1 Major Business Combination Cases in Fiscal Year 2014 (Tentative Translation) June 10, 2015 Japan Fair Trade Commission For the purpose of ensuring the transparency of reviews undertaken by the Japan Fair Trade Commission (hereinafter referred to as JFTC) on business combination cases, and for the purpose of improving the predictability of the JFTCs reviews on cases, the JFTC has published Guidelines to Application of the Antimonopoly Act concerning Review of Business Combination (hereinafter referred to as the Business Combination Guidelines)in applying the Antimonopoly Act (hereinafter referred to as the AMA) to the JFTCs reviews on business combinations. In addition, the JFTC has also published the results of the reviews of major business combination cases each fiscal year. This year, the JFTC also publishes the results of reviews of major business combinations in fiscal year 2014 and provides the data associated with these reviews. The JFTC sincerely hopes that companies planning business combinations will make use of the published outcomes of the JFTCs reviews of major business combination cases, as well as the Business Combination Guidelines. Inquiries: Mergers and Acquisitions Division Economic Affairs Bureau, General Secretariat Japan Fair Trade Commission Telephone: 03-3581-3719 (direct) Website: http://www.jftc.go.jp/
For the purpose of ensuring the transparency of reviews undertaken by theJapan Fair Trade Commission (hereinafter referred to as “JFTC”) on businesscombinationcases,andforthepurposeofimprovingthepredictabilityoftheJFTC’sreviews on cases, the JFTC has published “Guidelines to Application of theAntimonopolyActconcerningReviewofBusinessCombination(hereinafterreferredto as the “Business Combination Guidelines”)”in applying the Antimonopoly Act(hereinafterreferredtoasthe“AMA”)totheJFTC’sreviewsonbusinesscombinations.Inaddition,theJFTChasalsopublishedtheresultsofthereviewsofmajorbusinesscombinationcaseseachfiscalyear.
This year, the JFTC also publishes the results of reviews ofmajor businesscombinationsinfiscalyear2014andprovidesthedataassociatedwiththesereviews.
TheJFTCsincerelyhopesthatcompaniesplanningbusinesscombinationswillmake use of the published outcomes of the JFTC’s reviews of major businesscombinationcases,aswellastheBusinessCombinationGuidelines.
Inquiries: Mergers and Acquisitions Division Economic Affairs Bureau, General Secretariat
Japan Fair Trade Commission Telephone: 03-3581-3719 (direct)
companies concerned (note that the term “HHI” in this context refers to the Herfindahl-HirschmanIndex; thesameshallbeappliedhereafter).When itcomestomarketshare, inprinciple,thesefiguresareshownat5%intervals.
(Note4) Ineachcase,ahorizontalbusinesscombinationreferstoabusinesscombinationbetweencompanieswith a competitive relationship in the same particular field of trade, a verticalbusiness combination refers to a business combination between companies at differenttransactionstages,suchasamergerbetweenamanufacturerandadistributorthatsellsitsproducts, and a compound business combination refers to a business combination that isneitherahorizontalbusinesscombinationnoraverticalbusinesscombination,suchas theacquisitionofsharesbetweencompaniesindifferentgeographicrangesforthesameparticularfieldoftrade.
PartI OutlineofthiscaseMuromachi Foods Co., Ltd. established by Sato Foods Industries Co., Ltd.
(hereinafterreferredtoas“SatoFoods” ;thegroupofcombinedcompanieswhoseultimateparentcompanyisSatoFoodsshallbereferredtoas“SatoFoodsGroup”)whichmanufacturesanddistributespackagedricecakeinAugust2014asasubsidiaryof SatoFoodsplanned to acquire thepackaged rice cakemanufacturing and salesbusinessofKimuraFoodsCo.,Ltd.(hereinafter,“KimuraFoods”;SatoFoodsGroupandKimuraFoodsarehereinaftercollectivelyreferredtoas“theParties”.)
Packaged rice cake is aseptic-packaged rice cake preservable at roomtemperatureandhassomevarietiesdependingontheshape,thickness,andwhetheror not it has been sterilized by heat. However, there is no great difference iningredients,tastes,andeffectsamongthemandpricelevelsarenotlargelydifferenteither.Therefore,substitutabilityforusersisdeemedtoexistamongdifferenttypesofpackagedricecakeproducts.
AsforKagamimochi,roundricecakeofferedtoadeity,itisusednormallyforyear-endandnew-yeardecoration,andthushaslimitedsubstitutabilityforuserswithothertypesofpackagedricecake.However,Kagamimochiusuallycomesaspackagedricecakeinacontainerfordecorationandthereisnospecialequipment,technique,or process required to produce such containers for Kagamimochi. Therefore,substitutability for suppliers is deemed to exist between Kagamimochi and othertypesofpackagedricecakeproducts.
In consideration of the above, the JFTC defined “packaged rice cake”whichincludesKagamimochiastheproductrangeinthiscase.
With the conduct of this case, the totalmarket shareof thePartieswouldbeapproximately 40% (the largest) and the increment of HHI approximatetly 750.Therefore, the acquisition does notmeet the safe harbor standards forhorizontalbusinesscombinations.
【Marketshareofpackagedricecakein2013】Rank Companyname Marketshare1 A Approx.25%2 SatoFoodsGroup Approx.25%3 KimuraFoods Approx.15%4 B Approx.10%5 Others Approx.25%Total 100%
salesofpackagedricecake.Apartfromthem,thereareotherenterpriseswithacertaindegree of competitiveness, including some manufacturers which produce privatebrandgoods(hereinafter,“PBgoods”)formajordistributors.AsthesalesofPBgoodshavegrowninrecentyears,competitorsofthiskindconstitutesubstantialcompetitivepressureagainsttheParties.
largevolumetomajortradingfirmsandmassmerchandiserswhicharelargerthanthemselvesinthesizeofbusiness.Massmerchandisersarefacingtoughcompetitionintermsofpricesandalineupofproductsincludingpackagedricecake,andthushavetopurchasegoodswhichcouldattractmanycustomersatcheaperprices.Inlightofthis,packaged rice isnotnecessarilyattractive tomassmerchandisersbecause its
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salesareconcentratedaroundtheturnoftheyearandconsumers,especiallyyouths,areturningawayfromricecakeduetothechangeinJapaneselifestyle.Somemassmerchandisers claim thatpackaged rice cakeproductsof theParties caneasilybesubstitutedwith thosemade by other companieswhile the sales of PB goods aregrowingaswell.Inconsiderationofthis,itisreasonabletothinkthatcustomersofthePartieshavestrongpricebargainingpowerandthatpricecuttingpressurefromusersisstrong.
In considerationof theabove, it is reasonable to think thatKimuraFoodshadlimitedbusinesscapabilitiesatthetimeofthereviewofthiscase,comparedtoothermanufacturersofpackagedricecake.
PartI OutlineofthiscaseRidgeback Acquisition LLC (headquartered in the US), a subsidiary of Mars
Incorporated(headquarteredintheUS;hereinafterreferredtoas“Mars”;agroupofcombinedcompanieswhoseultimateparentcompanyshallbereferredtoasthe“MarsGroup”),whichmanufacturesanddistributespetfood,plannedtoacquirethewholebusinessofdomesticpetfoodsalesoftheProcter&GambleCompanyofJapanLimited(hereinafter, “P&G”;Mars and P&G are collectively referred to as “the Parties”), aJapanese subsidiary of Procter & Gamble Co. (headquartered in the US), whichmanufacturesanddistributespetfood.
growth,dogsandcatshavedifferenttastesforfoodaswell.Inconsiderationofsuchdifferences, pet food manufacturers are developing, commercializing, anddistributingfoodfordogsandcatsrespectivelyandconsumersarealsopurchasingthemaccordingly.
Dry type products, characterized by their high calories and nourishmentefficiency,areusuallysoldinlargeunits,suchasinalargebagatalowerpriceperunit.Ontheotherhand,wettypeproductstypicallycontainalotofwaterinthem,andthushaveapleasingflavorandareeasytoeat.Theyareusuallysoldinsmallunitssuchasincansandbagsatahigherpriceperunit.Forthisreason,consumerstendtopurchasedrytypeproductsasmaindishandwettypeassidedishfortheir
madeof fine ingredients and sold at a highprice range. Pet foodmanufacturersdifferentiate this type of product from other products when they develop,commercialize, and distribute it. Consumers, in the meantime, tend to choosegeneralproductsorpremiumfoodinterchangeablydependingonthepreferenceatthemomentbasedonthepriceandquality.
Dieteticfoodisatypeofgoodswhichpromotesimprovementofsymptomsofaspecificdiseaseofdogsorcatswithnutrientsadjustedaccordingtothesymptomsofthedisease.Petfoodmanufacturersdifferentiatethistypeofproductsfromotherswhen they develop and commercialize it, and sell it mainly through veterinaryhospitals.However,dieteticfoodisnotmedicinalsuppliesandthusnotsubjecttoapproval or authorization concerning manufacture and sales, or regulations forrepresentation.Forthisreason,petfoodmanufacturersdevelop,commercialize,anddistributeproductslabeledasdieteticfoodonthebasisofabenchmarkoftheirown.Consumerstendtodistinguishdieteticfoodfromothertypesofproductsfocusingonthespecialeffectsofdieteticfood.
Although each competitor does not have sufficient excess capacity, majorcompetitors suchasCompanyAandBhavea certaindegreeof excess capacityrespectively.
the same ingredientsandproduction facilitiesas thoseused forproducts sold inothercountries. Ingeneral,drydog foodsold in Japan isdifferent fromthatsoldoverseasonlyinitspackage.Therefore,productsforJapanesemarketcanbeeasilyproduced just by changing packages. It is true that importing pet food to Japan
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requiresanadvancenotificationtotheMinisterofAgriculture,ForestryandFisheriesandtheMinisteroftheEnvironmentbasedonthe“LawforEnsuringtheSafetyofPetFood”(ActNo.83of2008;hereinafterreferredtoas“PetFoodSafetyAct”).However,thisisnotconsideredasaninstitutionalimportbarrier.Ofallthedrydogfood,thereareonly few taxableproducts, forwhicha tariff rate is lowaswell.Moreover,asimportsareusuallytransportedbyship,thetransportationcostaccountsforaverysmallportionofasalesprice.
Becauseotherinstitutionalorpracticalimportbarriershardlyexisteither,itisrelativelyeasyformanufacturersofforeignproductstoenterJapanesemarket.Infact,some foreign enterprises have recently entered Japanesemarket and others aredoingthesame.
(4)EntrypressureAlthough starting pet food manufacturing and sale business requires a
notificationtotheMinisterofAgriculture,ForestryandFisheriesandtheMinisterofthe Environment based on the Pet Food Safety Act, it is not considered as aninstitutional barrier to entry. Aswell,while dedicated facilities are necessary forproducingdrydogfood,requiredinvestmentisintherangeof100millionyento1billionyen,whichisdeemedtoberecoverablewithinthreetofouryearsingeneral.Because other institutional or practical barriers to entry hardly exist either, it isrelativelyeasyforotherenterprisestoenterthedrydogfoodmarket.Infact,thereare some enterprises which have recently started dry dog food manufacturingbusiness.
requiresanotificationtotheMinisterofAgriculture,ForestryandFisheriesandtheMinister of theEnvironmentbasedon thePetFoodSafetyAct.Apart from this,however,therearenoinstitutionalregulationsconcerningrepresentationorothers.Aswell,dieteticdogfoodcanbeproducedwiththesameproductionfacilitiesasthoseforgeneralproducts. Ingeneral,researchresultsoningredients,nutrients,andthecompoundingratioeffectivetosymptomsofspecificdiseasesarepubliclyavailable,making it fullypossible todevelop andmanufacturedieteticdog foodproductsbasedonsuchpublishedresearchresults.Especiallyforexistingdogfoodmanufacturinganddistributingenterprises, it isdeemed toberelativelyeasy toproducedieteticdogfood.Infact,someenterpriseshaverecentlystarteddietetic
themarket for dietetic dog food is growing year by year and that this type ofproducts,usuallysoldatahigherpricerange,canbehighlyprofitablecomparedtootherproducts.
(5)CompetitivepressurefromusersAs discussed previously in II 1 (2), dietetic dog food is distributed mainly
throughveterinaryhospitals.However,asdieteticdog foodhasrecentlybecomeavailablethroughinternetandlarge-scalemassmerchandiserswhichhaveapetshop inside, a growing number of consumers are comparison shopping amongthesedifferentchannels.Becauselarge-scalemassmerchandiserspossessstrongbargainingpoweroverpetfoodmanufacturinganddistributingenterprises,andveterinaryhospitalsarealsodemandingthatwholesalersshouldreducepricesofdieteticdogfoodsoasnottoloseuserstootherchannels,itisreasonabletothinkthatusersareabletoputadamperonprice-increaseinitiativesbytheParties.
Case 3 Acquisition of stock of Chuetsu Pulp & Paper Co., Ltd. by Oji HoldingsCorporation
PartI ThePartiesOjiHoldingsCorporation(hereinafterreferredtoas“OjiHoldings”)isaholding
company which has a subsidiary manufacturing and distributing paper and pulpproducts.(OjiHoldingsandcompanieswhichhavealreadyformedjointrelationshipwithOjiHoldingsarehereinafterreferredtoas“OjiGroup”.)
Chuetsu Pulp & Paper Co., Ltd. (hereinafter, “Chuetsu Pulp & Paper”) is acompanymanufacturinganddistributingpaperandpulpproducts.(ChuetsuPulp&PaperandcompanieswhichhavealreadyformedjointrelationshipwithChuetsuPulp&Paperarehereinafterreferredtoas“ChuetsuPulp&PaperGroup”.)
Since October 2014, the Parties voluntarily submitted written opinions andmaterials to the JFTCstatingthat theacquisitionwouldnotsubstantially resetraincompetition,andtheJFTCheldmetingsseveraltimeswiththePartiesinresponsetorequestsbytheParties.Subsequently,onNovember4th,2014,theJFTCacceptedawrittennotificationoftheplanoftheacquisitionsubmittedbythenotifyingcompanybasedontheregulationsoftheAMA,andcommencedthepreliminaryinvestigation.TheJFTCproceededwiththepreliminaryinvetigationbasedontheabovementionedwrittennotificationandotherdocumentssubmittedbytheParites,etc.Asaresult,theJFTCdecided to open the secondary investigation, because of necessity of furtherinvestigation.OnDecember3rd,2014,theJFTCrequestedthenotifyingcompanytoprovide reports, etc.made the investigationpublic, and solicitedpublic commentsfromthirdpersons.
In thesecondary investigation, the JFTCheldmeetingsseveral timewith theParties in response to requests by the Parties. The JFTC also proceededwith the
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secondaryinvestigationontheeffectoftheacquisitiononcompetition,basedontheresults etc. of hearings and written surveys over users ， distributivebusinesses，competingrivals,inadditiontothereportsetc.sequentiallysubmittedbythenotifyingcompany.
