation of remedies that address different competition concerns in different national markets and result in consistent outcomes. This is the last statement in Practical Example 7 of the Guide. Consistently, our goal has been to ensure this principle as it pertains to the JFTC enforcement guidelines and enforcement cooperation research. The Guide suggests one must proceed with international cooperation when conducting a business combination examination. So, how should we proceed with cooperation? It would be optimal to proceed from economic analysis because its rationales and analytical methods are used all over the world. The legal system is different in every jurisdiction, as are the stakeholders who receive the benefits. However, economics, which is an analytical method, is common throughout the world. It would be helpful to use this common factor as the basis for advancing cooperation in the proceedings and conceptualization of business combination review. International cooperation in economics should be promoted since business combination examinations are common in economic analysis. Our assessments for future merger control cooperation are that globalization will continue and thus, cooperation in merger control will continue to be necessary. The Guide provides helpful direction and should be used appropriately. The following situations are possible: (i) examination cooperation for business combination in the large digital industry; (ii) international examination cooperation for rescue and reorganization types of business combination (such as with a failing company) in conventional industries; and (iii) taking measures to ensure that state-owned enterprises engage in international cooperation for business combination examination. The first situation involves business combinations in the vast digital industry. Specifically, what kind of business combination examination is desirable for business combinations concerning the GAFA jurisdictions (Google, Amazon, Facebook, and Apple) among other large companies in the digital industry? How should international cooperation proceed under these circumstances? First, in principle, the examination should be conducted within the framework of previous business combination examinations in the competition law context, even when the case involves a large enterprise. Furthermore, to create a special framework for a particular type of business combination examination is to adopt an intervention policy. It is undesirable for the government to intervene in market transactions where fair and free competition should take place. Based on this principle, it is possible that information that has not been priced yet (for example, data exchange) may become a source of market power that defines the market. The determination of market power based on such data is controversial even in jurisdictions with advanced competition policy. It is considered even more challenging to deal with competition authorities in developing countries. However, the digital world is developing rapidly, and it is possible that business combinations in that realm will be faster than in conventional industries. For this reason, it may become necessary to exchange information closely and introduce new ideas boldly when engaging in international cooperation for business combination examinations. To put those aims into practice, every authority would need to engage in regular training and voluntary research. The second situation involves a conventional industry’s rescue and reorganization type of business combination. Large-scale business combinations that cause competition policy problems may require special attention in the context of a bailout and reorganization. It can occur during digitization, and it may result in a conflict within the conventional industry. The examination of a rescue type of business combination may involve political action, which would be hard to manage. There are many potential difficulties for competition authorities seeking to follow the principles, and international cooperation will be necessary. Competition in a given country could be affected; nonetheless, one competition authority may need to provide a supporting opinion to help the difficult position of a competition authority of another jurisdiction. Competition is important as is performing outreach from an academic point of view as well as that of a policymaker. Efforts should be made to build trust among competition authorities and stakeholders. The third situation is the review of business combinations involving state-owned enterprises, which we expect to become even more complicated. Such cases can include large political powers and industrial and regulatory policies. One aspect where international cooperation in business combination examination is useful is its support of public opinion concerning the importance of competition. Another aspect is multilateral support for the competition authority in a jurisdiction from international organizations and networks. Competition authorities can also realize the essence of competition policy by strategically utilizing international cooperation as an external pressure. It may be necessary for international organizations to proceed with research on such cases to accumulate theoretical and empirical studies and run simulations. In any case, experience with international cooperation in merger control will accumulate with each assessment of cases in the future. We can prepare based on these experiences and case studies. V. CONCLUDING REMARKS This article has discussed international cooperation in merger control enforcement under competition law. We described the framework of merger control in Japan, recent international agreement developments, merger cases with international cooperation, and the standard review process of authorities, including waiver considerations. Finally, we evaluated the Practical Guide to International Cooperation in Mergers. This article makes three contributions to this field. First, it provides commentary on international cooperation in merger control, including the necessity of confidentiality waivers. Confidentiality waivers are a simple step during a merger review. The merging parties and reviewing authorities all seek to proceed promptly with the examination. The waiver is an effective means of sharing information, and it allows the examination to proceed faster than a separate review by multiple authorities. Second, the article provides basic information for assessing the appropriateness and transparency of merger control policies. Mergers are normal business transactions that should not be restricted unless they generate market power. When companies implement a merger, the move may be irreversible; therefore, prior examination is imperative. A prompt review is desirable for both domestic and international mergers. The need for information sharing has been discussed before in merger investigation procedures for international mergers. This article raises the following issues: it is easy to cooperate if there is an agreement; however, a waiver is necessary, and early contact—even if only informal—is essential. The third contribution is to encourage cooperation between inexperienced and advanced competition authorities. This recommendation is based on the experience of the JFTC’s international cooperation activity in merger control. From an academic viewpoint, the discussion of international cooperation in merger control is longstanding due to several mega-mergers in the last century.19 The creation of a practitioner’s guide to cooperation is necessary. There are three future challenges at the next step of enforcement cooperation. First, some jurisdictions have yet to establish cooperative relationships. Statutory time frames, market definition, analysis of competitive impact and remedies may all vary by country, although a merger may have similar impacts on competition everywhere. A discussion on preparedness for cooperative relationships should be promoted to achieve a business-friendly global environment. Second, we must pay attention to the differences among countries’ merger control systems. Due to distinctions in each country’s ideas and laws about merger control, conclusions may differ. Independent decision-making and respect for diversity are