Regulatory Comments

ICLE Comments to JFTC on Draft Business Combination Guidelines

Introduction

The International Center for Law & Economics (“ICLE”) respectfully submits these comments on the draft revised Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (the “Draft Guidelines”), published for public comment July 17, 2026. ICLE is a nonprofit, nonpartisan global research and policy center dedicated to developing the intellectual foundations for sensible, economically grounded policy. We have commented on merger-enforcement policy and proposed merger guidelines before competition authorities in the United States, the European Union, the United Kingdom, Canada, Australia, France, Korea, India, and Vietnam.^[1] We also have submitted comments to the Japan Fair Trade Commission (JFTC) on the Mobile Software Competition Act.^[2]

We commend the JFTC for the approach reflected in this revision. The Draft Guidelines recognize that most business combinations do not substantially restrain competition and that a large post-combination market share alone does not establish a substantial restraint. They also seek expressly to explain how the JFTC will account for the procompetitive effects of business combinations. The Draft Guidelines expand the analysis of countervailing competitive pressure in several economically sound ways, introduce a coherent counterfactual framework for comparing a transaction with the likely conditions absent that transaction, and recognize that structural relief is not always the appropriate remedy. Among the merger-guideline revisions now under consideration in major jurisdictions, these Draft Guidelines give the greatest attention to the benefits that business combinations can produce.

Our comments focus primarily on provisions that do not fully carry this approach through. The principal concern is the Draft Guidelines’ asymmetric treatment of harms and benefits. The revised efficiency provision requires procompetitive effects to exceed any loss of competition and to be “reliably brought about.” At the same time, Part VI adds a theory of harm that includes no substantiality requirement, specifies no causal mechanism, and—so far as the published materials disclose—draws on no case, empirical study, or economic literature. The requirement that efficiencies be passed on to users also remains framed in terms that the newly recognized supply-security and environmental benefits will rarely satisfy. The Draft Guidelines further permit a forward-looking counterfactual to support intervention without confirming that the JFTC will assess benefits over the same time horizon.

Guidelines of this kind do not bind courts or businesses as law. Their influence depends on the confidence that businesses, advisers, and courts place in them as an accurate synthesis of the statute, economic learning, and the JFTC’s experience. Each provision should therefore help a party or court predict how the JFTC will assess a transaction.

The Introduction states that “[t]he vast majority of business combinations do not substantially restrain competition, and it is possible to implement them as originally planned after undergoing review by the JFTC.” Part IV adds that “even if the market share of the company group after the business combination is large, it is not immediately determined that the business combination substantially restrains competition.” The Introduction also commits the JFTC to describing “the approach for taking into account the pro-competitive effects of such business combinations in the review of business combinations.” We agree with each proposition. The first may be the most important sentence in the Draft Guidelines.

That proposition has an implication the Draft Guidelines should make explicit. Merger review creates three kinds of cost: the cost of prohibiting or deterring transactions that would benefit users, the cost of permitting transactions that would harm them, and the cost of the review process itself. Most transactions benefit users or are competitively neutral. Erroneously prohibiting a transaction is also largely irreversible, while entry, repositioning, and later enforcement under the Antimonopoly Act’s conduct provisions may partly correct an erroneous clearance. The framework should therefore resolve genuinely ambiguous cases in favor of nonintervention.

As Frank H. Easterbrook explained in The Limits of Antitrust, 63 Tex. L. Rev. 1, 15 (1984), “(i)f presumptions let some socially undesirable practices escape, the cost is bearable . . . . One cannot have the savings of decision by rule without accepting the costs of mistakes.” His argument concerns the allocation of residual risk when the evidence does not clearly resolve a case, as well as the best use of finite investigative resources.

The concern is especially acute in merger review because the analysis is necessarily prospective. A conduct case examines what a firm has done. A merger case forecasts what a combination may do. An instruction to resolve uncertainty in favor of intervention affects the transactions the JFTC reviews and those that firms abandon or never propose. The latter transactions never enter the case record, so an overinclusive framework imposes costs that are real yet systematically unobservable.

Japan’s experience makes this concern concrete. The government has expressly identified acquisitions of emerging firms as a policy objective. The Startup Development Five-Year Plan (Cabinet Secretariat, Nov. 24, 2022) states that “[i]t is required that the M&A ratio be raised.” It identifies startup acquisitions as important both as an exit route for startups and as a means of advancing open innovation within established enterprises.