Regardingtherequestforprovisionofreports,etc. to thenotifyingcompany,submission of all reports, etc. was completedwith the reports etc. submitted onFebruary25th,2015.
traded with and concluded that the acquisition would not substantially restraincompetitioninanyparticularfieldoftradeincludingprintingtissuepaper,artpaper,basestockforbackcarbonpaper,unglazedshippingsackskraftpaper,otherunglazedbagandsackpaper,andunglazedbleachedkraftpaper,providedthattheremediesproposedbythePartiesare implemented.Theresultsofexaminationof theabovefieldsoftradesarediscussedlaterinVItoXI.
ThePartiesarguethatthedegreeofjointrelationshipbetweenthemwouldnotbestrongonthegroundsthattheobjectiveoftheacquisitionofstocksinthiscaseisnottoobtaincontrolofmanagementpoliciesofChuetsuPulp&PaperGroup;thattheincrease of the ratio of the voting rights would be limited; and that the effect ofinterlockingdirectorateswouldbelimited.SofarasfactsarguedbythePartiesareconcerned,thedegreeofjointrelationshipwouldbedeemednotnecessarilystrong.
However,theJFTCconcludedthatthedegreeofjointrelationshipbetweentheParties formed by the acquisitionwould be deemed not necessarilyweak on thegrounds that Oji Holdings considers that an objective of the acquisition is clearlydefiningChuetsuPulp&PaperasanOjiGroupcompanythroughmakingChuetsuPulp&PaperanOjiHoldings’affiliatedcompanyaccountedforbytheequity-methodof
Domesticdemand forpaperandpaperboard remained in the30-million tonrangeafterhavingreachedapeakin2000,whichwasfollowedbyasharpdeclinetoabout 28million tons in the post-2008 financial crisis in 2009. Since then it hasremainedinthe27-and28-milliontonranges.
Oftheabove,domesticdemandforpaperalonereacheditspeakin2006inthe19 million ton range, which has since been on the downward trend due to theshrinkingpopulationandcomputerization,fallingbelow16milliontonsin2014.
machineswhichmakepaperfrompulp.Thereareavarietyofpapermachines.Whileusually a single paper machine is used to produce multiple types of paper andpaperboard, typesofproducts thatcanbeproducedaredependentonthe typeofpapermachineused.
On theotherhand, a “wholesaler” is a distributivebusiness sellingproductsmainly to small andmediumusers.Wholesalers do not normallybuy paper frompapermanufacturersdirectly.Instead,theybuypaperfromagentsandsellittousers.Wholesalers’businessisusuallysmallerthanthatofagents.
“Guidelines to application of the antimonopoly act concerning review ofbusinesscombination”(JapanFairTradeCommission,May31st,2004.Hereinafterreferred to as “Guidelines for business combination”.) lists determing factors indeeming substantial restraint of competition through coordinated conduct in ahorizontalbusinesscombination.(Section3ofPartⅣ of“Guidelinesforbusinesscombination”) In light of those determing factors, the following situation isobservedinthiscase.
A.SomefieldsoftradeswherethePartiescompetepresentsituationwhereonlyafew competitors exist or the market share is concentrated on a few leadingenterprises,asdiscussedinVIandthereafter.
Difference in excess capacity could affect firms’ incentive for takingcoordinatedconductwithcompetitors.Ontheotherhand, thepastactionsbypapermanufacturersshowthattheytendtoraisepricesatalmostthesametimeregardless of whether they have excess capacity or not and rarely intend toincreasetransactionvolumebytakingadvantageofapricehikebycompetitors.Inotherwords,evenifapapermanufacturehasexcesscapacity,ithasseldom
D.Althoughdemandinthepaperindustryisonthedownwardtrend,therangeoffluctuationisnotsubstantiallylarge.Aswell,basedonthefactthattechnologicalinnovationsdonot takeplace frequentlyand that the lifecycleofgoods isnotshort,itcannotbeconcludedthatcoordinatedconductwithcompetitorsisnotlikelytobetaken.
E.Papermanufacturershaveannouncedincreaseofpricesatalmostthesametimewithalmostthesamedetails;suchpracticehasbeencontinuouslyfollowedforalongtime.Althoughthepapermanufacturershavenotbeenabletoraisepricesthe way they have announced, it should be considered only a result of theindividualnegotiation.
Printing tissuepaper isageneral term forultrathinuncoatedprintingpaperwhichisusedfordictionariesandothertypesofbookswithmanypages,insurancepolicyconditions,etc.
ofbookswithmanyleaves,printingtissuepaperisnotfullyinterchangeablewithothertypesofproducts.Although the Parties argue that any type of uncoated printing paper includingprinting tissuepaper canbeproducedby the samemanufacturing facilities, it isdeemed that substitutability for suppliers does not necessarily exist betweenprintingtissuepaperandotheruncoatedprintingpaperbecausetherearenotmanycaseswherethesamepapermachineisusedtoproducebothprintingtissuepaperandothertypesofuncoatedprintingpaper.Evenifsubstitutabilityforsuppliersdoesexist,suppliersarenotthesameandthereissignificantdifferenceintheirmarketshare between these different types of products. Therefore, substitutability forsuppliersalonedoesnotnecessarilyjustifydefining“uncoatedprintingpaper,etc.”includingprintingtissuepaperas theproductrangeoftheparticularfieldoftrade.Accordingly,theJFTCdefined“printingtissuepaper”astheproductrangeinthiscase.
papermanufacturersalloverJapanandthereisnogeographicalrestrictionintermsof transportation or regional price difference. Accordingly, the JFTC defined “allregionsofJapan”asthegeographicrange.
Competitors have a certain level of excess capacity. However, as discussedpreviouslyinV-4,evenwithexcesscapacity,competitorsarenot likelytotakecompetitiveactionsbymakinguseofitwhenthePartieshaveraisedprices,inlightofthepastcasesofsimultaneouspricehikebythepapermanufacturers.
pamphlets, etc.) and publication based on the ease of changing suppliers,purchasingvolume,etc.aslongasprintingandcommunicationpaperingeneralisconcerned.
However, major distributive businesses do not recognize price bargainingpower of printing tissue paper users on the grounds that the product has verylimitedusage.
marketwouldloseacompetingplayerandthetotalmarketshareofthePartieswouldreachapproximatetly60%.WhileCompanyAisdeemedtoremainamajorcompetitorwhichhasapproximatetly35%ofthemarket,theacquisitionofstocksinthiscasewouldbedeemedtosubstantiallyrestraincompetitioninthefieldoftradeofprintingtissuepaperbyunilateralconductorbycoordinatedconductwithcompetitors,onthegrounds that import pressure is not recognizable; that competitive pressure fromrelatedmarketisnotdeemedtobeinfulleffect;thatcompetitivepressurefromusersisdeemedtobelimitedinitseffect;andthatpapermanufacturerstendtoraisepricesatthesametime.
PartVII Artpaper1. Outline
Artpaperisatypeofpaperwhichhasbeenlayeredwithcoatingtorealizebettercolor development for printing (hereinafter, “coated paper, etc.”) and used forbrochures,magazinecovers,etc.
Apart from art paper, coated paper, etc. includes coated paper, light weightcoatedpaper,andultralightweightcoatedpaper.Thesetypesofpaperdifferintheamountofcoatingandqualityofbasepaper;artpaperisheavilycoatedanduseswoodfreepaperasabase.
2. Particularfieldoftrade(1)Productrange
Itistruethatacertaindegreeofsubstitutabilityforusersisrecognizableamongdifferenttypesofcoatedpaper,etc.,especiallybetweenartpaperandwoodfreecoated paper. However, on the grounds that each type of goods is recognized
Ontheotherhand,coatedpaper,etc.canbeproducedinmanufacturingfacilitieswith a standard coated paper machine without taking any particularmeasure.Therefore,thereisacertainlevelofsubstitutabilityforsuppliersamongthetypesofpaperinthisgroup.However,suppliersarenotthesameandthereissignificantdifferenceintheirmarketsharebetweenthesedifferenttypesofproductsofcoatedpaper,etc.Therefore,substitutabilityforsuppliersalonedoesnotnecessarilyjustifydefiningthegoodsoftheparticularfieldoftradeascoatedpaper,etc.Asaresult,inthiscase,theJFTCdefined“artpaper”astheproductrangebasedonthefactthatdistributivebusinessesandusersrecognizeartpaperasseparategoods.
(2)GeographicrangeAgents and major users nationwide are purchasing art paper from paper
manufacturersalloverJapan,andthereisnogeographicalrestrictionintermsoftransportation or regional price difference. Accordingly, the JFTC defined “allregionsofJapan”asthegeographicrange.
Withtheacquisitionofstockinthiscase,HHIwouldbeapproximatetly6,100,the total market share of the Parties the largest at approximatetly 75%, theincrementofHHIapproximatetly1,100.Therefore,thiscasefallsoutsidethesafe
1 Correlation is the relationship between two variables described by correlation coefficients. A correlation coefficient is a value between -1 and 1. The closer to one the absolute value of the correlation coefficient is, the higher the linkagebetween the variables is.2 Stationarity is a property that even where a series deviates from a certain level at a given time, it comes back to the level as time passes.
(3)Entry(regardingaswitchfromothertypesofproducts)According to theParties, artpaper canbeproducedwith themanufacturing
facilities for other coated paper, etc. without taking any particular measure;therefore,itisdeemedtobepossibletoswitchproductionfromanyothertypeofcoatedpapertoartpaper.However,itisreasonabletothinkthatthereisnotenoughincentive forsuchachange toartpaperproduction toreadily takeplaceon thegroundsthatthecompetitorhaslittleexcesscapacityasdiscussedpreviouslyin(1)
3 On the foreign trade statistics, data for art paper alone is not available. Instead, the statistics provides data for a group of products including art paper, wood free coated paper, and light weight coated paper. (Hereinafter, this group of products is referred to as “wood free coated paper, etc.”) In the economic analysis regarding import of wood free coated paper, etc. conducted by using this data, a tendency of declining sales of domestically-produced art paper was not observed as imports of wood free coated paper, etc. went up. In consideration of this, no substitutability was confirmed between them. In other words, the result of the economic analysis does not suggest that imports of wood free coated paper, etc. present significant competitive pressure against art paper produced in Japan.
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B), and that the long-term trend of declining domestic demand for art papercontinuestoshrinkthesizeofthemarket.
and calendars and publication of photo collections and art books, the usagecommon towood free coated paperwhich is less expensive althoughwith lesscoatings.Infact,therehavebeensomecaseswhereartpaperhasbeensubstitutedwithwoodfreecoatedpaper.
However, major distributive businesses do not recognize price bargainingpowerofartpaperusersonthegroundsthattheproductistradedinsmallunits.Inconsiderationoftheabove,competitivepressurefromusersisdeemedtobelimitedinitseffect.
lose a competing player and the total market share of the Parties would reachapproximatetly 75%. While there exists a major competitor controllingapproximatetly 20%of themarket, the acquisition of stock in this casewould be
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deemedtosubstantiallyrestraincompetitioninthefieldoftradeofartpaperwithcoordinatedconductbythePartiesaloneorincoordinationwithcompetitorsonthegrounds that neither import pressure nor entry pressure is recognizable; thatcompetitivepressurefrombothrelatedmarketandusersisdeemedtobelimitedinitseffect;andthatpapermanufacturerstendtoraisepricesatthesametime.
In this respect, thePartiesargue that there isnotmuchdifference inqualitybetweenbase stock forback carbonpaper andprinting tissuepaper. Awrittensurveyforcompetitorsanddistributivebusinessesshowstheirunderstandingthatitisnotpossibletosubstituteprintingtissuepaperforbasestockforbackcarbonpaperintermsofpaperproperties.Forthisreason,thetwotypesofproductsarenotdeemedtosharesubstitutabilityforusersbetweenthem.
Ontheotherhand,acertaindegreeofsubstitutabilityforsuppliersisdeemedtoexistbetweenbasestockforbackcarbonpaperandprintingtissuepaperonthegroundsthatthetwotypesofproductscanbothbeproducedwiththestandardmanufacturingfacilitieswithouttakinganyparticularmeasure.However,suppliersarenotthesameandthereissignificantdifferenceintheirmarketsharebetweenbase stock for back carbon paper and printing tissue paper. Therefore,substitutabilityforsuppliersalonedoesnotnecessarilyjustifydefiningthegoodsoftheparticularfieldoftradethroughlumpingtogetherprintingtissuepaperandbasestockforbackcarbonpaper.Hence,inthiscasetheJFTCdefined“basestockforbackcarbonpaper”astheproductrangeontherecognitionthatprintingtissuepaperandbasestockforbackcarbonpapercannotbeusedinterchangeablyintermsofpaperproperties.
Withtheconductinthiscase,HHIwouldbeapproximatetly5,500,thetotalmarketshareofthePartiesthelargestatapproximatetly65%,theincrementofHHI approximatetly 2,100. Therefore, the acquisition does notmeet the safeharborstandardsforhorizontalbusinesscombinations.
(3) Entry(regardingaswitchfromothertypesofproducts)AccordingtotheParties, it ispossibletoswitchproductionofprintingtissue
papertothatofbasestockforbackcarbonpaper,whichcanbeproducedwiththeproductionfacilitiesforprintingtissuepaperwithouttakinganyparticularmeasure.However, the acquisition of stock in this case would substantially restraincompetitioninthefieldoftradeofprintingtissuepaper.Therefore,printingtissuepapercannotbeevaluatedasentrypressure.
It is reasonable to think that there is not enough incentive for a switch toproductionofbasestockforbackcarbonpapertoreadilytakeplaceonthegroundsthat, in consideration of the paper manufacturers’ practice of raising pricessimultaneouslyasdiscussedpreviouslyinV-4,competitorsarenot likelytotakecompetitiveactionsbytakingadvantageofexcesscapacity,althoughtheydohavesome,incaseofapricehikebytheParty;andthatthelong-termtrendofdecliningdomesticdemandforbasestockforbackcarbonpapercontinuestoshrinkthesizeofthemarket.Asaresult,anytypeofproductsotherthanbasestockforbackcarbonpaperisnotlikelytoworkasentrypressureagainstthemarketofbasestockforbackcarbonpaper.
backcarbonpaperwouldloseacompetingplayerandthetotalmarketshareoftheParties would reach approximatetly 65%. While there exists a major competitorcontrollingapproximatetly35%of themarket, theacquisitionofstock in thiscasewouldbedeemedtosubstantiallyrestraincompetitioninthefieldoftradeofbasestock forbackcarbonpaperbyunilateralconductorbycoordinatedconductwithcompetingrivalsonthegroundsthatneitherimportpressurenorentrypressureisrecognizable;thatcompetitivepressurefromrelatedmarketsisnotdeemedtoexisteither;thatcompetitivepressurefromusersisdeemedtobelimitedinitseffect;andthatpapermanufacturerstendtoraisepricesatthesametime.