fundamental to the competition policies of various jurisdictions. We must balance the importance of cooperative relations and respecting the differences in merger control of each country to maintain transparency, competition-oriented thinking, and well-organized policy implementation. Third, it may be necessary to review information exchange before and after a merger. Although this protocol can be judged on a case-by-case basis, it may become useful to clarify what kind of information exchange is required during an examination and after the review. In particular, this procedure would apply to cases that are approved with remedies. Further studies are needed to maintain the transparency, legal stability, and predictability of merger investigations. Within the limits of available resources, it is necessary to accumulate case studies of information exchange for each country’s merger investigations and international cooperation experience and study the classifications and issues of cases in the future. Acknowledgement We would like to thank our colleagues for their useful comments. The opinions expressed in the article are the authors’ own and do not necessarily reflect the views of any organization. Funding This work was supported by JSPS KAKENHI Grant Number 16K03649. Also this research was supported by a grant-in-aid from Zengin Foundation for Studies on Economics and Finance. Footnotes 1 ICN, <http://www.internationalcompetitionnetwork.org/> accessed 1 May 2019. 2 Holger Breinlich, Volker Nocke and Nicolas Schutz, ‘International Aspects of Merger Policy: A Survey’ (2017) 50 International Journal of Industrial Organization 415. 3 Douglas A Melamed, ‘International Antitrust in an Age of International Deregulation’ (1997) 6 George Mason Law Review 437. and William E Kovacic, ‘Transatlantic Turbulence: the Boeing-McDonnell Douglas Merger and International Competition Policy’ (2001) 68 Antitrust Law Journal 805. 4 Imelda Maher, ‘Competition Law in the International Domain: Networks as a New form of Governance’ (2002) 29 Journal of Law & Society 111; and Abbott B Lipsky, ‘Managing Antitrust Compliance through the Continuing Surge in Global Enforcement’ (2009) 75 Antitrust Law Journal 965. 5 Larry Fullerton and Megan Alvarez, “Cover Story, Convergence in International Merger Control’ (2012) 26 Antitrust ABA 20. 6 Vanessa Turner and Max Kauman, “Convergence and Divergence in the EU and U.S. Approaches to Document Requests in Complex Mergers’ (2016) 31 Antitrust ABA 76. 7 Thomas Deisenhofer, ‘International Cooperation in Merger Cases — An EU Practitioner’s Perspective’ in Philip Lowe and Mel Marquis (eds), Merger Control in European and Global Perspective (Hart Publishing 2012) 227–42. 8 The article mentions that the Oracle case was the one rare exception. 9 Koki Arai, ‘An Airline Merger in Japan: A Case Study Revealing Principles of Japanese Merger Control’ (2004) 4 Journal of Industry, Competition & Trade 207. 10 Simon Vande Walle and Tadashi Shiraishi, ‘Competition Law in Japan’ in John Duns, Arlen Duke and Brendan Sweeney (eds), Comparative Competition Law (Edward Elgar Publishing 2013) 4. 11 Koki Arai, ‘Merger Assessment in Japan: The Declining Importance of Market Shares’ (2015) 6(5) Journal of European Competition Law & Practice 337. 12 See the JFTC’s website: <https://www.jftc.go.jp/en/legislation_gls/amended_ama09/amended_ama15_04.html> accessed 1 May 2019. 13 The JFTC’s ‘Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination’ (14 June 2011) <https://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/110713.2.pdf> accessed 1 May 2019. 14 The JFTC’s ‘Policies Concerning Procedures of Review of Business Combination’ (14 June 2011) <https://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/pcbr.pdf> accessed 1 May 2019. 15 The JFTC’s ‘Memorandum of Cooperation between the Fair Trade Commission of Japan and the Competition Commission of Singapore’ (22 June 2017) <https://www.jftc.go.jp/en/pressreleases/yearly-2017/June/170622_files/170622-2.pdf> accessed 1 May 2019. 16 Agreement between Japan and Mongolia for an Economic Partnership. See <https://www.mofa.go.jp/policy/economy/fta/mongolia.html> accessed 1 May 2019. 17 Japan has 17 EPAs of Japan, including the Trans-Pacific Partnership (TPP) Agreement and the Japan–EU Economic Partnership Agreement, as of 28 April 2019. See <https://www.mofa.go.jp/policy/economy/fta/index.html> accessed 1 May 2019. 18 International Competition Network, Merger Working Group, ‘ICN Practical Guide to International Enforcement Cooperation in Mergers’ (2015) <https://www.internationalcompetitionnetwork.org/wp-content/uploads/2018/05/MWG_GuidetoInternationalEnforcementCooperation.pdf> accessed 1 May 2019. 19 Ram Ramakrishnan and Anjan Thakor, ‘Cooperation versus Competition in Agency’ (1991) 7(2) Journal of Law, Economics, & Organization 248; Donald Baker, ‘Antitrust Merger Review in an Era of Escalating Cross-Border Transactions and Effects’ (2000) 18 Wisconsin International Law Journal 577. © The Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Antitrust Enforcement Oxford University Press

International cooperation in merger control in Japan

Journal of Antitrust Enforcement , Volume Advance Article – May 1, 2002

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Abstract

Abstract This article discusses international cooperation in merger control enforcement under competition law. It describes the framework of merger control in Japan, recent developments in international agreements, merger cases involving international cooperation and the relevant governing authorities’ standard process, including waiver considerations. This article offers three contributions. First, it comments on international cooperation in merger control, including the necessity of confidentiality waivers. Second, it provides basic information for assessing the appropriateness and transparency of merger control policies. Finally, it encourages cooperation between young and advanced competition authorities. The article’s deep understanding of merger activity is based on a detailed analysis of the Japan Fair Trade Commission’s guidelines for international cooperation in merger control. I. INTRODUCTION International merger control cooperation by antitrust agencies is a growing field of modern competition law enforcement. The International Competition Network (ICN) has focused on connecting and networking international antitrust authorities and made available a large volume of documents and recommendations for international merger cooperation (see the document library at the ICN website1). However, there are very few critical, academic approaches to international cooperation in merger control practices. Breinlich et al. surveyed the literature on national and international merger control policy, coordination and interactions between merger and trade policies.2 They concluded that there was little empirical evidence of international aspects of merger policy despite substantial theoretical interest in the topic. International cooperation in merger control has been discussed since the seminal merger case of Boeing/McDonnell-Douglas in 1997.3 The cooperation approach has extended across the entire field of competition law enforcement and technical assistance coordination and reached into the neighbouring legal fields of compliance and trade-related law.4 Many articles, such as those by Maher and Lipsky, analyse international merger control cooperation from the viewpoint of its impact on forthcoming antitrust enforcement and the legitimacy of democratic regimes. However, focusing on the details of merger control cooperation practices is essential to determining its appropriateness and effectiveness. This article considers Japanese merger control cooperation and analyses the grounds for best practices. Fullerton and Alvarez discuss convergence in international merger control.5 They do not provide a specific framework for cooperation, but they raise several points concerning convergence benefits and differences in horizontal merger analysis (the overarching purposes, analysis of competitive effects and roles of market definition and concentration). They also note that the 2010 US Horizontal Merger Guidelines are a positive development as they provide US practitioners with improved