Since the government issued that plan, acquisitions have risen to 88% of Japanese startup exits, up from roughly three-quarters. Acquisitions accounted for 1,908 of the 2,450 recorded exits between 2015 and 2025. (Japan Investment Corporation, Sut?toappu Fainansu Shij? Reby? (2025) [Startup Finance Market Review (2025)] (Apr. 2026).) The Ministry of Economy, Trade and Industry has since published guidance intended to accelerate startup acquisitions. Acquisitions now provide the principal channel through which Japan recoups venture investment and redeploys it into a new generation of firms. A merger framework that increases the cost or uncertainty of acquiring emerging firms could impede the innovation that the Introduction seeks to promote.

We therefore recommend that the Introduction state the governing principle expressly. Because most business combinations do not restrain competition and many improve outcomes for users, and because erroneous prohibition imposes costs in part through transactions that are never proposed, the JFTC will require an affirmative basis for concern before treating a transaction as problematic. The JFTC will not treat uncertainty alone as a ground for intervention.

I. Revisions That Strengthen the Draft Guidelines

Several proposed revisions are well-founded, and ICLE supports them. The Draft Guidelines sharpen the analysis of causation and the counterfactual, broaden the treatment of countervailing competitive pressure, and improve the measurement of market shares and import pressure. They also place sound limits on customer-foreclosure theories, recognize that external shocks can weaken a firm before it meets the failing-firm criteria, and allow greater flexibility in selecting remedies.

These revisions share a common principle. Merger review should assess likely competitive effects through transaction-specific mechanisms, objective evidence, and the constraints firms face in practice. We identify these improvements first because our recommendations seek to apply that principle consistently throughout the Draft Guidelines.

A. Causation Requires a Specified Mechanism

Part I correctly explains that the phrase “by means of such business combination” requires a causal connection between the combination and the restraint of competition. It also directs the JFTC to compare the likely competitive conditions with the combination against those that would likely prevail without it. This counterfactual framework improves the Draft Guidelines’ analytical clarity. Causation also requires a merger-specific mechanism—a defined path by which the transaction itself would produce the alleged competitive effect. We return to this requirement below.

The Draft Guidelines do not yet specify the probability required to establish that causal connection. Because merger review is prospective, the JFTC need not prove that harm is certain. It should identify objective evidence showing a reasonable probability that the transaction, through a specified mechanism, will substantially restrain competition in a particular field of trade. Market structure and uncertainty may support an inference, but neither should determine the outcome. The parties should have a meaningful opportunity to rebut that inference, and the JFTC should reach its ultimate conclusion only after considering the full record.

B. Countervailing Pressure Extends Across Products

The Draft Guidelines expand the analysis of countervailing competitive pressure in several useful ways. They add “indirectly similar goods,” recognize that customers farther downstream may transmit competitive pressure upstream, and account for bargaining power derived from other products and users’ knowledge of the company group’s cost structure. Each reflects a constraint that operates in practice but may escape an analysis confined to a single market.

The treatment of bargaining power across products deserves particular attention. A broad product range can constrain a supplier’s ability to raise prices because customers may respond by reducing purchases of the supplier’s other important products. A single-product customer lacks that source of bargaining power. The Draft Guidelines properly recognize product breadth as a potential constraint on market power.

The JFTC should apply this reasoning consistently throughout the Draft Guidelines. Other provisions, including the discussion on page 64, appear to treat the accumulation of capabilities across products as a presumptive source of competitive concern. The analysis should consider in each instance whether product breadth increases or constrains the combined firm’s market power.

C. Market Shares Should Reflect Competitive Conditions

The Draft Guidelines introduce welcome flexibility in measuring market shares. Using transaction data across several years when customers place large orders irregularly can prevent a single year from producing a distorted picture. Using pre-shock shares when a temporary demand or supply disruption skews the latest data can likewise prevent false conclusions about market structure. More accurate measurement is a clear improvement.

The Draft Guidelines also correctly recognize that tariffs alone do not establish weak import pressure and that excess foreign capacity caused by declining overseas demand may increase that pressure. Both clarifications direct the analysis toward actual competitive conditions.

D. Limits on Customer Foreclosure

Part v properly limits the customer-foreclosure theory, under which a vertically integrated firm may deny an upstream rival access to an important buyer. A firm may hold a large share downstream while accounting for only a modest share of purchases of the upstream input, particularly when that input is used primarily to make other products. If an upstream rival can redirect its sales to other customers, losing access to the merged firm will not produce foreclosure.