On theotherhand,amongall thewrappingpapers,unglazed shipping sackskraftpaper,unglazedgrocerypaperandotherunglazedbagandsackpapercanbeproduced with the standard paper machine used for making wrapping paper
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withouttakinganyparticularmeasure,andunglazedbleachedkraftpapercanalsobe producedwith the samemachine by taking a certainmeasure. Therefore acertaindegreeofsubstitutabilityforsupplierscanberecognizedamongthesetypesofproducts.However,suppliersarenotthesameandthereissignificantdifferencein their market share among these different types of products. Therefore,substitutabilityforsuppliersalonedoesnotnecessarilyjustifydefiningthegoodsthroughlumpingallthesedifferenttypesofproductstogether.Hence,inthiscasetheJFTCdefined“unglazedshippingsackskraftpaper”astheproductrangeonthegroundsthatsubstitutabilityforusersdoesnotexistbetweenunglazedshippingsackskraftpaperandotherwrappingpapers.
kraft paper from paper manufacturers all over Japan, there is no geographicalrestrictionintermsoftransportationorregionalpricedifference.Accordingly,theJFTCdefined“allregionsofJapan”asthegeographicrange.
Withtheacquisitionofstockinthiscase,HHIwouldbeapproximatetly3,100,the total market share of the Parties the largest at approximatetly 50%, theincrementofHHIapproximatetly1,100.Therefore,theacquisitiondoesnotmeetthesafeharborstandardsforhorizontalbusinesscombinations.
B. ExistenceofcompetorsAsmajorcompetingrivals, theCompanyF,GandHhaveover10%of the
market respectivelywhile the Company I has a certainmarket share aswell.However,thesecompanieshaveonlylimitedexcesscapacity.
(2)ImportsThe Parties argue that if the price of unglazed shipping sacks kraft paper
produced in Japan rises in the futureusers could easily switch to imports, thusconcludethatimportpressureisfullyworking.
However, as seen in 2013when imports accounted for less than 1% of thedomestic market of unglazed shipping sacks kraft paper, imports cover only alimitedportionofthetotalunglazedshippingsackskraftpaperdemand.Evenwhenimportssawahistoricpeakinthecoverageofthedomesticmarketin2012,theyaccountedforonlyabout1%.ThisiscorroboratedbythehearingfromcompetingrivalsanddistributivebusinesseswheremanysaidthatJapaneseuserstendtoaskforsmall,frequent,andquickdeliveriesofhigh-qualityproductsandthatimportcannotmeetsuchdemandintermsofqualityanddeliverywhilenoonethoughtimportswould increase in themarketofunglazedshippingsackskraftpaper infuture.
suppliers exists among some types of wrapping papers, enterprises producingothertypesofwrappingpaperscouldswitchtoproductionofunglazedshippingsackskraftpaper.However,onthegroundsthat,ingeneral,competitorswhichareproducingsuchwrappingpapersdonothavesufficientexcesscapacity,andthattheacquisitionofstockinthiscasewouldsubstantiallyrestraincompetitioninthefieldsoftradesofotherunglazedbagandsackpaperandunglazedbleachedkraftpaperamong all these types of wrapping papers, it is unreasonable to evaluate suchcompetitorsasentrypressureagainstthemarketofunglazedshippingsackskraftpaper.
However,asmanyusersofunglazedshippingsackskraftpaperaremedium-andsmall-sizedbagmanufacturers,manydistributivebusinessesansweredinawrittensurvey that theproduct’s usersdonot seem topossess strongpricebargainingpower.
Aswell,papermanufacturers firstannounceapricerise forvarioustypesofwrappingpapersincludingunglazedshippingsackskraftpaperatthesametime,andthengoontonegotiatewithdistributivebusinessesforthepricemarkup,whichisfollowedbyatalkbetweendistributivebusinessesanduserstopasstheincreaseontotheusers.Asaresult,acertaindegreeofpriceincreasehasbeenachievedalthough with a little differences in increments and timing across papermanufacturers.
4. LegalassessmentbasedontheAntimonopolyActWith the acquisitionof stock in this case, thedomesticmarket of unglazed
shippingsackskraftpaperwouldloseacompetingplayerandthetotalmarketshareof thePartieswould reach approximatetly50%.While thereexist four competingrivalsincludingthreemajorones,theacquisitionofstockinthiscasewouldbedeemedto substantially restrain competition in the particular field of trade by unilateralconduct or by coordinated conduct with competors on the grounds that neitherimportpressurenorentrypressureisrecognizable;thatcompetitivepressurefromusersisdeemedtobelimitedinitseffect;andthatpapermanufacturerstendtoraisepricesatthesametime.
Asdiscussedintheabove1,otherunglazedbagandsackpaperisdifferentfromunglazedgrocerypaperinitscolorandusage;itisoftenusedforenvelopes.Aswell,as a result of economic analysis, while the price ratio of the two products isstationary,thereisacleardownwardtrendandpricedifferenceisgettinglarger.Basedonthis,substitutabilityforusersbetweenotherunglazedbagandsackpaperandunglazedgrocerypaperisdeemedtobelimited.
Ontheotherhand,asdiscussedpreviouslyinIX-2(1),becausesometypesofwrappingpapers includingotherunglazedbagandsackpapercanbeproducedwiththestandardpapermachineusedformakingwrappingpaperwithouttakingany particular measure, a certain degree of substitutability for suppliers existsamongthesetypesofproducts.However,suppliersarenotthesameandthereissignificantdifferenceintheirmarketshareamongthesedifferenttypesofproducts.Therefore,substitutabilityforsuppliersalonedoesnotnecessarilyjustifydefiningthegoodsthroughlumpingallthesedifferenttypesofproductstogether.Hence,inthiscasetheJFTCdefined“otherunglazedbagandsackpaper”astheproductrangeon the understanding that substitutability for users is limited between otherunglazedbagandsackpaperandunglazedgrocerypaper,thelatteralsoclassifiedasotherunglazedbagpaper.
Withtheacquisitionofstockinthiscase,HHIwouldbeapproximatetly3,600,the total market share of the Parties the largest at approximatetly 45%, theincrementofHHIapproximatetly700.Therefore,theacquisitiondoesnotmeetthesafeharborstandardsforhorizontalbusinesscombinations.
【Marketshareofotherunglazedbagandsackpaperin2013】
B. Existenceofcompetitors Asmajorcompetitors, theCompany JandKhaveover10%of themarket
unglazed bag and sack paper. As well, in the hearing from competitors anddistributive businesses,many said that Japanese users tend to ask for small,frequent,andquickdeliveriesofhigh-qualityproductsandthatimportcannotmeetsuchdemandintermsofqualityanddeliverywhilenoonethoughtimportswouldincreaseinthemarketofotherunglazedbagandsackpaperinfuture.
forsuppliersexistsamongsometypesofwrappingpapers,enterprisesproducingothertypesofwrappingpaperscouldswitchtoproductionofotherunglazedbagandsackpaper.However,onthegroundsthat,ingeneral,competitorswhichareproducingsuchwrappingpapersdonothavesufficientexcesscapacity,andthattheacquisitionofstockinthiscasewouldsubstantiallyrestraincompetitioninthefieldsoftradesofunglazedshippingsackskraftpaperandunglazedbleachedkraft paper among all these types of wrapping papers, it is unreasonable toevaluatesuchcompetitorsasentrypressureagainstthemarketofotherunglazedbagandsackpaper.
However,asfoundinhearingsandawrittensurvey,someusersthinkthatitisimpossibletoswitchtoothersuppliersofwrappingpapersbecausetheyusethem on a continuous basis. Coupledwith this,many distributive businessesansweredinawrittensurveythattheusersofotherunglazedbagandsackpaperdonotseemtopossessstrongpricebargainingpower.
4. EvaluationbasedontheAntimonopolyActWith the acquisition of stock in this case, the domestic market of other
unglazedbagandsackpaperwouldloseacompetingplayerandthetotalmarketshareofthePartieswouldreachapproximatetly45%.Whilethereexisttwocompetitors,theacquisitionofstockinthiscasewouldbedeemedtosubstantiallyrestraincompetitionin theparticular fieldof tradebyunilateral conductby thePartiesor coordinatedconductwith competitors on the grounds that neither import pressure nor entrypressureisrecognizable;thatcompetitivepressurefromusersisdeemedtobelimitedinitseffect;andthatpapermanufacturerstendtoraisepricesatthesametime.
PartXI Unglazedbleachedkraftpaper1. Outline
Ofallthewrappingpapers,whitepaperswhichareproducedbybleachingrawmaterialpulpareclassifiedasbleachedwrappingpaper.Bleachedwrappingpaperisquitedifferentinitsappearancefromunbleachedwrappingpaper.Itbreaksdownintomachine glazed poster paper, bleached kraft paper, and other bleachedwrappingpaper.Bleachedkraftpaperisfurtherclassifiedintotwotypesofproducts:unglazedbleachedkraftpaperandmachineglazedbleachedkraftpaper.
Asdiscussed in theabove1,bleachedwrappingpaper includingunglazedbleached kraft paper, and unbleachedwrapping paper appearquite different,whichmakessubstitutabilitybetweenthemlimited.Ofbleachedwrappingpaper,unglazedbleachedkraftpaper,whichisclassifiedasbleachedkraftpaper,andmachineglazedbleachedkraftpaperarealsoquitedifferentinappearanceandprintpropertiesaccordingtowhetherornothavingonesideglazed.Therefore,substitutabilityforusersbetweenthemisdeemedtobelimited.
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In the meantime, substitutability for suppliers does not exist betweenunglazedbleachedkraftpaperandmachineglazedbleachedkraftpapereitherbecauseproduction of the latter requires a Yankeemachine (a type of papermachinewhichhasaYankeedryerwithamirror-finishedsurfaceinstalledinitsdryerpart.Wetpaperbecomesone-sideglazedpaperafterbeingstuckanddriedontheYankeedryersurface.)However,asunglazedbleachedkraftpapercanbeproducedwiththestandardpapermachineusedformakingwrappingpaperbytakingparticularmeasures,acertaindegreeofsubstitutabilityforsuppliersexistswithsometypesofproducts.Nevertheless,suppliersarenotthesameandthereis significant difference in theirmarket share among these different types ofproducts. Therefore, substitutability for suppliers alone does not necessarilyjustifydefiningthegoodsthroughlumpingallthesedifferenttypesofproductstogether.Hence,inthiscasetheJFTCdefined“unglazedbleachedkraftpaper”asthe product range on the grounds that substitutability for users is limitedbetweenbleachedwrappingpaperandunbleachedwrappingpaper,andthatitisalsolimitedbetweenunglazedbleachedkraftpaperandmachineglazedbleachedkraftpaper,bothclassifiedasbleachedkraftpaper.
With regard to types of products which have a certain degree ofsubstitutabilityforsupplierswithunglazedbleachedkraftpaper,areviewwillbemadeofwhetherornottheycanbeevaluatedasentrypressureagainstunglazedbleachedkraftpaper.
paper from paper manufacturers all over Japan, there is no geographicalrestrictionintermsoftransportationorregionalpricedifference.Accordingly,theJFTCdefined“allregionsofJapan”asthegeographicrange.
3. Examinationofsubstantialrestrainmentofcompetition(1)Stateofcompetition,etc. A. PositionsoftheParties
Withtheacquisitionofstockinthiscase,HHIwouldbeapproximatetly3,700,the total market share of the Parties the largest at approximatetly 55%, theincrementofHHIapproximatetly1,200.Therefore,thiscasefallsoutsidethesafeharborruleforahorizontalbusinesscombination.
However, imports cover only a limited portion of the total demand forunglazedbleachedkraftpaper.In2013,importsaccountedforaverylittleportion,about1%,ofthedomesticmarketofunglazedbleachedkraftpaper,whichwasmore or less the case during thepreceding five years aswell. Aswell, in thehearingsfromcompetitorsanddistributivebusinesses,manysaidthatJapaneseuserstendtoaskforsmall,frequent,andquickdeliveriesofhigh-qualityproductsandthatimportcannotmeetsuchdemandintermsofqualityanddeliverywhilenoonethoughtimportswouldincreaseinthemarketofunglazedbleachedkraftpaperinfuture.
suppliersexistsamongsometypesofwrappingpapers,rivalsproducingothertypesofwrappingpaperscouldswitchtoproductionofunglazedbleachedkraftpaper.However,onthegroundsthattheacquisitionofstockinthiscasewouldsubstantially restrain competition in the fields of tradesof unglazed shippingsackskraftpaperandotherunglazedbagandsackpaperamongallthesetypesofwrappingpapers, it is unreasonable to evaluate such competitors as entrypressureagainstthemarketofunglazedbleachedkraftpaper.
Therefore, entry pressure cannot be recognized against the market ofunglazedbleachedkraftpaper.
However,asfoundinhearingsandawrittensurvey,someusersthinkthatitisimpossibletoswitchtoothersuppliersofwrappingpapersbecausetheyusethem on a continuous basis. Coupledwith this,many distributive businessesansweredinawrittensurveythattheusersofunglazedbleachedkraftpaperdonotseemtopossessstrongpricebargainingpower.
Aswell,papermanufacturersfirstannounceapriceriseforvarioustypesofwrappingpapersincludingunglazedbleachedkraftpaperatthesametime,andthengoontonegotiatewithdistributivebusinessesforthepricemarkup,whichis followed by a talk between distributive businesses and users to pass theincreaseontotheusers.Asaresult,acertaindegreeofpriceincreasehasbeenachievedalthoughwithalittledifferencesinincrementsandtimingacrosspapermanufacturers.
4. EvaluationbasedontheAntimonopolyActWith the acquisitionof stock in this case, thedomesticmarket of unglazed
bleachedkraftpaperwouldloseacompetingplayerandthetotalmarketshareofthePartieswouldreachapproximatetly55%.Whilethereexistfivecompetitorsincludingtwomajorones,theacquisitionofstockinthiscasewouldbedeemedtosubstantiallyrestrain competition in theparticular fieldof tradewithunilateral conductby the
InresponsetotheCommission’sargumentregardingVI-4,VII-4,VIII-4,IX-4,X-4,andXI-4,thePartiesproposedtakingthefollowingmeasuresasremedies. (1) The Parties conduct business activities independently from each other with
regard to production and distribution of six types of products discussedpreviously fromVI toXI (printing tissuepaper,artpaper,base stock forbackcarbonpaper,unglazedshippingsackskraftpaper,otherunglazedbagandsackpaper,andunglazedbleachedkraftpaper;thesameapplieshereinafter.)IncaseofabusinesscombinationorabusinesscollaborationbeingcarriedoutbetweenthePartiesintheproductionanddistributionofthesixtypesofproducts,thePartywillhavetheCommission’spriorunderstandingaccordingly.
(2) ThePartiesdonotdisclosetoeachotherinformationrelatedtotheproductionanddistributionof thesix typesofproductswhich isnotknowntothepublicbutsignificant in terms of competition. (Hereinafter referred to as “classifiedinformation”;itincludes,butnotlimited,toproductioncost,productionvolume,salesprices,salesvolume,andbuyers).