transparency. Turner and Kauman consider developments in convergence and divergence in the European Union and the USA.6 They deal with recent issues regarding internal document requests and second request procedures based on the differences between EU and US merger controls. However, procedural issues have not been adequately studied in other regions; for example, if a merger was complex and global, then it would be necessary to notify various authorities from many jurisdictions. Deisenhofer, an official of DG Competition, surveyed international cooperation in the field of business combination mainly in the European Union.7 Deisenhofer shows there was little disagreement (following G.E./Honeywell) between EU and US competition authorities, based on qualitative and statistical analyses.8 The cost of non-cooperation is too high, and the competition authorities of different jurisdictions make good faith efforts and cooperation. This prior research essentially supports the present article. Section II of this article deals with the basics of Japanese merger control and international agreements. Section III explains several recent merger cases involving international cooperation. Section IV describes the actual practices involved in international cooperation in Japan’s merger control. Section V consists of concluding remarks. II. MERGER CONTROL IN JAPAN Few articles deal with merger control in Japan. Arai mentions that merger control policy in Japan is competition-oriented, systematically designed and transparent; however, the direction of the policy is regulatory.9 Vande Walle and Shiraishi explain the basic outline of merger control, using two recent cases to describe trends of the economics-based approach.10 Arai points out that the market share approach to merger control policy was set aside in two important cases that were adopted recently by the Japan Fair Trade Commission (JFTC).11 The JFTC’s current attitude mirrors the growing importance of economic analysis in cases examined in Japan and other regions. Although these studies are useful for understanding Japanese merger control characteristics, there are very few references to international cooperation practices in merger control. Therefore, this article considers international cooperation practices in Japan’s merger control to clarify Japan’s strategy for merger policy and assess its implementation process. First, we will review the basic framework of Japan’s merger control. Chapter IV of the Antimonopoly Act of Japan prohibits mergers and acquisitions that would substantially restrict competition in a goods or service market. Chapter IV of the Antimonopoly Act12 Shareholdings by a company (Article 10) Interlocking directorates (Article 13) Shareholdings by persons other than companies (Article 14) Mergers (Article 15) Joint incorporation-type company split, absorption-type split (Article 15-2) Joint share transfer (Article 15-3) Acquisition of businesses, etc. (Article 16) Market concentration regulations focus on individual products and services and prohibit mergers and acquisitions that will substantially restrain competition in a particular field of trade. The rules governing business combinations aim to control the forming, maintaining, or strengthening of market power to raise the price of a product by reducing output. The rules require 30 days prior notification of an impending merger if certain conditions are met to prevent the emergence of an anticompetitive market structure. To review transactions, the JFTC requires merging parties to notify it of a transaction before implementation when the domestic sales volume of merging parties exceeds a certain threshold. Similar to other major competition authorities, the JFTC has adopted a two-phase reviewing procedure. The JFTC clears most transactions at the end of the primary stage, which is usually completed within 30 days of notification. In some cases, however, the JFTC proceeds to a secondary stage for closer scrutiny. The JFTC is open to frequent communication with notifying companies at both stages, even during the consultation period prior to notification. In pre-notification communication, merging companies can propose possible remedies to competitive concerns raised by the JFTC. In the 2016 Japanese fiscal year (April 2016–March 2017), the JFTC received 319 transaction notifications, of which the JFTC reviewed 308 during the primary review stage. Eight of the 319 transactions were withdrawn at that stage. The secondary review was initiated for three transactions. As of this writing, all three transactions remain under review. In the 2017 fiscal year, the JFTC received 306 transaction notifications. Among these notifications, 299 transactions were cleared during the primary review stage, six transactions were withdrawn, and one transaction was cleared following a secondary review. The JFTC initiates a merger review by defining the market, type of products or services, and where the merging parties compete. For each defined market, the JFTC considers whether the merger will substantially restrain competition: the ‘assessment of competition harm’. In the merger review process, there are three applications of ‘theories of harm’. First, the JFTC examines whether safe harbours apply. If they do not apply, then the JFTC examines whether the particular field of trade falls under safe harbours based on a unilateral or coordinated effect. Finally, if necessary, the JFTC examines the remedies proposed by the merging parties. The JFTC has published two guidelines for its merger review policy: ‘Guidelines for the Application of the Antimonopoly Act Concerning the Review of Business Combination’, which expresses the JFTC’s merger review policy,13 and ‘Policies Concerning the Procedures of Review of Business Combination’, which details the JFTC’s review procedures.14 The Mergers and Acquisitions (M&A) Division of the Economic Affairs Bureau oversees merger reviews. The division has dozens of employees, including economists and attorneys, who review information related to proposed mergers. These processes are used in Japan to analyse cooperation in international merger control. The JFTC has begun publishing a quarterly report to increase the transparency of business combination reviews and the possibility of foreseeing the results of an investigation. From November 2017, the report began including information on matters of which the JFTC has been notified but has not yet issued cease-and-desist orders. From March 2017 to September 2017, there were 12 unproblematic notifications based on Article 9 of the merger review regulation (March: 10, April: 24, May: 25, June: 21, July: 5, August: 23, and September: 12). The publication of this report establishes that there have been no problems in these merger control investigations. It is a unique legal system that can be appreciated for the clarity of its merger control. III. INTERNATIONAL COOPERATION IN MERGER CONTROL In this section, we will analyse international cooperation in merger control in terms of three characteristics: international agreements between competition agencies, the history of international merger review cases from 2009 to 2016, and the process of international cooperation, including waivers of confidentiality. International agreements International agreements between the JFTC and other competition authorities are listed in Table 1. These agreements have three classifications: (i) antimonopoly cooperation agreements, (ii) interagency cooperation memorandums or arrangements, and (iii) economic partnership agreements (EPAs). Table 1. International agreements between the JFTC and other competition authorities International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam (Source: Compiled by the authors) Open in new tab Table 1. International agreements between the JFTC and other competition authorities International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam International agreements Legal binding power Partner jurisdictions Antimonopoly cooperation agreements Legally binding Canada, European Communities, United States Interagency cooperation memorandums/arrangements Legally non-binding Australia, Brazil, Canada, China, Kenya, Korea, Mongolia, Philippines, Singapore, Vietnam Economic partnership agreements (competition-related