Akinori Uesugi 13 December 2007 Recent Antitrust Developments in Japan

1 Today’s topics  Developments in cartel regulation  Developments in merger regulation  Major legislative developments

2 1.Developments in cartel regulation (1) Major developments regarding cartel regulation in Japan The leniency program has started as of Jan (only 2 years ago). Total applications for leniency position amounted 105 in its first 15 months. This means 7 applications per month on average. When the leniency program was adopted by the Diet in April 2005, not many applications were predicted. The JFTC had already handed down 7 cartel cases based on the leniency applications. Many more leniency related cases are under investigation. The court is getting tougher against cartelists by imposing heavier criminal fines. As to the steel bridge construction bid rigging case, the Tokyo High Court imposed 7.8 billion yen in total (about US $70 million) criminal fines on 26 cartel participating companies.

3 1.Developments in cartel regulation (2) Basic information on the cartel regulation system in Japan Both administrative fines and criminal fines can be imposed on cartel participating companies. The criminal case can be prosecuted only if the JFTC files an accusation on the case with Attorney General. The JFTC files accusation only in serious cartel cases. The number of applicants in each leniency case is limited to a maximum of three. Leniency application after the start of the JFTC investigation is permitted.

4 1.Developments in cartel regulation (2) The first applicant before the start of the JFTC investigation is immune not only from administrative fines but also from criminal penalties. The criminal immunity covers individuals belonging to the applicant company. In case of bid rigging, ordinary suspension period from public works by procurement agencies is halved if the companies are among the qualified leniency applicants. Administrative fine = 10% of turnover during the cartel period (three years maximum).

5 1.Developments in cartel regulation (3) Examples of recent administrative fines Nagoya subway bid rigging case (14 Nov 2007): total amount of surcharge ordered is 1.92 billion yen Polyethylene tubes for gas pipeline bid rigging case (29 June 2007): 1.83 billion yen in total Floodgate construction contract bid rigging case (8 March 2007): 1.67 billion yen in total Sewage plant contract bid rigging case (16 Jan 2007): 2.07 billion yen in total

6 2.Developments in merger regulation (1) The JFTC issued new merger guidelines in March The new merger guidelines symbolise the JFTC’s willingness to harmonise its merger regulation process with U.S. and EU counterparts. Main features of this amendment: Adoption of SSNIP test for a market definition Safe harbor by using HHI after the merger and the delta of HHI Japan set higher standards for safe harbor; namely, —where the post merger HHI is below 1500; —where post merger HHI is above 1500 but below 2500, the delta is below 250; and —where post merger HHI is above 2500, the delta is below 150.

7 2.Developments in merger regulation (2) It means that the preparation for merger clearance for international mergers becomes easier, because the same analysis with those for the U.S. and EU might be sufficient. Since the early part of 2000, the JFTC held merger analysis conferences with counterparts of the U.S. and EU using cases disposed of by each agency. On international merger cases, the JFTC cooperates regularly with U.S. and EU counterparts.

8 3.Major legislative developments (1) The JFTC plans to submit an amendment bill to the next regular session of the Diet starting in Jan Major amendments under discussion are: Expansion of coverage of administrative fine order to an exclusionary acts of monopolisation and certain types of unfair trade practices. Extension of statute of limitation from 3 to 5 years. Increase of fines against the ring-leaders of cartels and decrease of fines against those who had cooperated with the JFTC investigations. Improvement in merger notification system; change from ex-post notification as to share acquisition into ex-ante notification system. Change of notification thresholds for foreign acquirers.

9 3.Major legislative developments (2) Expansion of leniency positions for group companies. More than two companies within a group can be afforded the same leniency position. Extension of statute of limitations from 3 to 5 years; this amendment will make it easier for the JFTC to start an investigation on international cartel cases concurrently with U.S. and EU competition authorities. Change in prior notification system of share acquisition. Up to now, foreign acquiring companies could easily avoid post-filing obligations by using indirect way of share acquisitions. This amendment will make the JFTC merger clearance a more important consideration for foreign acquirers.

10 For further information, please contact: Akinori Uesugi Freshfields Bruckhaus Deringer Ark Mori Building 18F, Akasaka, Minato-ku, Tokyo TEL: FAX:

11 © Freshfields Bruckhaus Deringer 2007 This material is for general information only and is not intended to provide legal advice. TOKBS20586