(4) Aspartofthemeasure(2),thePartiesconfirmthattheinterlockingdirectorshaveanobligationtonotdiscloseclassifiedinformationofanassigneecompanytohisor her home company, and make sure that the directors comply with theobligation.Aswell,thePartiesconfirmandmakesureitisknownthatemployeesonloanbetweenthePartieswillbesubjecttoadisciplinaryactioniftheydiscloseclassifiedinformationoftheirassignedcompanytohomecompany.Moreover,thePartiesconfirmthatexecutivesfromOjiHoldingsandcompaniesofthePartieswhichproduceanddistributethesixtypesofproductshaveanobligationtonotdiscloseclassifiedinformationtotheotherParty,andconfirmandmakesureitisknown that employees of production and sales divisions of the six types ofproducts(hereinafter,“personsincharge”)willbesubjecttoadisciplinaryaction
befollowedandthatviolatorswillbesubjecttoadisciplinaryaction,andmakesurethatexecutivesfromOjiHoldingsandexecutivesandpersonsinchargefromcompaniesofthePartieswhichproduceanddistributethesixtypesofproductswillbefullyawareoftheabove(1)to(4)andacodeofconductincompliancewiththeAntimonopolyActconcerningsalesactivitiesoftheirowngoods.Aswell,the Parties carry out training on a regular basis (at least once a year) onobservanceoftheAntimonopolyActconcerningproductionanddistributionofthesixtypesofproducts.
thiscase,theywouldconductbusinessactivitiesindependentlyfromeachotherwithregardtoproductionanddistributionofthesixtypesofproductsandthattheywouldnotshareclassified informationrelated to thesaidproductionanddistribution. Inadditiontothis,throughtheacquisitionofstockinthiscase,OjiGroupwouldholdonlyalittlemorethan20%ofthevotingrightsofChuetsuPulp&PaperGroupwhilethenumberofinterlockingdirectorswouldbelimitedtoone.Inconsiderationofthis,thePartiesaredeemedtomaintainindependentbusinessactivitiesinfuturewithregardtotheproductionanddistributionofthesixtypesofproducts.
PartXIII ConclusionThe acquisition of stock in this case is not deemed to substantially restrain
competition inanyparticular fieldof trade,provided that the remedieswhich thePartiesproposedwillbeimplemented.
PartI OutlineofthiscaseAgroupofcombinedcompanieswhoseultimateparentcompanyis Novartis
InternationalAG(headquarteredinSwitzerland;hereinafterreferredtoas“Novartis”;thegroupofcombinedcompaniesishereinafterreferredtoas“NovartisGroup”.),aholding company. planned to acquire a substantial part of the business related toanticancerdrugproductsfromagroupofcombinedcompanieswhoseultimateparentcompanyisGlaxoSmithKlineplc(headquarteredintheUK;hereinafterreferredtoas“GSK”;thegroupofcombinedcompaniesishereinafterreferredtoas“GSKGroup”;NovartisGroupandGSKGrouparehereinaftercollectivelyreferredtoas“theParties”.),aholdingcompanyofGlaxoSmithKlineK.K.whichmanufacturesmainlyethicaldrugs.(Thegroupishereinafterreferredtoas“GSKGroup”;NovartisGroupandGSKGrouparehereinaftercollectivelyreferredtoas“theParties”.)
PartII Particularfieldoftrade1. Methodsoftreatmentforcancer
For cancer treatment, there are a variety of methods including surgicaloperations, radiation treatment, chemotherapy, molecular target therapy,immunotherapy,etc.,whichareusedindividuallyortogether.
As chemotherapy and immunotherapy,molecular target therapy is a typeofpharmacotherapy, preventing growth and increase of cancer cells by aiming atrelevant specific molecules and impeding their influence. This therapy has thepropertyofgivingloweradversedrugreaction(sideeffects)tohealthycells,comparedto other methods of treatment including chemotherapy and radiation treatment,becauseitfocusesonmoleculesandmutantcellsspecifictocancer.Ontheotherhand,evenmoleculartargetdrugswhichaimatcommonmoleculesresponsibleformultipletypesofcancerareusuallyonlyeffectivetoaderivativeofspecificcancer,notmultipletypesofcancer.
Basedonclinicalguidelinesandapproval,doctorschoosemethodsoftreatmentinconsiderationofthetypeofcancer,stageofdisease(staging),thepatient’sreactiontopriortreatmentandprognosis.Aswell,multiplemethodsoftreatmentareusedtogether in each stage in some cases, while different methods of treatment are
(i)asearchforanewsubstance,(ii)preclinicaltrialstoexaminedrugeffects,physicalproperties, disposition, and toxicity, (iii) clinical trials at amedical institution, (iv)applicationtoPharmaceuticalsandMedicalDevicesAgency(hereinafter,“PDMA”)forapprovalofmanufactureandsalesbyfilingresultsofthenonclinicalandclinicaltests;reviewbyPDMAandtheMinistryofHealth,LabourandWelfare;andapprovalbytheMinisterofHealth,LabourandWelfare.
Thisprocessfromsearchingforanewsubstancetosalesofanewdrugafterreceiving approval usually takes 9 to 17 years. And development cost for drugs,includingcostfordevelopmentwhichhasbeenabandonedalongtheway,couldreachuptoabout100billionyenperanewdrug.Especially,clinicaltests,whicharemadeoftestsofphaseI,II,andIII,requireagreatamountoftimeandmoney(RefertoFig.1.).
range isdefined inaccordancewith the functionsandeffectsofdrugs from theperspectiveofusers,thatis,medicalinstitutions,etc.
For classification of ethical drugs, the ATC classification system 6 , whichEuropeanPharmaceuticalMarketResearchAssociation (EphMRA)developed, iswidelyused. In theATCclassificationsystem,drugsareprovidedwithacodeofLevel1to4(calledATCcode)andtherebyclassified.
Inpastbusinesscombinationcases,competitiveproductswereusuallyspecifiedaccordingtotheLevel3codeofATCclassificationand,ifdrugsweregiventhesameLevel 3 code but their functions and effects were not equivalent from theperspectiveofmedicalinstitutions,etc.(forexample,incaseswheredrugswerenotusedinterchangeablyinlightofactualpracticeofmedicationtopatientsordecisionofdoctors),theproductrangewasdefinedaccordingtoLevel4orfurtherdetailedclassification7.
Navoban8,andZofran(firstfourbyNovartisGroup,thelastGSKGroup).Alloftheseproducts are used to reduce nausea and vomiting caused by chemotherapeuticdrugsadministeredforcancertreatment.
Based on the ATC classification system, these products are all classified as“ANTIEMETICSANDANTINAUSEANTS”withtheLevel3code(A4A)and“Serotoninantagonist antiemetics/antinauseants”with theLevel 4 code (A4A1).Under theLevel 3 classification, serotonin antagonists are classified together with “Otherantiemetics and antinauseants” (A4A9) which are used to reduce nausea andvomiting caused by motion sickness, Meniere’s disease, etc. but not to reducenauseaandvomitingcausedbychemotherapeuticdrugsadministeredforcancertreatment.Therefore,theproductsproducedbythePartiesand“Otherantiemeticsand antinauseants” are different in effects and efficacy, and thus not used
5 Ethical drugs are drugs supplied with objectives of being used by medical doctors or dentists or being used under their prescription or instruction. 6 The ATC classification system stands for “Anatomical Therapeutic Chemical Classification System”. Classification criteria include anatomical parts on which drugs act, indication, usage, chemical composition, and action mechanism.7 For example, in the “Capital Alliance between Kirin Group and Kyowa Hakko Group” (Case collection 2008, Case 1), the
product range was defined by taking this approach. 8 Manufacture and sales of Navoban in Japan ended in the end of February 2014.
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interchangeably.Based on this, the JFTC defined “Serotonin antagonist
“PROTEIN KINASE INHIBITOR ANTINEOPLASTICS (L1H)” was newlyaddedtotheATCclassificationin2014.Sinceitincludesmoleculartargetdrugswhoseindicationencompassesawidevarietyofcancer,itisnotappropriatetodefinetheproductrangewiththeLevel3ATCclassification.
ThePartiesarerespectivelydevelopingmoleculartargetdrugswitheffectsandefficacyforthesametypeofcancer.Thesedrugswouldbelongto“PROTEINKINASE INHIBITOR ANTINEOPLASTICS (L1H)” under the Level 3 ATCclassification. Novartis Group is researching and developing LGX818 (B-RAFinhibitor)andMEK162(MEKinhibitor)(conductingthephaseIIIclinicaltest)whereasGSKGroup isresearchinganddevelopingTafinlar(B-RAF inhibitor)and Mekinist (MEK inhibitor) (preparing application for approval ofmanufactureandsales).
Withregardtotheseproducts,(i)allofthemareforthesameindicationofB-RAFmutationpositiveadvancedmelanomaandsharetypesofcancerwhichtheyareforandstageswheretheyareadministered;(ii)therearepossibilitiesthat theywillbeused in the same treatment line; (iii)TafinlarandMekinistpresuppose that they will be used together while LGX818 and MEK162presupposejointorindividualuseaswell.Therefore,thereisahighprobabilityof these products of the Parties being used interchangeably at medicalinstitutionsonceresearchanddevelopmenthascompletedandtheyhavebeenapprovedforsalesbytheMinisterofHealth,LabourandWelfare.
Based on the above consideration, the JFTC defined “protein kinaseinhibitorantineoplasticsfortheindicationofB-RAFmutationpositiveadvancedmelanoma”astheproductrange.
areatthephaseIIIclinicaltest,andthushaveacertainlevelofprobabilityofbeingplacedonthemarketaswell.Therefore,itisdeemedreasonabletothinkthat potential competition between the Parties would cease to exist by theconductofthiscase.Forthisreason,impactonthecompetitionisexamined.
4. GeographicrangeFor all the products defined previously in 3, ethical drugmanufacturing and
distributing enterprises conduct business nationwide and there is no specialcircumstancesrestrictingtransportation,etc.whileusersincludingmedicalinstitutionsareabletopurchaseproductsonthesameconditionsanywhereinJapan.Accordingly,theJFTCdefined“allregionsofJapan”asthegeographicrange.
With the conduct of this case, the totalmarket shareof thePartieswouldbeapproximately5%orless.Aswell,HHIwouldbeapproximatetly3,800atmaximumandtheincrementofHHIapproximatetly5.Therefore,theacquisitionmeetthesafeharborstandardsforhorizontalbusinesscombinations.
【Marketshareofserotoninantagonistantiemetics/antinauseantsin2013】Rank Companyname Marketshare1 A Approx.60%2 B Approx.10%3 C Approx.10%7 GSK talApprox.0-5%10 Novartis Approx.0-5%
ThereisnoenterprisemanufacturinganddistributingproteinkinaseinhibitorantineoplasticsfortheindicationofB-RAFmutationpositiveadvancedmelanomaunder approval in Japan. However, there is one enterprise which has filed forapprovalpriortotheParties.Thiscompany’sproductisalsoestimatedtohitthemarketwithahighprobability,andthusestimatedtopresentacertaindegreeofcompetitivepressureagainsttheproductsoftheParties.
Furthermore, as three companies including the previous one are currently conductingthephaseIIIclinicaltest,thereisacertainlevelofprobabilitythatdrugsof these companies become available, and thus they are estimated to presentcompetitivepressure.
Aswell, four companies are conducting the phase I or II clinical test at themoment.
could potentially be used in a stage and a treatment line similar to those ofmolecular target therapy. For example, immunotherapeutic drugs, dendritic celltherapeuticdrugs,cancervaccines,etc.areconsideredhighlyeffectiveandcouldimposesignificantcompetitivepressureagainstproteinkinase inhibitors for theindication of B-RAF mutation positive advanced melanoma. As forimmunotherapeutic drugs in Japan, ananti-PD-1drug developedby adomesticmanufacturer showed high effects for treatment in the clinical results and gotapproved in 2014, followed by commercialization. With regard to otherimmunotherapeutic drugs, one enterprise has filed for approval, another at thephaseIIIclinicaltest.
tosubstantiallyrestraincompetitioninthefieldoftradeofproteinkinaseinhibitorantineoplasticsfortheindicationofB-RAFmutationpositiveadvancedmelanomawithunilateralconductbythePartiesorcoordinatedconductwithcompetitorsonthe grounds that therearemultiple competitorswhich aredevelopingproducts
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(waiting forapprovalandconductingthephaseIIIclinical test)whichwouldbeusedinterchangeablyatmedicalinstitutionsoncetheyareplacedonthemarket;and that a substantial degree of competitive pressure is expected from relatedmarket(competinggoods).
TonenGeneralSekiyuK.K.,etc.(hereinafterreferredtoas“Parties”),whichrespectivelyconduct primary distribution of liquefied petroleum gas (hereinafter, “LP gas”)planned to integrate their businesses by having Gyxis Corporation (former tradename: Cosmo Petroleum Gas Co., Ltd.) take over the LP gas primary distributionbusiness,etc.throughtheformofabsorption-typesplit1.
integrationoncompetition.The past case of “Integration of liquefiedpetroleumgas business between JX
Nippon Oil & Energy Corporation and Mitsui Marubeni Liquefied Gas Co., Ltd”(hereinafter,“2011integration”;CasecollectionFY2010,Case8)issimilartothiscase,andthusdiscussionissimplifiedonthingsincommonbetweenthetwocases.
PartII Particularfieldoftrade1. Outlineoftheproduct
Propane is normally sold from primary distributors throughwholesalers orretailerstoendusers(generalconsumers,etc.)(approximatetlyover90%)whereasbutane is more likely to be directly sold from primary distributors to end usersincluding factories, citygas companies,power companies, chemicalmanufacturers(approximatetly50%).
As for distribution of LP gas, imports and domestic products are firsttransportedfromimportstoragefacilitiesandoilfactoriesrespectivelytosecondarystoragefacilitiesbytanktrucksortankerscapableofregulatingpressure.Then,thegasisdeliveredfromthesecondarystoragefacilitiesdirectlytoendusersbyusingtanktruckersorcylinders,ortogasstationsbytanktruckers,wherethegasisplacedincylindersandsenttogeneralhouseholds.
1 The parties would have Gyxis Corporation take over their LP gas primary distribution businesses, etc. through absorption-type split, and then acquire 25% of the voting rights of Gyxis Corporation respectively.
Contractbetweenprimarydistributorsandwholesalers,etc.arelargelydividedintofixedtermcontractandspotcontract.Tradeunderfixedtermcontractrequiresdeciding about (i) a pricingmethod (formula) and (ii) trade quantity (a yearlongpurchasingplanstartingfromthecontractstartdate)andiscarriedoutbasedonthepriceandpurchasingplan.SpotcontracthandlesunexpectedsurplusLPgaswhichisgeneratedintherefiningprocessatoilfactoriesofprimarydistributors,andthusdealswithsmalltradingvolumeingeneral,wheresalespricesarealittlelowerthanthoseunderfixedtermcontract.