provisions only) Legally binding ASEAN, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand, Vietnam (Source: Compiled by the authors) Open in new tab Each agreement generally contains provisions regarding the notification and exchange of information. For example, the JFTC’s ‘Concluded Memorandum of Cooperation with the Competition Commission of Singapore’ on 22 June 2017 states: ‘Each competition authority will notify the other competition authority with regard to its enforcement activities that the notifying competition authority considers may affect the important interests of the other competition authority’, and ‘Each competition authority will provide the other competition authority with information that is relevant to the enforcement activities of the other competition authority.’15 These agreements are based on official merger control cooperation as well as unofficial communication between the authorities. Each case requires an official consulting channel for security reasons, but informal communication is more in line with the conceptualization of cooperation agreement. International merger review cases Table 2 details the history of international merger review cases from 2009 to 2016. Table 2. History of international merger and acquisition review cases Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A (Source: Compiled by the authors) Open in new tab Table 2. History of international merger and acquisition review cases Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A Year M&A cases Cooperating agencies Results of reviews Geographical market that the JFTC defined 2009 Acquisition of shares of Sanyo Electric Co., Ltd., by Panasonic Corporation US FTC, European Commission Accepted with conditions All regions of Japan 2010 Acquisition of shares of Varian Inc. by Agilent Technologies, Inc. US FTC Accepted with conditions All regions of Japan 2010 Establishment of a joint venture for producing iron ore by BHP Billiton PLC/BHP Billiton Limited and Rio Tinto PLC/Rio Tinto Limited ACCC, European Commission, German, Federal Cartel Office, KFTC The parties abandoned their plan N/A 2011 Two M&As in the sector of manufacturing hard disc drives (Hitachi-Western Digital, Samsung-Seagate) US FTC, European Commission, KFTC Accepted with conditions Worldwide 2013 M&A between ASML Holdings N.V. and Cymer Inc. USDOJ, KFTC Accepted with conditions Worldwide 2013 M&A of operations between Thermo Fisher Scientific Inc. and Life Technologies Corporation US FTC, European Commission Accepted All regions of Japan 2015 Transaction of Zimmer, Inc. and Biomet, Inc. US FTC, European Commission Accepted with conditions All regions of Japan 2015 Integration of NXP Semiconductors N.V. and Freescale Semiconductor, Ltd. US FTC, European Commission Accepted with conditions Worldwide 2015 Integration of Intel Corporation and Altera Corporation European Commission Accepted Worldwide 2016 Integration of Western Digital Corporation and SanDisk Corporation US FTC Accepted Worldwide 2016 Integration of Denali Holding Inc. and EMC Corporation US FTC, European Commission Accepted Worldwide 2016 Acquisition of KLA-Tencor Corp. shares by Lam Research Corp. USDOJ The parties abandoned their plan N/A (Source: Compiled by the authors) Open in new tab In these cases, the JFTC exchanged information or coordinated enforcement activities with entities such as the United States Federal Trade Commission (US FTC), the United States Department of Justice (USDOJ), and the European Commission. In 2009, the JFTC examined the Panasonic Corporation’s acquisition of Sanyo Electric Co., Ltd.’s shares, alongside 10 other competition authorities, including the US FTC and the European Commission. There were many common factors in this case, although each competition authority defined each country (or region) as a geographical product market (such as ‘all regions of Japan’ or ‘European Economic Area’). The JFTC exchanged information and coordinated enforcement activities with the other competition authorities. Concerning mergers between high-tech manufacturers in 2011, the JFTC exchanged information and coordinated enforcement activities on the cases that involved integration among central processing unit (CPU) and hard disc drive (HDD) manufacturers. In these cases, the JFTC defined the geographical market as worldwide. The last case concerned the proposed acquisition of KLA-Tencor Corporation shares by Lam Research Corporation in 2016. This case represented a vertical merger between Lam, a leading supplier of semiconductor fabrication equipment, and KLA, a leading supplier of metrology and inspection equipment. The JFTC examined this case while exchanging information with the USDOJ. The merging parties abandoned their plan after the JFTC informed them that the proposed business integration would substantially restrain competition in the fields of production and sales of semiconductor fabrication equipment due to the potential for Lam to foreclose competition by denying timely access to KLA’s metrology, inspection equipment, and related services. Process of international cooperation Three controversial issues arise in the process of international cooperation. The first concerns confidentiality waivers. This section briefly outlines the release of confidentiality waivers and highlights problems with confidentiality legislation. The second issue is identifying appropriate actors for information exchange. It is necessary to identify the partner organization and the appropriate counterpart as soon as possible to realize a smooth exchange of information with the entity that examines a business combination. The third problem is the timing of the information exchange. There are differences among various jurisdictions’ systems and practices of business combination examination as well as their timing for making second requests and remedies. However, finding the best approach for national authorities and business combination parties to agree on timing would be highly desirable. The first issue of confidentiality waivers is as follows. When the JFTC plans to exchange information and coordinate enforcement activities with other competition authorities, it obtains confidentiality waivers from the merging parties. Confidentiality waivers are covered by Article 39 of the Antimonopoly Act, which prohibits the chairman, commissioners, and staff members of the JFTC from divulging information to others or making surreptitious use of enterprise secrets. Regarding this article, the phrase ‘secrets of enterprises’ means information that satisfies the following three conditions: (i) it is not known publicly, (ii) the enterprise hopes it will remain secret and (iii) there is an objective, rational reason for the information to remain secret. Confidentiality waivers are concerned with the second condition: the enterprise hopes the information will remain secret. It is important for the JFTC to obtain confidentiality waivers so that it can respect Article 39 of the Antimonopoly Act. National law provisions that work as information gateways allow competition authorities to exchange confidential information without obtaining waivers. In Japan, Article 43-2 of the Antimonopoly Act corresponds to these provisions. There are also so-called ‘second generation agreements’, which are similar agreements between competition authorities. For example, the ‘USA and Australia Mutual Antitrust Enforcement Assistance Agreement’, which concluded in 1999, contains such a provision. There are three critical issues concerning the use of confidentiality waivers. First, using confidentiality waivers means that merging or third parties consent to providing competition authorities with confidential information that will enable them to discuss and exchange information that would otherwise be protected by confidentiality rules. Second, generally speaking, merging parties have the ability and incentive to promote cooperation with competition authorities because they hope to obtain these authorities’ clearance as soon as possible. Thus, merging parties can influence the timing of investigations. For example, it is preferable for all competition authorities to be notified concurrently to coordinate enforcement effectively. It is easier to obtain waivers in cases concerning mergers than those over