Monday, February 19, 2007

Japan Defends New Merger Guidelines

Source: Japanese Regulator Defends Merger Rules, Fair Trade Commission to Revise Merger Guidelines, Japan Fair Trade Commission

The Fair Trade Commission (FTC) of Japan has been defending its new merger guidelines, which aim to facilitate the organization's anti-monopoly objectives, against criticisms that the rules were designed to enhance the strength of domestic companies by stifling foreign competition. These criticisms are grounded in the fact that these guidelines will make it easier for domestic companies to enter into mergers. They will be implemented in April.

Under the new guidelines, the FTC will review fewer proposed mergers. Part of the aim of the revised rules was to make regulations more transparent and predictable while speeding up the overall review process. While some understand this to mean that the new regulations will make mergers easier, Takeshima, chairman of the FTC, disagrees. He cites the increased competition that Japanese firms face on the global market and the subsequent need to streamline the merger review process for the sake of efficiency as major reasons behind the revisions.

Critics claim that these rules will be used as a means to block foreign takeovers of Japanese firms by making it easier for a Japanese company to rescue another Japanese company that has become the target of foreign bids. In other words, they open the door to friendly mergers with domestic firms with less anti-monopoly scrutiny.

1) Do the new rules favor Japanese domestic companies?
2) Will Japan face serious ramifications in the form of decreased foreign investors because of the way the new guidelines work?
3) What other motivations might Japan have to pass such guidelines?

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