Theyaredifferent incomposition,properties,mainusage,andfacilitiesconcerningdistribution,storage,andusagebyendusersduetothedifferenceinboilingpoints.Therefore, there is only small substitutability for users between them. As well,propane and butane are different in facilities and methods used concerningproductionandstocking,andthus,substitutabilityforsuppliersisalsosmall.
becausepricesaredecidedbasedonformulas,thereisapossibilitythatregionalLPgas primary distribution market is formed on the grounds that the area oftransportationislimited,inconsiderationoftransportationcost,insidearegionalblocwhich has an oil factory or import storage facilities; and that LP gas primarydistributorsareconductingsalesactivitiesbyregionalbloc.
2 CP stands for Contract Price. It is an LP gas sales price for the following month which Saudi Aramco, a Saudi Arabian national petroleum company, unilaterally notifies to its customers every month, and adopted as a base price for trades of propane and butane worldwide.
3 The Parties are not competing with each other in either Hokkaido bloc or Okinawa bloc since both regional blocs have only one of the Parties selling propane.
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AllregionsofJapan
2 Approx.30% Approx.2,500 Approx.500
Asshownabove,theacquisitionmeetsthesafeharborstandardsforhorizontalbusinesscombinations(theincreamentofHHI150orless)in regionalblocsofTohoku,Chugoku,andKyushu.Thus,furtherexaminationisconductedinregionalblocs of Kanto, Chubu, Kinki, and Shikoku, and all regions of Japan where theacquisitiondoesnotmeetthesafeharborstandards.
As shown above, the acquisition meets the safe harbor standards for ahorizontalbusinesscombinations(theincreamentofHHI150orless)inregionalblocs of Tohoku, Chugoku, Shikoku and Kyushu. Thus, further examination isconductedinregionalblocsofKanto,Chubu,Kinki,andOkinawa,andallregionsofJapanwheretheacquisitiondoesnotmeetthesafeharborstandards.
4 The Parties do not conduct primary distribution business of butane in Hokkaido bloc.
Therearevariouscompetinggoodsagainstpropaneandbutaneforeachtypeofusage.Asdiscussedinthefollowing,asubstantialdegreeofcompetitivepressureisdeemed to exist from city gas (for household, business, and industrial use),electricity (for household, business, and industrial use), and gasoline (forautomobiles).
A.CitygasCurrently, city gas pipe extension is underway nationwide and a growing
FY2012andenergy-producinghomes5,agrowingnumberofhouseholdshaveadoptedanall-electrichomewhichisequippedwithasolarphotovoltaicdevice.ItisnoteworthythattherearesomewholesalerswhichareseeingsalesofLPgasforhouseholdandbusinessgoingdown.Notlimitedtohouseholdandbusinessusage,similarchangeishappening in industrialusagewhereLPgashasbeenreplacedwithelectricitybecauseuserscannotkeepasecurity-licensedemployeeorcouldgetridofstoragefacilitiesbytheswitch.
(2)GeographicallyneighboringmarketIn prefectures adjacent to other regional blocs, some wholesalers, etc. are
purchasingpropaneorbutanefromimportstoragefacilities,etc.belongingtotheadjacent regional blocs if the distance from the facilities justifies it andtransportationisavailable.Infact,inregionalblocsofKanto,Chubu,andShikoku,therehavebeencasesofpurchasefromneighboringregionalblocsrespectively.InOkinawabloc,however,itisdifficulttopurchasefromshippingfacilitiesinadjacentblocsbecausethereisnooverlandrouteconnectingOkinawabloctootherregionalblocs.
or butane in Japan,where it is deemed reasonable to assume that competition isvigorousindownstreammarketduetoconstantexposuretopricecompetitiononthegroundsthatendusersforhouseholdsandbusinessarefrequentlyswitchingtootherwholesalersandretailers,andthatindustrialusersarealsocallingforbidsfromeverymonthtoeveryhalfayear.
Asanotherissue,wholesalersandretailersareusuallypurchasingfrommultiplesuppliersforvariousreasonsandpurposessuchasstableprocurement,restraintsonpurchasing costby comparison shopping and adjusting trading volume fromeachsupplier, and creation of business relationship to ensure technical assistance.Therefore,itiseasyforthemtoswitchsuppliersandadjusttradingvolumetherebyswitchingfromthePartiestocompetitors.
Partieswouldnotsubstantiallyrestraincompetitioninprimarydistributionbusinessofpropaneandbutaneinanyregionalblocorthecountryasawholeonthegroundsthat(i) ineachregionalblocandJapanasawhole,multiplecompetitors includingmajor ones exist and have sufficient excess capacity respectively, (ii) neighboringmarket (city gas, electricity, and other competing goods, aswell as other regionalblocs) is imposingasubstantialdegreeofcompetitivepressure(infact,inregionalblocs of Kanto, Chubu, and Shikoku, there has been cases of purchase fromneighboring regional blocs respectively) and (iii) competition is vigorous indownstreammarketandswitchingsuppliersiseasy.
Second, the Commission also decided that coordinated conduct would notsubstantiallyrestraincompetition inprimarydistributionbusinessofpropaneandbutane on the grounds that (iv) it is not necessarily easy to agree upon commonstrategicalmoveswithregardtopricesandquantityamongcompetitorsbecause,inadditionto(ii)and(iii)above,itwouldrequirethemtoestimatevariousfactorsusedinpricingformulasbyothercompanies,suchasthestandardtimebasedonwhichCPandthecurrencyexchangeratehavebeenacquired,specificcostofoceanfreight,etc.,allofwhicharedifferentacrossprimarydistributors.
6 Difference-in-differences design is a method of analysis used to study and estimate effects of an event by taking advantage of two different groups, one which can be strongly influenced by the event and the other which is not affected.
7 In Hokkaido bloc, a remedy was adopted in which the newly integrated company resulted from the 2011 integration would sign contract of deposit for consumption with other primary distributors, which would let them use shipping facilities of the newly integrated company. For this reason, analysis was made again after removing Hokkaido bloc from samples, which still resulted in an outcome similar to that discussed later.
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incrementofHHI,andtheotherregionalblocs. According to the result of this analysis, therewas no statistically significant
difference in fluctuations of the primary distribution price between regions withespeciallyhighpost-conductHHIandincrementofHHIandtheotherregionsafterthe2011 integration. Aswell, a rise of a primary distribution pricewhich cannot beaccountedforbychangeinimportpriceswasnotobservedafter2011.Fromthisfactand the above analysis result, it is reasonable to presume that the same level ofcompetitivepressurewaseffectiveinalltheregionalblocsafterthe2011integration.Basedonthisconsideration,itisalsoreasonabletopresumethattheconductofthiscasewouldnotleadtoariseofprimarydistributionprices.
ThispresumptionconcurswiththereviewresultdiscussedpreviouslyinPartIIIthattheconductofthiscasewouldnotleadtothePartiesbeingsomewhatcapableofcontrolling the primary distribution price of propane on the grounds that majorcompetitorshavesufficientexcesscapacityandthatpressurefromrelatedmarketandusersareeffective.
PartII Particularfieldoftrade1. Wroughtcopperandcopperalloyproducts
Wroughtcopperandcopperalloyproductsareageneraltermforproductsinformsofboard,strip,pipe,stick,andwire,shapedbyplacing“copper”andcopperalloy,whichincludes“brass”,analloymadeofcopperandzinc,and“phosphorbronze”madeofcopper,tin,andphosphorus,throughaprocessofmelting,casting,rolling,drawing,forging,etc.Wroughtcopperandcopperalloyproductsassumedifferentpropertiesaccordingtotheircompositionandcombinationratiosandareusedinavarietyofways including wiring for electrical appliances, circuits, valves, parts for airconditionersdependingonthecharacteristics.
1-2%of leadandareexcellent inbothhotforgingpropertiesandmachinability;dezincificationresistantbrassrodsandbarswhichhavebeentreatedforpreventionofcorrosioncausedbyzincelution;navalbrassrodsandbarswhichareproducedby adding tin and have corrosion resistance and seawater resistance; and highstrengthbrassrodsandbarswhichareproducedbyaddingiron,etc.andhavehighintensityandcorrosionresistance.Theseproductsareusedinavarietyofareasincludingelectricalandelectronicequipment,automobiles,waterworks,andgas,asvariouspartssuchasscrews,bolts,valves,andtapcomponentsaccordingtotheirproperties. Aswell, brassmade by adding zinc to copper (hereinafter, “generalmaterial”) is used for environmentally-friendly productsmade of cadmium-freematerialorlead-free,cadmium-freematerialcontainingleadand/orcadmiumlessthanacertainamount.
Since users choose from the above products according to their usage andpurposeofprocessing,thereisnosubstitutabilityforusersbetweentheproducts.Althoughsomeproductsmayusedifferentmaterials(generalmaterial,cadmium-freematerialorlead-free,cadmium-freematerial),usersdonotnecessarilyselectproductsbymaterialbecausethereisnoregulationsconcerningthecontentofleador cadmium inwrought copper and copper alloyproductsused in Japan at themoment.Therefore,substitutabilityforusersamongmaterialsisdeemedtoexist.
Sincetheaboveproductscanbeproducedinthesameproductionfacilitiesandprocess,substitutabilityforsuppliersamongtheproducts isdeemedtoexist.Aswell,brassrodsandbarsandfreecuttingbrasswires(referto(2)belowformoredetails for free cutting brasswires) share each process ofmelting, casting, andextruding, and thus can be produced in the same production facilities, whereproduction can be easily switched between the two products just by choosingequipment for thedrawingprocess (rodsandbars)or thewiredrawingprocess(wires).Basedonthisconsideration,substitutabilityforsuppliersisdeemedtoexistbetweenbrassrodsandbarsandfreecuttingbrasswires.
Therefore, the JFTCdefined“brassrodsandbars (which include freecuttingbrasswires,hereinafter)”astheproductrange.
(2)BrasswiresBrasswiresarea typeofbrassproduct ina linear form,and includes those
excellent in rollabilityandexpansibility (hereinafter, “generalbrasswires”), freecutting brasswireswhich are produced by adding 2-3%of lead and have highmachinability,brasswiresforwelding,brasswiresfornipples,etc.Brasswiresare,
Since users are choosing products according to their usage, purpose ofprocessing,andprocessingmethod,thereisnosubstitutabilityforusesamongtheproducts.
On theotherhand, sinceproductsexcept for freecuttingbrasswirescanbeproduced in the same production facilities and process, substitutability forsuppliersamongtheproductsexceptforfreecuttingbrasswiresisdeemedtoexist.
closetotin’smeltingpoint)totin-electroplatedwires,whicharemadebyplacingbrasswires,purecopperlines,etc.throughelectrotinningprocess,sothatcrystalwhiskerscausingashortcircuitwouldnotbegenerated.Reflowtin-platedwiresaremainly used as material for terminal pins for connectors with relatively smalldistance between each pin found in home appliances, electronic devices,automobiles,etc.Ontheotherhand,tin-electroplatedwiresareusedforelectricwires for construction and power, automobile parts, and terminal pins forconnectorswithrelativelylargedistancebetweeneachpin.
Withtheconductofthiscase,thetotalmarketshareofthePartieswouldbeapproximately45%andtheincreamentofHHIapproximatetly650.Therefore,theacquisition does not meet the safe harbor standards for horizontal businesscombinations.
Rank Companyname Marketshare1
1 CKSan-EtsuGroup Approx.40%2 A Approx.20%3 B Approx.20%4 NipponShindo Approx.10%
Others Approx.10%Total 100%
(2)StateofcompetitorsInaddition to twomajor competitors controllingapproximatetly20%of the
conform to the Japanese Industrial Standard, and thus arenotdifferentiatedbymanufacturers,makingiteasytoswitchsuppliers.Infact,wholesaledealersandusers are trading with multiple manufacturers and adjusting purchase volumeaccordingtothepricepresentedinordertopromotepricecompetitionandensurestablesupply.
approximatetly45%,theconductofthiscasewouldnotbedeemedtosubstantiallyrestrain competition in the field of trade of brass rods andbarswith unilateralconductbythePartiesorcoordinatedconductwithcompetitorsonthegroundsthatthere aremany competitors includingmajor ones, that a substantial degree ofimportpressureandcompetitivepressurefromrelatedmarketisdeemedtoexist,andthatacertaindegreeofcompetitivepressurefromusersisdeemedtoexist.
2. Brasswires(1)PositionsoftheParties
Withtheconductofthiscase,thetotalmarketshareofthePartieswouldbeapproximately30%andtheincrementofHHIapproximatetly290.Therefore,theacquisition does not meet the safe harbor standards for horizontal businesscombinations.
Rank Companyname Marketshare2
1 CKSan-EtsuGroup Approx.25%2 C Approx.15%
2 Imports are not included.
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3 D Approx.15%4 E Approx.15%7 NipponShindo Approx.5%
(3)ImportpressureThere is no institutional barrier concerning import of brasswires. In recent
years, quality difference between domestic products and imports (substantialportionsfromChina)hasbecomesmaller,andthusswitchtoChineseproductsisontherise;importsjumpedfromabout2,000tonsinFY2008toabout4,000tonsinFY2013.
to the Japanese Industrial Standard, and thus are not differentiated bymanufacturers,makingiteasytoswitchsuppliers.Infact,wholesaledealersandusers are trading with multiple manufacturers and adjusting purchase volumeaccordingtothepricepresentedinordertopromotepricecompetitionandensurestablesupply.
approximatetly30%,theconductofthiscasewouldnotbedeemedtosubstantiallyrestraincompetitioninthefieldoftradeofbrasswireswithunilateralconductbythePartiesorcoordinatedconductwithcompetitorsonthegroundsthattherearemany competitors including major ones, that a substantial degree of import
Withtheconductofthiscase,thetotalmarketshareofthePartieswouldbeapproximately70%andtheincrementofHHIapproximatetly2,000.Therefore,theaquisition does not meet the safe harbor standards for horizontal businesscombinations.
Rank Companyname Marketshare1 CKSan-EtsuGroup Approx.40%2 NipponShindo Approx.30%3 F Approx.20%4 G Approx.5%5 H Approx.5%
there are four or more competitors. These competitors have sufficient excesscapacitywhichis,at least,greaterthan50%ofactualsalesvolumemadebytheParties inFY2013.Aswell, thereareotherpotential competitorsmanufacturingsolelyforcaptiveconsumption.
materialforterminalpinsforconnectors,reflowtin-platedstrips(withitsmarketdozensoftimesaslargeasthatofreflowtin-platedwires),whichareproducedbyplacing brass strips, etc. through electrotinning and reflow treatment, have thepropertiessimilartothoseofreflowtin-platedwiresandareusedinthesameway.
Whilesometerminalpinprocessors,directusersofreflowtin-platedwires,onlyhaveprocessingfacilitiesspecializedinwirerods,connectormanufacturerswhichpurchase terminal pins for connectors consider specifications and prices ofconnectors,andchooseproductsbycomparingquality,price,etc.betweenterminal
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pinsmadefromwirerodsandthosefromstrips.Basedonthis,itisreasonabletoassume that reflow tin-plated wires are subject to price cutting pressure fromconnector manufacturers, users in downstream market, through terminal pinprocessors.Therefore,strongcompetitivepressurefromusersisdeemedtoexist.
approximatetly70%,theconductofthiscasewouldnotbedeemedtosubstantiallyrestraincompetitioninthefieldoftradeofreflowtin-platedwireswithunilateralconductbythePartiesorcoordinatedconductwithcompetitorsonthegroundsthatthere are major competitors with sufficient excess capacity, and potentialcompetitorsaswell,andthatstrongcompetitivepressurefromusersisdeemedtoexist.