cartels because competition authorities and merging parties generally cooperate. Merging parties may need to negotiate remedy proposals with multiple jurisdictions, such as the JFTC and other competition authorities. Third, obtaining waivers results in competition authorities being able to engage in more informed, detailed discussions on substantive assessment and possible remedies; exchange confidential information, such as documents or statements, allowing agencies to obtain timely information; or promote cooperation on remedy design and implementation, helping to avoid inconsistent outcomes. Nonetheless, it is possible for competition authorities to cooperate without waivers. The first step to international cooperation is identifying the counterpart agencies. The JFTC generally collects this information from merging parties, press releases, and news sources, such as newspapers and internet media. The merging parties often inform the JFTC which jurisdictions they have notified. The next step is for the JFTC to contact the counterpart agencies. The JFTC generally contacts counterparts through a case team, liaison officers, such as from the ICN framework, bilateral or multilateral relations, or the international affairs division. The third step is for the JFTC to communicate with the counterpart agencies. The JFTC generally does so through emails and teleconferences. Sometimes, cases can take a long time to resolve because the time differences between agencies can impede information exchange and coordinated enforcement activities. International cooperation comprises bi- and multi-lateral frameworks. Bilateral examples include governmental cooperation agreements, the competition chapter of the Free Trade Area or EPA, and memorandums of understanding (MOUs) between competition agencies. Multilateral frameworks consist of notifications based on the recommendation of the Organisation for Economic Cooperation and Development (OECD) for international cooperation or the ICN’s framework for merger review cooperation. These bi- and multi-lateral international cooperation frameworks can help to accelerate the identification of information exchange partners. The counterparts identified in this way are important for communication when a specific case occurs and on a daily basis. Every country recognizes that competition authorities are essential to the voluntary provision and exchange of information and opinions from both sides. The third issue is the timing of the information exchange. The time constraints that apply to business combination reviews vary in different jurisdictions. The merger parties planning business combinations must deal with this issue. In fact, business combination parties must plan and implement a notification strategy in anticipation of possible indications from national authorities and the possible timing of such indications. Some jurisdictions, like Japan, have a rigid business combination examination schedule following notification. There are also places, such as the EU, where examination starts when the necessary materials have been aligned with the parties. Business combination examinations must be conducted in secrecy. However, hearings may be required for examinations, and examinations may have to be made public for the public interest. Therefore, it may be possible to adjust the timing of disclosures through interactions with the business combination party. Adjusting timings may be difficult if business combination review deadlines differ. Likewise, typically, remedies are pre-planned with certain jurisdictions in mind. In other jurisdictions, a remedy may not suffice. In that case, the parties may dislike the ‘cascading’ nature of the remedies as they proceed successively. Thus, parties may seek to coordinate between national authorities. Nonetheless, different remedies are inevitable because the effects of business combinations can differ depending on the jurisdiction. However, if timing problems are avoided, it is possible to exchange information early, reducing the burden on the parties and effecting an appropriate business combination. Problems and handling in reality Cooperation in merger review is voluntary. Aggressiveness toward cooperation differs in each jurisdiction in terms of competition authority and the individuals involved in a given case. Even if the agencies’ cooperation progresses smoothly, the available information may differ depending on the timing of the notification and the phases of the review. A competition authority that has already been notified or is proceeding with further examination may provide information unilaterally. For authorities that have enough information, little new evidence is obtained through the information exchange. In such a case, cooperation may be a burden for competition authorities that are providing information. Information provided by competitors and third parties may improve review efficiency. Despite the relative ease of obtaining waivers from the parties, it may be difficult to acquire similar permission from competitors and third parties. It is not realistic for competitors and third parties to provide opinions and information individually to competition authorities; therefore, useful information may not be shared efficiently. Information exchange is useful when competition authorities determine whether a merger is anticompetitive and which problem-solving measures are necessary. However, it does not apply to the effectiveness of remedies. Each country’s competition authorities must monitor whether parties comply with the remedies. The parties must commit separately to the competition authorities that judged the merger to be anticompetitive. Each authority is required to implement substantive remedies that are appropriate to the circumstances of the parties concerned and that the exchange of views are conducted to the extent necessary. Based on these facts, the authorities’ success depends on two important points: early communication and taking a case-by-case approach. Early contact and communication, even before merger notification, is preferred during investigations. It is beneficial because it enables the identification of counterpart agencies as soon as possible. Communication with other agencies may be beneficial when: deciding whether to open an in-depth (second-phase) investigation, discussing remedies with merging parties, determining to prohibit or challenge a merger, and anticipating the closing of an investigation. The extent of cooperation may vary with specific cases or counterpart agencies. For example, in some cases, the agency might only be able to exchange general information, such as the review schedule, market definition, or theory of harm. However, there are cases in which investigation tools, remedy design, and implementation can be coordinated, and confidential information can be exchanged based on waivers. Because each case is unique, it is important to identify and contact counterpart agencies as soon as possible. The strategic use of international cooperation in business combination examination also should be considered. In the case of a notification of a certain jurisdiction, business combination party may have reasons for seeking cooperation with other authorities to schedule business integration. The authorities may also explain to the parties of the business combination their reasons for taking time to conclude an internationally consistent review. They must also explain the remedy. International cooperation may be used to comment on the need for international consistency. Also, authorities may differ in policy and conclusions (as in the cases described above in Section I). In such cases, the authority can explain that it is making a borderline decision between international cooperation and domestic competition policy. International cooperation may help to highlight and explain the authorities’ actions. Not only promoting but also strategically positioning international cooperation serve to increase utility value. Technical assistance in merger control Another important factor remains concerning international cooperation in merger examination: technical cooperation in the context of merger examination. The JFTC has provided technical cooperation, particularly to countries in East and Southeast