PartI ThePartiesZimmer,Inc.(thecorporategrouptowhichthecompanybelongsishereinafter
referred to as “Zimmer”) is a company that conducts medical device marketingbusiness,etc.
Biomet,Inc.(thecorporategrouptowhichthecompanybelongsishereinafterreferred to as “Biomet”) is a company that conducts medical device marketingbusiness,etc.
TheapplicableprovisionsareArticles10and15oftheAntimonopolyAct.Zimmer, Inc. and Biomet, Inc. are companies that conduct medical device
marketing business, and there are a wide range of products marketed by bothcompaniesortheirsubsidiariesthatareinhorizontalrelations1.FromSection3belowonward, among such products, investigation was carried out for artificial joints2
Since June 2014, the Parties voluntarily submitted written opinions and
1 Refers to being in competition within the same field of trade. 2 Regarding artificial joints, medical institutions (physicians) select products and purchase from wholesalers. Artificial joints are covered by the insurance reimbursement system (material price standard system). In the system, insurance reimbursement prices (hereinafter referred to as “reimbursement prices”) are specified by the Ministry of Health, Labour and Welfare (MHLW) for medical materials that constitute each medical device (refers to designated insured medical materials; the same shall apply hereinafter), and medical institutions that performed medical services using artificial joints are uniformly reimbursed of the reimbursement prices from a health insurance society, etc. Reimbursement prices are revised once every two years after investigation by MHLW on the purchase prices of medical devices by medical institutions and selling prices of similar products in overseas. In most cases, medical institutions purchase medical devices at prices cheaper than reimbursement prices by a certain degree, since purchasing at prices higher than the reimbursement prices results in the difference between the reimbursement prices and the purchase prices (including consumption tax) becoming a loss.
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materials to the JFTCstating that theTransactionwouldnot substantially restraincompetition,andtheJFTCheldmeetingsseveraltimeswiththePartiesinresponsetorequestsbytheParties.Subsequently,onAugust4th,2014,theJFTCacceptedawrittennotificationoftheplanoftheTransactionsubmittedbythenotifyingcompaniesbasedon the regulations of the Antimonopoly Act, and commenced the preliminaryinvestigation.The JFTCproceededwiththepreliminary investigationbasedontheabovementionedwirttennotificationandotherdocumentssubmittedbytheParties,hearingtousers,etc.Asaresult,theJFTCdecidedtoopenthesecondaryinvestigation,becauseofnecessityoffurtherinvestigationonSeptember3,2014,theJFTCrequestedthenotifyingcompanies toprovidereportsetc,made the investigationpublic,andsolicitedpubliccommentsfromthirdpersons.
In thesecondary investigation, the JFTCheldmeetingsseveral timewith theParties in response to requests by the Parties. The JFTC also proceededwith thesecondaryinvestigationontheeffectoftheTransactiononcompetition,basedontheresultsetc.ofhearingfrommedicalinstitutions,wholesalersandcompetingrivals,inadditiontothereportsetc.sequentiallysubmittedbythenotifyingcompanies.
Regardingtherequestforprovisionofreportsetc.tothenotifyingcompanies,submission of all reports etc. was completed with the reports etc. submitted onDecember25th,2014.
on“UKA”and“artificialelbowjoints”amongartificialjointsproposedtotheJFTCbythe Parties would be taken, the JFTC concluded that the Transaction would notsubstantiallyrestraincompetitioninanyparticularfieldsoftrades,includingfieldsoftradeotherthanthetwo.
Replacement therapyusing artificial hip joints is roughlydivided into two
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methods.Oneistotalhiparthroplasty(THA;hereinafterreferstoartificialhipjointsusedforthistherapymethod)toreplacebothoftheacetabularside(pelvicside)andthefemoralsidethatconstitutehipjointstoartificialjointsforwhendamage is identified inbothsides.Theother is “artificial femoralhead(AFH)replacement”toreplacethefemoralsideonlytoartificialjointsforwhentheneckpartoftheboneheadatthetipoffemurisfractured.
THA consists of pelvic side medical materials “acetabular cup” and“acetabular liner”andfemoralsidemedicalmaterials“femoralstem”,“femoralhead”,etc.,whileAFHconsistsof“femoralstem”and“femoralhead”only.
TwotypesofproductsareavailableforTHAandAFH.Oneis“primary”thatisusedforthefirstsurgeryandtheotheris“revision”thatisusedforrepeatsurgery.Further, there are two types of femoral stem or acetabular cup productsdependingonthejoiningmethodwiththebone.Oneiscement-lesstypethatisused for direct fixingbymeans of bone fusion (property of bone fusingwithtitanium)andtheotheriscementtypethatisusedforindirectfixingbymeansofbonecement.
B.SubstitutabilityforusersAmongartificialhip joints,whileTHA isused forwhenreplacingboth the
acetabularsideandthefemoralside,AFHisusedforwhenreplacingthefemoralsideonly.ApplicableconditionsaredifferentbetweenTHAandAFH,andthusthereisnosubstitutability forusersbetweenthetwo.Regardingprimaryandrevision,basicallyprimaryproductsareusedforthefirstsurgeryandrevisionproductsareusedforrepeatsurgery,andthustheirsubstitutabilityforusersislimited. Meanwhile, regarding cement-less type products and cement typeproducts,physiciansmaketheselectiondependingontheconditionofthepatient,experience,etc.,buttheysharethebasicusageandthusthereissubstitutabilityforusers.
C.SubstitutabilityforsuppliersMedicalmaterials that constitute AFH are basically the same as a part of
medical materials that constitute THA, and thus there is substitutability forsuppliersbetweenTHAandAFH.
etc.basedonthePharmaceuticalsandMedicalDevices(PMD)Act3 (seeSection2 below) and it usually takes 6-12months from application to approval, therequired time becomes shortened considerably when similar products areavailableinthemarket.
For that reason, it is considered that an enterprise that currentlymarketsprimaryproductsonly (orrevisionproductsonly) isable tomanufactureandmarketrevisionproducts(orprimaryproducts)inashortperiodoftimewithoutbearingalargeamountofadditionalexpense.Therefore,thereissubstitutabilityforsuppliersbetweenprimaryandrevision.
D.SummaryAs described above, a certain degree of substitutability for users and
substitutability forsuppliers is identifiedamong theabovementionedproducttypes,andtheJFTCdefinedtheproductrangetobe“artificialhipjoints”.
Replacementtherapyusingartificialkneejointsisroughlydividedintotwomethods.Oneistotalkneearthroplasty(TKA,whichhereinafterreferstoartificialkneejointsusedforthistherapymethod)toreplaceboththeinnersideandtheoutersideofkneejointstoartificialjointsforwhendamageisidentifiedinbothsides. The other is “unicompartmental knee arthroplasty” (UKA; hereinafterreferstoartificialkneejointsusedforthistherapymethod)toreplacetheinneroroutersideofkneejointstoartificialjointsforwhendamageisidentifiedinonesideonly.
Similar to artificial hip joints, there are primary products and revision
3 Former Pharmaceutical Affairs Act. The “Act for Partial Amendment of the Pharmaceutical Affairs Act, etc.” came into force on November 25, 2014, and it was renamed to “Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, Regenerative and Cellular Therapy Products, Gene Therapy Products, and Cosmetics” (abbreviation: Pharmaceuticals and Medical Devices Act or PMD Act).
kneejoints,UKAisusedforwhenreplacingonesideonly.ApplicableconditionsaredifferentbetweenTKAandUKA,andthusthereisnosubstitutabilityforusersbetweenthetwo.Similartoartificialhipjoints,substitutabilityforusersbetweenprimary and revisionofTKA is limited, and there is substitutability forusersbetweencement-lesstypeandcementtypeproducts.
C.SubstitutabilityforsuppliersWhile the form etc. ofmedical materials that constitute TKA and UKA is
different,thetechnologyrequiredformanufacturingissimilar,andequipmentrequiredformanufacturingisalmostidentical.Further,whilesalesofTKAandUKAbymanufacturersetc.inJapanrequireapprovaletc.basedonthePMDActanditusuallytakes6-12monthsfromapplicationtoapproval,therequiredtimebecomes shortened considerably when similar products are available in themarket.Forthatreason,itisconsideredthatanenterprisethatcurrentlymarketsTKAonly(orUKAonly)isabletomanufactureandmarketUKA(orTKA)inashort period of time without bearing a large amount of additional expense.Therefore, there is substitutability for suppliers between TKA and UKA.Additionally,similartoartificialhipjoints,thereissubstitutabilityforsuppliersbetweenprimaryandrevisionofTKA.
D.SummaryAs described above, there is no substitutability for users yet there is
substitutabilityforsuppliersbetweenTKAandUKA,andthereissubstitutabilityforusersamongabovementionedproducttypesofTKAandUKA.Forthat,itispossible todefinetheproductrangeto“artificialknee joints(TKAandUKA)”.However,inadditiontothefactthatthereisnosubstitutabilityforusersbetweenTKA and UKA due to different applicable conditions, the competitionenvironment(compositionofsuppliersandthesituationofmarketshare)oftheTKAmarketissignificantlydifferentfromthatoftheUKAmarket.Therefore,itisappropriatetoconsiderthatTKAandUKAformdifferentmarkets.
Artificial shoulder joints are medical devices used as a replacement ofshoulderjointsforwhenthefunctionoftheoriginalshoulderjointsisimpaired.
ReplacementtherapyusingartificialshoulderjointsisroughlydividedintotwomethodsOneistotalshoulderarthroplasty(TSA,whichhereinafterreferstoartificial shoulder joints used for this therapy method) to replace both thehumeral sideand the scapular side that constitute shoulder joints toartificialjointsforwhendamageisidentifiedinbothsides.Theotheris“artificialhumeralhead(AHH)replacement”toreplacethehumeralsideonlytoartificialjointsforwhendamageisidentifiedonlyintheboneheadatthehumeralsideofshoulderjoints.
Similar to artificial hip joints, there are primary products and revisionproductsforartificialshoulderjoints,andtherearecement-lesstypeandcementtypeproductsforhumeralstemandglenoid.
thehumeralsideandscapularside,AHHisusedforwhenreplacingthehumeralsideonly.ApplicableconditionsaredifferentbetweenTSAandAHH,andthusthere isno substitutability forusersbetween the two. Similar toartificialhipjoints, substitutability for users betweenprimary and revision is limited, andthere is substitutability for users between cement-less type and cement typeproducts.
C.SubstitutabilityforsuppliersMedicalmaterials that constituteAHHarebasically the same as a part of
medical materials that constitute TSA, and thus there is substitutability forsuppliersbetweenAHHandTSA.Additionally,similartoartificialhipjoints,thereissubstitutabilityforsuppliersbetweenprimaryandrevision.
Replacementtherapyusingartificialelbowjointsisroughlydividedintotwomethods. One is total elbow arthroplasty (TEA, which hereinafter refers toartificialelbowjointsusedforthistherapymethod)toreplaceboththehumeralside and theulnar sideof elbow joints to artificial joints forwhendamage isidentifiedinbothsides.Theotheris“artificialradialhead(ARH)replacement”toreplacethesectionneartheradialheadtoartificial jointsforwhendamageisidentifiedinthesection.
4 One of the Parties does not market reverse type products and reverse type products are not in horizontal relations between the Parties, and thus the market is not separately defined for reverse type products.
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There are linked type (the abovementioned components are completelylinked) and non-linked type (the abovementioned components are notcompletelylinked)productsforTEA.Basically,applicableconditionsarecommonforthebothtypes,andeitheroflinkedtypeandnon-linkedtypeproductsisusedwhen the collateral ligament functions, and non-linked type products areselectivelyusedinrelativelysevereexceptionalcaseswheredamageisidentifiedinthecollateralligament.
humeral sideandulnar side,ARH isused forwhenreplacing theradialhead.ApplicableconditionsaredifferentbetweenTEAandARH,andthusthereisnosubstitutabilityforusersbetweenthetwo.Regardingthelinkedtypeandnon-linked type products, while physicians make the selection depending on theconditionofthepatient,experience,etc.,applicableconditionsarebasicallythesameforthemexceptsomeexceptionalcaseswherethecollateralligamentisnotfunctioning.Therefore,thereissubstitutabilityforusersbetweenlinkedtypeandnon-linked type products. Additionally, similar to artificial hip joints,substitutability forusersbetweenprimaryandrevisionofTEAis limited,andthere is substitutability for users between cement-less type and cement typeproducts.
C.SubstitutabilityforsuppliersWhile the form etc. ofmedical materials that constitute TEA and ARH is
reverse type) and artificial elbow joints, sales of individual products by domesticmanufacturers, Japanese subsidiaries of overseas manufacturer or sole importdistributorshipsrequireapprovaletc.basedonthePMDAct.Additionally,thecurrentsituationisthatmedicalinstitutionsasuserspurchasetheapprovedgoodsdesignedformarketinginJapanviawholesalers.
BytheTransaction,theHerfindahl-HirschmanIndex(HHI)willbeapproximately1400,thecombinedmarketshareandrankingofthePartiesbecomeapproximately30%andthefirstplace,respectively,andtheincrementalHHIwillbeapproximately280. Therefore, the Transaction comes under the safe harbor rules for horizontalbusinesscombination.
By theTransaction,HHIwill be approximately 2400, the combinedmarket
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shareandrankingofthePartiesbecomeapproximately40%andthefirstplace,respectively, and the incrementalHHIwillbeapproximately720.Therefore, theTransaction does not come under the safe harbor rules for horizontal businesscombination.
whoperformsurgery selectproductsdependingon thequalityofproductsandexperience.Inlateyears,therearesomecasesobservedwherepricesaretakenintoaccountintheselection,suchascaseswheremedicalinstitutionsrequesttolowerprices by holding discount negotiations with multiple wholesalers. However,medical institutions (physicians) still have a tendency to set high value on thequalityofproductsandexperience.Additionally,whilespecialsurgeryequipmentisused on performing artificial joint replacement, the method of use of suchequipmentvariesdependingonthemanufacturer,anditisnecessarytoacquireacertainlevelofskillstousetheequipment.Alsofromthisviewpoint,physicianstendnot to change to products from othermanufacturers frequently. Therefore, it isconsideredthatsuchasituationhasnotcometoastatewherediscountnegotiationsconductedbymedicalinstitutionscanbeassessedascompetitivepressure.