Asia. Technical cooperation is celebrated in the competition chapter or EPA. For example, the Japan–Mongolian Economic Partnership Agreement,16 which was signed and put into effect recently, contains the following clauses. Chapter 11 Competition Article 11.2 Cooperation on Controlling Anticompetitive Activities The Parties shall, in accordance with their relevant laws and regulations, cooperate, and assist each other to control anticompetitive activities within their relevant, available resources. The details and procedures of the implementation of cooperation under this Article shall be specified in the Implementing Agreement. Similar language is present in more than 10 EPAs between Japan and countries such as Vietnam and Indonesia.17 By establishing such a framework, the JFTC carries out competition cooperation with a variety of competition authorities. An important issue in this cooperation is technical support, and one of the pillars of technical support is the sharing of knowledge and experience of the practice of business combination review. Teaching the philosophical and theoretical underpinnings of business combination examination as well as case studies of Japanese examinations are part of the technical support of business combination examination within the framework of such international cooperation, especially in recent years. Technical assistance has become practical; it now includes discussions of the merits and limitations of the methods of business combination examination, which are based on concrete cases from the destination country. In fact, technical support has become a routine form of exchanging experiences and opinions on common issues. This situation can be explained in several specific cases. For example, a local seminar on technical assistance projects using the Japan-ASEAN Integration Fund was held in Bandung, Indonesia, in 2017. It was attended by both of the authors and participants from the competition authorities of major Association of Southeast Asian Nations (ASEAN) countries. Lectures were given on theoretical and practical aspects of business combination examination, a report based on examples from each attendee was presented, and question and answer sessions followed. Discussions deepened the relationships between the officials from the countries represented. Moreover, sharing a list of participant names secured a means of continuing communication in the future. Such seminars are held several times a year, advancing technical support on the methods and tasks of business combination examination. IV. FUTURE FRAMEWORK OF COOPERATION We will now evaluate the practice of international merger control cooperation between the JFTC and another authority based on the guidelines that were prepared by the ICN Merger Working Group in May 2015. The ‘Practical Guide to International Enforcement Cooperation in Mergers’ (the ‘Guide’) draws on the experiences of the ICN Merger Working Group’s member agencies and non-governmental advisers.18 The Guide describes five overarching principles: i) Help to promote consistent outcomes; ii) Increase investigative efficiency by reducing unnecessary duplication of work, delays, and burdens for parties and agencies; iii) Reduce gaps in the information available to agencies and lead to more informed agency decision-making and enhanced analytical robustness; iv) Help to promote convergence, both in the analysis of specific cases as well as more generally, in relation to principles applicable to all mergers; and v) Increase familiarity between agencies and the mutual understanding of their merger review processes, which in turn may help foster trust and aid future cooperation. The Guide also presents several real-world examples that are highly applicable to practice. An excerpt from the Guide is shown below in the frame. The Guide is the most significant of our collected reference documents. As researchers and philosophers planning a future competition policy, we determine the relevance of real cooperation circumstances and future plans for authority cooperation by comparing them to the Guide. (i) It is possible to experience varying degrees of cooperation with different agencies regarding the same transaction and have differences in the process due to different levels of tolerance for cooperation. This first statement appears in Practical Example 1 of the Guide. There are examples of cooperation among the various authorities of the European Commission. In fact, in recent international business combinations, many authorities have had to notify the authorities in order to examine a transaction’s competitive impact on their jurisdiction. While there are differences in the degree of cooperation among those authorities, cooperation should be initiated as soon as possible, and the process should be transparent. It is valid for the substantive review and remedies to differ from one jurisdiction to another, and such differences may reflect distinctions among legislative or policy objectives. Such diversity, at least in the short term, may be unavoidable. However, delays should be avoided whenever possible as should ambiguity in the schedule and requests for obscure evidence and data. If uncertainty arises in a separate jurisdiction, it can place a heavy burden on the business combination party. (ii) Benefits of early identification of other reviewing agencies and early contact. The second statement comes from the JFTC merger cooperation enforcement. This recommendation is the same as the result of our research analysis in the sub-Section ‘Process of international cooperation’. It may seem simple at first glance. However, when exchanging information across jurisdictions, identifying appropriate partners is imperative but time-consuming. For this reason, it is necessary to find opportunities to promote cooperation and exchange information. (iii) Successful cooperation is necessary when agency investigations are in different phases of review. It is the future goal of the competition authority in the early stage. This process is too advanced to be implemented by the competition authority in the early stage. The JFTC takes a systematic approach to cooperating with authorities through close communication. The hurdle of international cooperation is rather high for authorities where competition law enforcement has just begun. For example, there may be few staff members who are fluent enough in other languages to exchange opinions, and their positions may not be high-ranking enough. In such a jurisdiction, awareness of competition law and policy may be limited, and business combination examination itself may be challenging. Therefore, international cooperation in business combination examination with competition authorities in jurisdictions with little antitrust law experience is difficult. To respond to such circumstances, the competition authority with more history and resources should conduct a suggestive model of business combination examination in cooperation with the less experienced authorities. In addition to the difficulty of reviewing a business combination in an agency’s own jurisdiction, it is an additional burden to attend to the needs of the cooperating authorities. If possible, appropriate cooperation should be carried out with the help of international organizations and the ICN rather than engaging with only one jurisdiction. (iv) Successful cooperation without the use of waivers is possible and practically feasible. This type of cooperation is realistic and feasible, based on our analysis of actual cooperation enforcement. This part of the Guide indicates that procedural issues are important but can be reduced by solid substantive examination. Procedural issues are too time-consuming when it comes to determining which measures are needed. Therefore, it is important to research and explore the possibility of following procedures beforehand. It is a significant contribution to a jurisdiction’s examination process if case information from a previous procedure can be disclosed. For this reason, information disclosure and further research on cases utilizing examination procedures should be encouraged in jurisdictions with a history of competition law and resources. (v) While joint interagency investigations can avoid unnecessary duplication of work