The Parties are claiming that the reimbursement prices are acting assuppression pressure on price increase. As amatter of fact,medical institutionalmost never purchase artificial joints (e.g., TKA) at prices higher than thereimbursementprices.However,manufacturerscompeteatthepricerangethatisbelow the reimbursementprices, and the reimbursementprices themselvesarerevisedonce every twoyears reflecting the actual sellingprices. Therefore, it isconsidered not appropriate to assess the reimbursement prices as adequatesuppressionpressureonpriceincrease.
become approximately 40%, and the number of companies competing in themarketwillreducebyone.However,therestillexistcompanyDandcompanyEasinfluential competitors in the market, and there also exist other competitors.Additionally,eachcompetitorpossessesacertainlevelofexcesscapacity,andthereisnocircumstanceidentifiablethatwillfacilitatehighlyaccuratepredictionofeach
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other’sactionsbytheenterprises.Therefore, the JFTCconcluded that theTransactionwouldnotsubstantially
By theTransaction,HHIwill be approximately 7800, the combinedmarketshareandrankingofthePartiesbecomeapproximately90%andthefirstplace,respectively,andtheincrementalHHIwillbeapproximately3800.Therefore,theTransaction does not come under the safe harbor rules for horizontal businesscombination.
10%asaninfluentialcompetitor,thegapfromthePartiesislargeandthemarketshareofothercompetitorsisextremelysmall(competitorsthatareinfluentialinotherartificialjointsmarketsdonotholdmuchmarketshareintheUKAmarket).Additionally,thePartiesoccupiedthemarketasthefirstplaceandthesecondplacewith similar market shares of approximately 50% and approximately 40%,recognizedeachotherasacompetitorandactivelycompetedinthepast.Therefore,itisconsideredthattheinfluenceofthecompetitionbetweenthePartiesceasingtoexistonthecompetitionislarge.
become approximately 90%, and there will emerge a significant gap fromcompetitors.Additionally,competitionpreviouslyconductedbetweenthePartieswillbelost.Meanwhile,eachcompetitivepressureontheUKAmarketislimited,andtheTransactionwouldresultincreatingasituationwherethePartieswouldbeable to freely control the prices etc. to a certain degree. Therefore, the JFTCconcludedthattheTransactionwouldsubstantiallyrestraincompetitionintheUKAmarket.
By theTransaction,HHIwill be approximately 2700, the combinedmarketshareandrankingof thePartiesbecomeapproximately30-40%andthesecondplace,respectively,andtheincrementalHHIwillbeapproximately600.Therefore,theTransactiondoesnotcomeunderthesafeharborrulesforhorizontalbusinesscombination.
5 The scale of artificial knee joints (TKA and UKA) market in 2012 was approximately 31 billion yen, and the percentage of UKA in the artificial knee joints market was less than 10% in a quantity basis.
6 While the scale of artificial knee joints (TKA and UKA) market in 2012 was approximately 31 billion yen, the scale of artificial shoulder joints market was approximately 1.1 billion yen.
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competinginthemarketwillreducebyone.However,therestillexistcompanyJandcompany K as influential competitors in themarket, and there also exist othercompetitors.Additionally,eachcompetitorisconsideredtopossessacertainlevelofexcesscapacity,andthereisnocircumstanceidentifiablethatwillfacilitatehighlyaccuratepredictionofeachother’sactionsbytheenterprises.
Therefore, the JFTCconcluded that theTransactionwouldnotsubstantiallyrestraincompetitionintheartificialshoulder jointsmarketbecauseofunilateralconductofthePartiesorcoordinatedconductwithcompetitors.
By theTransaction,HHIwill be approximately 4600, the combinedmarketshareandrankingofthePartiesbecome60-70%andthefirstplace,respectively,and the increased portion of HHI will be approximately 1900. Therefore, theTransaction does not come under the safe harbor rules for horizontal businesscombination.
(6)LegalassessmentbasedontheAntimonopolyActAfter theTransaction, themarketshareoftheParties in theartificialelbow
jointsmarketwillbecome60-70%,andtherewillemergeasignificantgapfromcompetitors.Additionally,competitionpreviouslyconductedbetweenthePartieswill be lost.Meanwhile, each competitivepressureon the artificial elbow jointsmarketislimited,andtheTransactionwouldresultincreatingasituationwherethePartiescan freelycontrol thepricesetc. toacertaindegree.Therefore, the JFTCconcluded that the Transaction would substantially restrain competition in theartificialelbowjointsmarket.
PartVI EconomicanalysisExpenditures on artificial joints are subject to reimbursement under the
7 While the scale of artificial knee joints (TKA and UKA) market in 2012 was approximately 31 billion yen, the scale of artificial elbow joints market was approximately 0.4 billion yen.
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institutions (hereinafter referred to as “wholesale prices”) are below thereimbursement prices by a certain degree, and the average selling prices frommanufacturerstowholesalers(hereinafterreferredtoas“manufacturerprices”)are,in turn,belowthewholesaleprices.Therefore, it ispossible for theTransactiontoaffectthesepricesateachdistributionstage.Additionally,thereimbursementpricesarerevisedonceeverytwoyearsinaccordancewiththelevelofprevailingwholesaleprices. Therefore, if competition amongmanufacturers declines as a result of theTransaction,causingthemanufacturerpricesandwholesalepricestoincrease,thereisapossibilitythatfuturereimbursementpriceswillremainhigh.
To address these concerns, the JFTC conducted econometric analysisregardingtherelationshipbetweenmarketstructureandmanufacturer,takingintoaccountthepossibilitythatmanufacturerpricesaffectmarketstructurethroughnewentry.Asaresult, itwasfoundthathighermarketconcentrationisassociatedwithhighermanufacturerprices.Basedonthisresult,simulationanalysispertainingtotheimpact of theTransaction onmanufacturer prices and reimbursement priceswascarried out. According to the simulation results, if a Transaction similar to theTransactionhypotheticallytookplaceinFY2011,themanufacturerpricesinthenextfiscalyearisestimatedtohaveincreasedby6.2%forUKA;4.3-5.3%forartificialelbowjoints;and1.5-3.1%forartificialhipjoints,TKAandartificialshoulderjoints. ThiswouldhaveledtoreimbursementpricesinFY2014beinghigherthantheactualpricesby4.3%forUKA;1.3-3.2%forartificialelbowjoints;and0.3-2.0%forartificialhipjoints,TKAandartificialshoulderjoints8.
These results are consistent with the investigation results described inSection5above,andtheJFTCtookthemintoaccountinmakingitsjudgment9.
8 The reason why there is a range in the estimated values is because artificial joints are divided into multiple reimbursement categories (categories specified by the Ministry of Health, Labour and Welfare, where medical equipment that are similar in terms of structure, intended use, medical efficacy, etc. are placed into one group) and the estimated values vary across reimbursement categories. 9 When simulation analysis is applied to the review of a business combination as in the present case, it has to be recognized that the results by necessity rely on a set of assumptions. Therefore, the simulation results should be interpreted as supplementary information to the results of qualitative investigation, not as a definitive conclusion on the effects of this Consolidation.
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(1) Tangible assets (e.g., inventory, design history, experimental and clinical data),intellectualpropertyrights(patents,trademarks,know-how,etc.usedinthesubjectgoods), etc. pertaining to the Parties’ leading brands corresponding toapproximately50%ofthemarketshareintheUKAmarket inFY2012aretobedivested;
(3)Buyersaretobeenterpriseswhichhaveadequateexperienceandcapabilityintheorthopedics and artificial joints business and be independent of and financiallyunrelated to theParties, thatneed tobe selected in light of the criteria such aspossessingthefunds,specialtyandinsentivetomaintainanddevelopthebusinesssubjecttothedinestitures,ThepossiblebuyersaretobenotifiedtoandobtainanclearancefromtheJFTCafterconcludingcontractswiththebuyers;
PartVIII AssessmentoftheRemedyOn the premise that the Remedy would be taken, the Parties’ combined
market share and rank in the UKA market after the Transaction would beapproximately 40% and the second place, respectively, and the Parties’ combinedmarketshareandrankintheartificialelbowjointsmarketaftertheTransactionwouldbeapproximately40%andthefirstorsecondplace,respectively.However,inbothoftheUKAmarketandartificialelbowjointsmarket,theParties’marketshareaftertheTransactionwouldbe lowerthanthe largermarketshareof thePartiesbeforetheTransaction.
PartI OverviewofthetransactionKadokawaCorporation(hereinafterreferredtoas“Kadokawa”;thegroupof
combinedcompanieswhoseultimateparentcompanyisKadokawashallbereferredtoas“KadokawaGroup”),mainlyconductingpublishingbusiness,andDwangoCo.,Ltd.(hereinafter, “Dwango”; the group of combined companieswhose ultimate parentcompanyisDwangoshallbereferredtoas“DwangoGroup”;KadokawaGroupandDwango Group are hereinafter collectively referred to as “the Parties”), mainlyconductingportalbusinessplannedtoestablishanewholdingcompanythroughjointsharetransfer.
distribution business”, “paid video provision business”, and “niconico” which aredeemed to receive relatively large impact on competition, are discussed in II andthereafter.
PartII Particularfieldoftrade1. Productorservicerange(1) PlatformbusinessA.Servicerange
DwangoGroupisprovidingservicessuchasniconicodouga(video),niconicolive (live broad casting), niconico seiga (pictures) (hereinafter collectivelyreferredtoas“niconico”)throughitsportalsiteontheinternet.Throughtheseservices,DwangoGroupisprovidingaservicetoprovidersofcontentsincludingvideos, e-books, etc. (hereinafter, “contents”) allowing such providers to havetheir contents viewed through niconicoby the service’smembers, and at thesametime,DwangoGroupisprovidingviewers,whoareniconicomembers,witha service of distributing contents. Therefore, Dwango Group is acting as anintermediaryoftradebetweendifferentusers.(Hereinafter,aserviceprovidingsuch function is referred to as “platform”; and a service allowing contentproviderstohaveviewersviewtheircontentsthroughaplatform,andaserviceprovidingcontentstoviewersarehereinaftercollectivelyreferredtoas“rangeoftwo services”.) (Business providing contents to viewers by first providingcontents to a platform enterprisewhich thenmake the contents viewable toviewersishereinaftercollectivelyreferredtoas“contentsprovisionbusiness”.)
Platform service at niconico breaks down into “free video distributionbusiness”,“paidvideodistributionbusiness”,and“e-bookdistributionbusiness”according to the types of contents distributed. The JFTC defined “free videodistribution business”, “paid video distribution business”, and “e-bookdistributionbusiness”astheservicerangeinthiscaseaccordingtothetypesofservicesprovidedbyniconicoonthegroundsthatitisreasonabletothinkthatthereisno(oronlylimited)substitutabilityforusersfromtheperspectivesofviewersandcontentsprovidersbecauseeachbusinessprovidesdifferenttypeofcontentssuchas,freeandpaidvideos,ande-books;andthatsimilarserviceisprovidedforeachbusinessbydifferentcompetitors.Aswell,niconico,asawhole,is providing a unique combination of a variety of services including internetshoppingfunctioninadditiontotheaforementionedservicesthroughitsgeneralportal site. Originality of niconico can also be observed in a function whichenablesviewerstoaddcommenttodistributedvideos.Inconsiderationofsuchuniquenessofniconico,thereisonlylimitedsubstitutabilitywithothergeneralportalsites.Therefore,theJFTCoverlappinglydefined“niconico”astheservicerange.
Asdiscussedpreviously, enterprises operating these typesof businessareproviding service to two different user groups, that is, viewers and contentsproviders.Accordingly,theservicerangeisdefinedbytherangeoftwoservicesrespectivelyprovidedtothetwogroups.
10 Premium members are paid members who pay monthly registration fees of 540 yen (incl. tax). Unlike general members who do not pay registration fees, premium members receive special benefits such as (i) they can view high-quality video; (ii) they have reliable access to live streaming even when there are many viewers watching it; and (iii) they can watch missed live streaming later. However, in addition to monthly registration fees, premium members have to pay for paid videos, etc., to watch them.
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B.Reviewontwo-sidedmarket11
Paidvideodistributionenterprisesandniconicohavevariouskindsofpaidvideocontentsandarecompetingthroughalineupofofferingbyspecializinginspecificfieldsand/ormeetingtheneedsofallsortsofgenres.Aswell,theJFTCfound, through the economic analysis it conducted, that there were indirectnetworkeffects12 thatasthenumberandtypesofcontentsincreaseatniconico,its membership grows and the number of viewers who watched distributedcontentsincreases,andviceversa.13
For this reason, the JFTC examined the impact of conduct of this case oncompetition inconsiderationof thecharacteristicsof two-sidedmarketof theplatformwhichthePartiesoperated.
byindividuals(exceptforenterprises)orenterprises(includingsoleproprietors)anddistributedtoviewersbysuchvideodistributionenterprises,aredividedintofreeandpaidvideocontentsaccordingtowhetherornotpaymentisrequiredforviewing.Apartfromthisdifference,freeandpaidvideocontentsaredifferentinthatwhileacertainamountofmoneyisinvestedincreatingpaidvideocontentsbecausethey need to be profitabale, free video contents are usually produced anddistributed for an individual’s self-expression or an enterprise’s advertisingpurposes,andthusthefreevideocontentsassuchdonotneedtobeprofitable.Forthisreason,basedonthedifferenceinprofitabilityandpurposesofproduction,itisreasonabletothinkthatthereisdifferenceinqualityaswell,andthus,freeandpaidvideocontentsarenotdeemedtobechoseninterchangeably.
11 There is a variety of understanding with regard to the definition of two-sided market. Here, it is defined as a market which meets three requirements: there are two or more different types of user groups; there is a platform providing space which acts as an intermediary of trade between different types of users; and there are indirect network effects. 12 Indirect network effects are observed in cases where there are two different types of user groups; and a growth of the number of users in one group decides the number of users in the other and quality of service provided by the other, and vice versa, through which the two different types of users are mutually influenced by each other. 13 Economic analysis was conducted through a Granger causality test and impulse response analysis by using the result of estimation of a vector autoregressive model expressing the relationship between the number of niconico members and the number of channels provided at niconico. The result of the Granger causality test indicated causal relationships in both directions, that is, from the number of channels to the number of members, and the other way around. In the meantime, impulse response analysis showed that an increase of the number of niconico’s animation channels except for those provided by Kadokawa was followed by a significant growth of the number of members and that a growth of membership was followed by a significant increase of the number of channels.
(2) Combination of paid video distribution business and niconico with paid videoprovisionbusiness
Inthiscase,theplatformoperatedbythePartiesactsasanintermediaryoftrade between contents providers, the sellers, and viewers, the buyers. In thisrespect,thePartieshaveafunctionsimilartothatwhichretailershaveinasupplychainofconsumergoods,etc.whereconsumergoodsmanufacturerssellproductstoconsumersthroughretailers.
Basedonthisconsideration,therelationshipofpaidvideoprovisionbusinesswith paid video distribution business and niconico in this case is reasonablyconsidered to be similar to vertical relationship of upstream market anddownstreammarket,andthereforeistobeexaminedinlightofcriteriaofverticalbusinesscombinationwhilecharacteristicsoftwo-sidedmarketaretobereviewedseparatelyinexaminationofdeterminingfactors.