for parties, it is required that the authorities in each country maintain autonomy and independence with impartial merger control implementation. Our research on international merger control cooperation supports this principle. Each competition authority needs to make its decision based on its own analysis. A critical examination of the involvement of competition authorities in international cooperation can be conducted after their independence is assured. Business combinations are, in principle, a form of free commerce. If there is a high probability of a business combination will result in an anticompetitive situation, then it is necessary to address that risk. Therefore, the business combination examining authority should perform the examination to achieve a suitable post-transaction situation without establishing a conflicting relationship with the business combination party. Merger review officials in every country must keep in mind the necessity of conducting appropriate, rational examinations. International cooperation in this context should benefit the parties to the notified transaction. However, the goal is to balance all stakeholders, including the parties, competitors and consumers, and level the playing field in the jurisdiction. It may be possible to adjust the applicable time frames upon the request of the parties. However, the parties should be aware from the beginning that such adjustments may prove difficult. Common issues should be aired so that they complement the discussions. Opinions from different angles should also be considered. When preparing each conclusion, there should be multifaceted conversations. In summary, it is essential to talk from an early stage about promoting a competition authority’s international cooperation with business combination parties and communicate that conclusions may take different forms. (vi) The goal for all authorities is to cooperate in the negotiation of remedies so that they lead to efficient, effective outcomes for the agencies and the merging parties. This statement appears in Practical Example 6 of the Guide. The JFTC and other authorities rely on this principle as they oversee cases. This goal can be achieved as case reviews proceed. The case study on remedies is not clear-cut. For example, the measures taken by the Chinese authorities differed in several cases with the JFTC. Much of the content of the international exchange of opinions cannot be disclosed due to confidentiality. However, it can be stated that the best remedy was considered in both jurisdictions so as not to restrict competition substantially; as a result, the required remedy changed. It appears that there was a lot of interaction with the parties, and it was a very long, time-consuming case. It will be seen as a case of remedy in many international cooperation projects in the future. Although it is desirable to disclose as much appropriate information as possible, for the time being, it is important to accumulate cases steadily. (vii) It is beneficial to cooperate in the implementation of remedies that address different competition concerns in different national markets and result in consistent outcomes. This is the last statement in Practical Example 7 of the Guide. Consistently, our goal has been to ensure this principle as it pertains to the JFTC enforcement guidelines and enforcement cooperation research. The Guide suggests one must proceed with international cooperation when conducting a business combination examination. So, how should we proceed with cooperation? It would be optimal to proceed from economic analysis because its rationales and analytical methods are used all over the world. The legal system is different in every jurisdiction, as are the stakeholders who receive the benefits. However, economics, which is an analytical method, is common throughout the world. It would be helpful to use this common factor as the basis for advancing cooperation in the proceedings and conceptualization of business combination review. International cooperation in economics should be promoted since business combination examinations are common in economic analysis. Our assessments for future merger control cooperation are that globalization will continue and thus, cooperation in merger control will continue to be necessary. The Guide provides helpful direction and should be used appropriately. The following situations are possible: (i) examination cooperation for business combination in the large digital industry; (ii) international examination cooperation for rescue and reorganization types of business combination (such as with a failing company) in conventional industries; and (iii) taking measures to ensure that state-owned enterprises engage in international cooperation for business combination examination. The first situation involves business combinations in the vast digital industry. Specifically, what kind of business combination examination is desirable for business combinations concerning the GAFA jurisdictions (Google, Amazon, Facebook, and Apple) among other large companies in the digital industry? How should international cooperation proceed under these circumstances? First, in principle, the examination should be conducted within the framework of previous business combination examinations in the competition law context, even when the case involves a large enterprise. Furthermore, to create a special framework for a particular type of business combination examination is to adopt an intervention policy. It is undesirable for the government to intervene in market transactions where fair and free competition should take place. Based on this principle, it is possible that information that has not been priced yet (for example, data exchange) may become a source of market power that defines the market. The determination of market power based on such data is controversial even in jurisdictions with advanced competition policy. It is considered even more challenging to deal with competition authorities in developing countries. However, the digital world is developing rapidly, and it is possible that business combinations in that realm will be faster than in conventional industries. For this reason, it may become necessary to exchange information closely and introduce new ideas boldly when engaging in international cooperation for business combination examinations. To put those aims into practice, every authority would need to engage in regular training and voluntary research. The second situation involves a conventional industry’s rescue and reorganization type of business combination. Large-scale business combinations that cause competition policy problems may require special attention in the context of a bailout and reorganization. It can occur during digitization, and it may result in a conflict within the conventional industry. The examination of a rescue type of business combination may involve political action, which would be hard to manage. There are many potential difficulties for competition authorities seeking to follow the principles, and international cooperation will be necessary. Competition in a given country could be affected; nonetheless, one competition authority may need to provide a supporting opinion to help the difficult position of a competition authority of another jurisdiction. Competition is important as is performing outreach from an academic point of view as well as that of a policymaker. Efforts should be made to build trust among competition authorities and stakeholders. The third situation is the review of business combinations involving state-owned enterprises, which we expect to become even more complicated. Such cases can include large political powers and industrial and regulatory policies. One aspect where international cooperation in business combination examination is useful is its support of public opinion concerning the importance of competition. Another aspect is multilateral support for the competition authority in a jurisdiction from international organizations and networks. Competition authorities can also realize the essence of competition policy by strategically utilizing international cooperation as an external pressure. It may be necessary for international organizations to proceed with research on such cases to accumulate theoretical and empirical studies and run simulations. In any case, experience with international cooperation in merger control will accumulate with each assessment of cases in the future. We can prepare based on these experiences and case studies. V. CONCLUDING REMARKS This article has discussed international cooperation in merger control enforcement under competition law. We described the framework of merger control in Japan, recent international agreement developments, merger cases with international cooperation, and the standard review process of authorities, including waiver considerations. Finally, we evaluated the Practical Guide to International Cooperation in Mergers. This article makes three contributions to this field. First, it provides commentary on international cooperation in merger control, including the necessity of confidentiality waivers. Confidentiality waivers are a simple step during a merger review. The merging parties and reviewing authorities all seek to proceed promptly with the examination. The waiver is an effective means of sharing information, and it allows the examination to proceed faster than a separate review by multiple authorities. Second, the article provides basic information for assessing the appropriateness and transparency of merger control policies. Mergers are normal business transactions that should not be restricted unless they generate market power. When companies implement a merger, the move may be irreversible; therefore, prior examination is imperative. A prompt review is desirable for both domestic and international mergers. The need for information sharing has been discussed before in merger investigation procedures for international mergers. This article raises the following issues: it is easy to cooperate if there is an agreement; however, a waiver is necessary, and early contact—even if only informal—is essential. The third contribution is to encourage cooperation between inexperienced and advanced competition authorities. This recommendation is based on the experience of the JFTC’s international cooperation activity in merger control. From an academic viewpoint, the discussion of international cooperation in merger control is longstanding due to several mega-mergers in the last century.19 The creation of a practitioner’s guide to cooperation is necessary. There are three future challenges at the next step of enforcement cooperation. First, some jurisdictions have yet to establish cooperative relationships. Statutory time frames, market definition, analysis of competitive impact and remedies may all vary by country, although a merger may have similar impacts on competition everywhere. A discussion on preparedness for cooperative relationships should be promoted to achieve a business-friendly global environment. Second, we must pay attention to the differences among countries’ merger control systems. Due to distinctions in each country’s ideas and laws about merger control, conclusions may differ. Independent decision-making and respect for diversity are fundamental to the competition policies of various jurisdictions. We must balance the importance of cooperative relations and respecting the differences in merger control of each country to maintain transparency, competition-oriented thinking, and well-organized policy implementation. Third, it may be necessary to review information exchange before and after a merger. Although this protocol can be judged on a case-by-case basis, it may become useful to clarify what kind of information exchange is required during an examination and after the review. In particular, this procedure would apply to cases that are approved with remedies. Further studies are needed to maintain the transparency, legal stability, and predictability of merger investigations. Within the limits of available resources, it is necessary to accumulate case studies of information exchange for each country’s merger investigations and international cooperation experience and study the classifications and issues of cases in the future. Acknowledgement We would like to thank our colleagues for their useful comments. The opinions expressed in the article are the authors’ own and do not necessarily reflect the views of any organization. Funding This work was supported by JSPS KAKENHI Grant Number 16K03649. Also this research was supported by a grant-in-aid from Zengin Foundation for Studies on Economics and Finance. Footnotes 1 ICN, <http://www.internationalcompetitionnetwork.org/> accessed 1 May 2019. 2 Holger Breinlich, Volker Nocke and Nicolas Schutz, ‘International Aspects of Merger Policy: A Survey’ (2017) 50 International Journal of Industrial Organization 415. 3 Douglas A Melamed, ‘International Antitrust in an Age of International Deregulation’ (1997) 6 George Mason Law Review 437. and William E Kovacic, ‘Transatlantic Turbulence: the Boeing-McDonnell Douglas Merger and International Competition Policy’ (2001) 68 Antitrust Law Journal 805. 4 Imelda Maher, ‘Competition Law in the International Domain: Networks as a New form of Governance’ (2002) 29 Journal of Law & Society 111; and Abbott B Lipsky, ‘Managing Antitrust Compliance through the Continuing Surge in Global Enforcement’ (2009) 75 Antitrust Law Journal 965. 5 Larry Fullerton and Megan Alvarez, “Cover Story, Convergence in International Merger Control’ (2012) 26 Antitrust ABA 20. 6 Vanessa Turner and Max Kauman, “Convergence and Divergence in the EU and U.S. Approaches to Document Requests in Complex Mergers’ (2016) 31 Antitrust ABA 76. 7 Thomas Deisenhofer, ‘International Cooperation in Merger Cases — An EU Practitioner’s Perspective’ in Philip Lowe and Mel Marquis (eds), Merger Control in European and Global Perspective (Hart Publishing 2012) 227–42. 8 The article mentions that the Oracle case was the one rare exception. 9 Koki Arai, ‘An Airline Merger in Japan: A Case Study Revealing Principles of Japanese Merger Control’ (2004) 4 Journal of Industry, Competition & Trade 207. 10 Simon Vande Walle and Tadashi Shiraishi, ‘Competition Law in Japan’ in John Duns, Arlen Duke and Brendan Sweeney (eds), Comparative Competition Law (Edward Elgar Publishing 2013) 4. 11 Koki Arai, ‘Merger Assessment in Japan: The Declining Importance of Market Shares’ (2015) 6(5) Journal of European Competition Law & Practice 337. 12 See the JFTC’s website: <https://www.jftc.go.jp/en/legislation_gls/amended_ama09/amended_ama15_04.html> accessed 1 May 2019. 13 The JFTC’s ‘Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination’ (14 June 2011) <https://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/110713.2.pdf> accessed 1 May 2019. 14 The JFTC’s ‘Policies Concerning Procedures of Review of Business Combination’ (14 June 2011) <https://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/pcbr.pdf> accessed 1 May 2019. 15 The JFTC’s ‘Memorandum of Cooperation between the Fair Trade Commission of Japan and the Competition Commission of Singapore’ (22 June 2017) <https://www.jftc.go.jp/en/pressreleases/yearly-2017/June/170622_files/170622-2.pdf> accessed 1 May 2019. 16 Agreement between Japan and Mongolia for an Economic Partnership. See <https://www.mofa.go.jp/policy/economy/fta/mongolia.html> accessed 1 May 2019. 17 Japan has 17 EPAs of Japan, including the Trans-Pacific Partnership (TPP) Agreement and the Japan–EU Economic Partnership Agreement, as of 28 April 2019. See <https://www.mofa.go.jp/policy/economy/fta/index.html> accessed 1 May 2019. 18 International Competition Network, Merger Working Group, ‘ICN Practical Guide to International Enforcement Cooperation in Mergers’ (2015) <https://www.internationalcompetitionnetwork.org/wp-content/uploads/2018/05/MWG_GuidetoInternationalEnforcementCooperation.pdf> accessed 1 May 2019. 19 Ram Ramakrishnan and Anjan Thakor, ‘Cooperation versus Competition in Agency’ (1991) 7(2) Journal of Law, Economics, & Organization 248; Donald Baker, ‘Antitrust Merger Review in an Era of Escalating Cross-Border Transactions and Effects’ (2000) 18 Wisconsin International Law Journal 577. © The Author(s) 2019. Published by Oxford University Press. All rights reserved. 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Journal of Antitrust EnforcementOxford University Press

Published: May 1, 2002

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