WhilepaidvideodistributionbusinessismadeoftherangeoftwoservicesasdiscussedpreviouslyinPartII1(1)A,thepositionofvideodistributionenterprisesinthe range of service inwhich contents providers are the users is considered to bereflectedinthepositionintherangeofserviceinwhichviewersaretheusers.Therefore,accordingtocalculationofmarketshareintherangeofserviceinwhichviewersarethe
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users,with the conductof this case, the total share controlledby theParties in themarketofpaidvideodistributionbusinesswouldbeapproximately5%,HHIabout2,800atmaximum,theincreaseofHHIabout5.Asaresult,theconductofthiscasemeetsthethesafe-harborcriteriaforhorizontalbusinesscombinations.
Marketshareofpaidvideodistributionbusinessin2013Rank Companyname Marketshare1 A Approx.35%2 B Approx.30%- KadokawaGroup Approx.0-5%- DwangoGroup Approx.0-5% Others Approx.35-25%
(3)ExaminationofdetermingfactorsA. Kadokawa Group’s refusal of providing paid video contents to the Parties’competitors(hereinafterreferredtoas“inputforeclose”)
Unlike general consumer goods (tangible products), in contents provisionbusiness concerning paid video and other contents, contents data are notproducedforeachplatformwhichtheyareprovidedto,butthesamedataareprovidedtomultipleplatforms,andthusmarginalcostisextremelysmall,andcontents can be provided to a variety of platforms asmany times aswantedwithoutadditionalcost.Aswell,asthenumberofplatformstouploadcontentsincreases, the chances of contents being viewed by more users also grow,translatingintomoreprofits.
In case of input foreclose by Kadokawa Group, there would be a hugedrawbackcausedbylossofsalesopportunitiesonthegroundsthatthePartiesonlycontrolabout5%ofthemarketofpaidvideodistributionbusiness,andthat,ofallthesalesofpaidvideocontentsofKadokawaGroup,salesthroughDwangoGroupaccountsforonlyasmallportion.
However, it could lead to lowerprofits forDwangoGroup in termsof thechargeonpaidvideocontentstoniconicomembers,monthlyregistrationfeesfrompremiummembers,distributionfeesfrompaidvideoprovisionenterprises,and/orthechargeontheuseofadvertisingspacetoadvertisers,asaresultofadiminished quality of its paid video distribution service to its viewers andeventual decrease in thenumberof viewers, because customer foreclosure, ifimplemented,wouldreducethenumberandtypesofpaidvideocontentswhichDwango Group carries in consideration of the two-sided market’s indirectnetworkeffects,asdiscussedpreviously inPart II1 (1)B,basedonthesmallproportionKadokawaGroupaccountsfortoallthepaidvideocontentsprovidedbyDwangoGroupatthemoment.
Basedon theabove, it is reasonable to think that there isno incentive for
conductofthiscasewouldnotsubstantiallyrestraincompetitioninanyparticularfield of trade discussed previously with unilateral conduct by the Parties orcoordinatedconductwithcompetitors.
PartI OverviewoftransactionMaxValu Kanto Co, Ltd., operating supermarkets in Kanto region as a
subsidiary of Aeon Co., Ltd. (hereinafter referred to as “Aeon”; the group ofcombinedcompanieswhoseultimateparentcompanyisAeonshallbereferredtoas“AeonGroup”)andTheMaruetsu,Inc.(hereinafter,“Maruetsu”),andKasumiCo., Ltd. (hereinafter, “Kasumi”; Aeon Group and Maruetsu are hereinaftercollectively referred to as “the Parties”), the latter two also operatingsupermarketsinKantoregion,plannedtoestablishaholdingcompanythroughjoint share transfer and Aeon planned to make the holding company aconsolidatedsubsidiaryofAeonafterthejointsharetransfer. TheapplicableprovisionsinthiscaseareArticle10andArticle15(iii)ofthe
AMA.
PartII JointrelationshipsstrengthenedbyconductofthiscaseTherearealreadycertainjointrelationshipsformedamongAeonGroup,and
MaruetsuandKasumisinceAeonholdsalittlemorethan30%ofthevotingrightsof Maruetsu and Kasumi respectively. Through the conduct of this case, Aeonwouldadditionallyacquirevoting rightsofMaruetsuandKasumi,whichmakethem its subsidiaries, and thus joint relationships between Aeon Group andMaruetsuandKasumiwouldbedeemedtobestrengthened.Therefore,impactofthesestrengthenedjointrelationshipsoncompetitionistobeexamined.
Supermarkets are divided into general merchandise stores (hereinafter,“GMS”)whichsellavarietyofgoodsincludingfood,dailynecessities,andclothes,andfoodsupermarketswithafocusonfood.BothGMSandfoodsupermarketscarryawidevarietyoffood,especiallyperishables,andaretargetedmainlyatconsumerswhobuysuchgroceriesinbulk.AccordingtotheunderstandingofenterprisesoperatingGMSorfoodsupermarkets,competitionistakingplacenotin respective field of GMS or food supermarkets but rather in a greater fieldirrespectiveofwhatform,GMSorafoodsupermarket,istaken.Thisistruefrom
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consumers’ perspectives as well, and it is reasonable to think that they arechoosingstoreswheretheypurchasefoodregardlessofwhetherthestorestakeaformofGMSorafoodsupermarket.
As well, as other forms of business dealing in similar products sold atsupermarkets, convenience stores, drug stores, DIY stores, etc. have beenincreasingtheirlineupoffoodrecently,whichismakingthedifferencebetweenbusinessformssmaller.However,withregardtoperishableitems,thestrengthof supermarkets, these formsofbusinessstilldonotofferasmuchvarietyassupermarketsdo.Forthisreason,itisreasonabletothinkthatconsumersarechoosingbetweensupermarketsandtheseformsofbusinessaccordingtotheirneedsespeciallyincaseofbulkbuyingofdailynecessities.
are smaller than a regular size (generally with floor space 500 m² or less)(hereinafter,“smallsupermarkets”)duetoagingofurbanpopulation,lessspaceforopeningalarge-scalestore,andarestrainedbudgetforopeningstores,etc.
ThePartiesarenoexceptiontothistrendandAeonGroupandMaruetsuhave opened small supermarkets called “My Basket” and “Maruetsu Petit”respectively.
Setupmainlyinurbanareas,smallsupermarketsarelimitedinstoresize,andthussellalimitedvarietyandquantityofproducts,comparedtostandardsupermarkets.Sincesmallsupermarketsaretargetedatsingle-personorsmallhouseholdswhichmainlyusethemfor“purchasinginsmallquantity”or“casualpurchasing”, small supermarketsaredeemed tobe in toughcompetitionwithretailersofotherbusinessforms,comparedtostandardsupermarkets.However,smallsupermarketscarryageneralselectionofproductsincludingperishablesas well. Therefore, they are deemed to be equipped with functions ofsupermarkets,althoughtoalesserdegree.
Basedon theconsiderationabove, forexaminationof theconductof thiscase on competition, small supermarkets are to be included in “supermarketbusiness”;andthedifferencebetweensmallsupermarketsandsupermarketsistobeconsideredasadeterminingfactor.
There are about 300 geographic rangeswhere the Parties competewitheachother.Itistechnicallydifficulttocalculatemarketshareofeachsupermarketstoreforeverygeographicrange(andtherebydecidewhetherornottheconductofthiscasemeetsthesafe-harborcriteriaforahorizontalbusinesscombinations).However, it is reasonably assumed that the more the number of stores in ageographicrangeis,themoreintensethecompetitionis,andthatthefewerthenumberofstoresofcompetingenterprisesinthegeographicrangeis,thelargertheimpactofconductofthiscaseoncompetitionis.
WhenitcomestothegeographicrangewherethePartiescompetewitheachother, there aremultiple or at least one store operated by either somemajorsupermarket enterprise or some relatively large supermarket enterprise otherthantheParties(hereinafter,“majorcompetingstore”)inanygeographicrange.Withregardtothegeographicrangewhichonlyhasonemajorcompetingstore,at leastoneofthefollowingcasesapplies:(i)thescaleofthemajorcompetingstoreisgreaterthanthatofanystorerunbytheParties,(ii)thegeographicrangeis located in the suburbs and multiple major competing stores exist ingeographicallyneighboringmarket,and(iii)inthegeographicrangewherethestoreofoneofthePartiesisasmallsupermarket,thereisaretailerofotherformswhichisintoughcompetitionwithsmallsupermarkets.
supermarket business, prices are usually set in a unified manneracross all the stores in a prefecture or beyond. Therefore, the JFTCexaminedcompetitivesituationineachprefectureinadditiontothecircular geographic range with a store in the center. As a result,however,theJFTCdidnotfindanyprefecturewherecompetitivenessofthePartieshadgrownduetothePartiesaccountingforamajority,etc.
manypermissionsbasedonavarietyoflawsincludingpermissionofprocessedmeat sales businesses in accordancewith FoodSanitationAct (ActNo. 233 of1947).This,however,doesnotconstituteaninstitutionalbarriertoentry.
Aswell,when an enterprise operating supermarket business launches anewstorewithstandardfloorspace,investmentofhundredsofmillionsofyenisrequired,whichisdeemedtoberecoverableinseveralyearsingeneral,andthusthe scale of investment does not constitute a barrier for opening anew store,either.
Whenaretailstorewithspacelargerthan1,000m2islaunched,anadvancednotification to prefectures or cities designated by ordinance is required inaccordancewithActontheMeasuresbyLarge-scaleRetailStoresforPreservationof Living Environment (Act No. 91 of 1998) in order to conserve livingenvironment of the surrounding area. Many such notifications have beensubmitted.Aswell,manynewsupermarketswith spaceof1,000m2or smallerwhichanotificationisnotrequiredforarealsobeinglaunched.
When it comes toKantoregionwhichhasmanyareaswherebothof theParties operate stores, the section between Tokyo and Kanagawa of theMetropolitan Inter-City Expressway (Ken-O Expressway) which will form anouter ring roadof theGreaterTokyoMetropolitanareahasopenedsince June2014andotherunopenedroutesinSaitamaandIbarakiprefecturesarescheduletostartservicebyFY2015.Thisdevelopmentwillimprovetrafficconvenienceandreduce time required to transport goods, and thus is deemed tobepromotingsupermarket enterprises to open new stores in areas which have beenunreachable.
Based on the above consideration, a certain degree of entry pressure isdeemedtobeeffectiveinanygeographicrange.
Productssoldinsupermarketsareavailableinothertypesofstoressuchasconveniencestores,drugstores,andDIYstoresalthoughwithsomedifferencein variety.While such stores in other forms do not have asmuch variety ofperishableitemsassupermarketsdo,acertaindegreeofcompetitionisdeemedto exist in terms of prices and services for products available both in thesestores and the stores of the Parties, as seen in cases of special sales, etc.Especially, as discussed previously in Part III 1 (2), small supermarkets aredeemedtobeintoughcompetitionwithretailersofotherforms,comparedtoregularsupermarkets.
(2)CompetitivepressurefromgeographicallyneighboringmarketConsumers sometimes shop at supermarkets located outside the area
wherestorestheyusuallyusearelocated.InneighboringareaofthegeographicrangedefinedpreviouslyinPartIII2,therearestoresrunbyothersupermarketenterprises.Here, too, a certaindegreeof competition is deemed to exist intermsofpricesandservicesbetweenthesestoresofcompetingenterprisesinneighboringareaandthestoresoftheParties,asseenincasesofspecialsales,etc.
Main services of banking business are deposit service, loan service, andcurrencyexchangeservice,allofwhichareprovidedbybothoftheParties.Amongthethreeservices,depositandloanservices,amajorpartoftheservicesprovidedby theParties, arediscussed in thiscase.Deposit servicerefers toservice thatreceives money from depositors and loan service refers to service that lendsmoneytocompaniesandindividuals.
Whiletheseservicesareprovidedbyfinancialinstitutionsotherthanbankssuch as shinkin banks and credit cooperatives, in this case, deposit and loanservicesconductedbycitybanks,regionalbanks,etc.,banksasspecifiedbytheBanking Act, are to be discussed in order to provide thorough examination;financialinstitutionsotherthanbanksarereviewedascompetitivepressurefromrelatedmarketasneeded.
2. GeographicrangeMain business area for the Parties for both deposit and loan services is
TokyoforTokyoTominBankandTokyoandKanagawaforYachiyoBank.Largepartofuserswho tradewith thePartiesareresidentsandcorporations in themunicipalitieswherebranchesofthePartiesarelocated,andatthesametime,the Parties are conducting business activities firmly linkedwith communities.Accrodingly, the JFTCdefined geographic range byevery “municipality” in this
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case. It is true that some deals go beyond the boundaries of municipalities,
however,inthiscase,geographicrangeisdefinedbyeverymunicipalityinorderto provide thorough examination; and if needed, such transactions are to bediscussedascompetitivepressurefromgeographicallyneighboringmarket.
Forbothdeposit and loan services, the incrementofHHIwouldbe fromapproximatetly0 toapproximatetly40, less than150, inanygeographic rangedefinedpreviouslyinPartII2.Therefore, theacquisitionmeetsthesafeharborstandardsforhorizontalbusinesscombinations.
2.Notification system regarding business combination plans pursuant to theAMA(foraflowchartonreviewsofbusinesscombinations,seeparagraph2,Appendix2)
Whenabusinesscombinationisimplementedbetweencompaniesthatsatisfycertainrequirements,theAMArequiressuchcompaniestomakeanotificationontheir business combination plan in advance to the JFTC (for a summary of theconditionsrequiringnotification,seeparagraph1,Appendix2).The JFTC conducts a review of whether or not the business combination
regardingwhichpriornotificationhasbeenmadeneedsadetailedreviewwithin30daysafterreceivingthenotification.Whenthecaseinquestiondoesnotraiseany issues in light of the provisions of the AMA, the JFTC concludes its reviewwithin the prescribed period. If the JFTC judges that the case requires furtherreview,itrequeststhatthecompaniessubmitreports,etc.anddetermineswhetherornotthebusinesscombinationinquestionmayraiseanyissues, inlightoftheprovisionsoftheAMA,within90daysafterreceivingallthereports,etc.InacasewheretheJFTCjudgesthatthebusinesscombinationraisesanissuein
lightoftheprovisionsoftheAMA,theJFTCnotifiestheperson(s)tobedesignatedastheaddresseeoftheorder ofthepossiblecontents,etc.oftheceaseanddesistorder,andthentheJFTCprovidestheperson(s)/addressee(s)withanopportunitytodeliveropinionsandprovideevidence,andfinallytheJFTCissuesaceaseanddesist order against the person(s)/addressee(s). Moreover, theperson(s)/addressee(s) is capable of requesting a hearing by the JFTC and ajudgmentbyacourt if theperson(s)/addressee(s) isdissatisfiedwith the ceaseanddesistorderissued.
(Note1) Domestic total turnover mean the aggregate domestic turnover ofcompanies, etc. belonging to a business combination group (a groupconsistingof"theultimateparentcompany"ofthenotifyingcompanyanditssubsidiaries).
(Note2) Proportionofvotingrightsheldmeanstheproportionofvotingrightsheldby the group of combined companies to which the notifying companybelongs.