The JFTC should state the broader principle expressly. Customer foreclosure requires the ability and incentive to deny rivals access to customers, as well as a likely adverse effect on competition. The share of the market allegedly foreclosed remains relevant, but it should never determine the outcome by itself.

E. External Shocks and Competitive Weakness

The Draft Guidelines properly recognize that demand trends, regulatory changes, or significant international developments may weaken a firm’s financial performance. Treating this factor separately from the stricter failing-firm criteria acknowledges that a firm’s competitive constraint can weaken by degrees before the firm faces imminent exit.

The JFTC should clarify that this factor applies independently. A party need not satisfy the failing-firm criteria before the JFTC considers competitive weakness caused by an external shock.

F. Greater Flexibility in Remedies

The Draft Guidelines properly take a more flexible approach to behavioral remedies, which govern a firm’s future conduct. We have argued against the categorical preference for structural relief that several jurisdictions have adopted, particularly when authorities dismiss binding access commitments without weighing their likely effects. See Brief of Amici Curiae International Center for Law & Economics and Law & Economics Scholars in Support of Petitioners, Illumina, Inc. v. FTC, No. 23-10707 (11th Cir. June 12, 2023).

The Draft Guidelines correctly recognize that divestiture may be impracticable in markets with declining demand and that behavioral measures may be appropriate until an expected structural change occurs. Our recommendations at the end of these comments address the presumptions the Draft Guidelines apply when selecting remedies. We support their willingness to consider behavioral relief.

II. A Symmetrical and Workable Efficiency Framework

The Draft Guidelines’ expanded recognition of procompetitive effects is welcome, but the operative requirements may prevent those effects from influencing merger review. The Draft appears to demand greater certainty for efficiencies than for predicted harm. Its “returned to users” condition may exclude long-term supply-security and environmental benefits, while its merger-specificity test may require parties to disprove purely theoretical alternatives.

The JFTC should apply comparable evidentiary standards and time horizons to harms and benefits, recognize competitively relevant benefits that accrue across markets or periods, and assess merger specificity against realistic alternatives. These changes would give practical effect to the new efficiency categories and make the Draft Guidelines internally consistent.

A.  Efficiencies Should Not Require Greater Certainty

Part IV, 2(7) (p. 43) adds the following requirement:

[W]hen the degree of competition lost through a business combination is large, for such a business combination to be justified by efficiency improvements, the degree of pro-competitive effects from the efficiency improvements must be greater than the degree of competition lost, and such effects must be reliably brought about.

The proportionality requirement is sound. Greater predicted harm requires greater offsetting benefits. The phrase “reliably brought about,” though, appears to impose a materially higher evidentiary standard on benefits than on harm. The Antimonopoly Act prohibits business combinations whose effect “may be substantially to restrain competition,” and the Draft Guidelines interpret that language to require probability rather than certainty. The same probabilistic standard should govern the efficiencies offered to offset the predicted harm.

United States v. Baker Hughes Inc. illustrates the problem. The government argued that a defendant could rebut a prima facie case under Section 7 of the Clayton Act only through a “clear showing.” Then-Judge Clarence Thomas, joined by then-Judge Ruth Bader Ginsburg, rejected that standard. Requiring a defendant to disprove predicted anticompetitive effects clearly “must essentially persuade the trier of fact on the ultimate issue in the case,” collapsing the distinction between the burden of producing evidence and the burden of persuasion. The court explained that “[r]equiring a ‘clear showing’ in this setting would move far toward forcing a defendant to rebut a probability with a certainty.” United States v. Baker Hughes Inc., 908 F.2d 981, 991–92 (D.C. Cir. 1990).

We cite Baker Hughes as an analogy. Japan need not adopt the prima facie case and burden-shifting framework used in U.S. merger litigation. The narrower principle applies directly here. The JFTC should not subject efficiencies to an evidentiary standard materially more demanding than the one governing predicted harm.

The Draft Guidelines expand the recognized efficiencies to include research and development involving next-generation technologies and improved environmental capabilities. They also recognize better access to funding that expands investment and produces new products, as well as improvements in supply security. These effects are inherently probabilistic and often take years to emerge. Additional evidence can strengthen the basis for predicting them, but it cannot make them certain. A reliability standard calibrated to verifiable, near-term cost savings would render these new efficiency categories largely ineffective.

The JFTC has already articulated a sound evidentiary principle. Its Study Group on Innovation and Competition Policy recommended that firms claiming a transaction will promote innovation actively present objective supporting evidence. Japan Fair Trade Commission, Inob?shon to Ky?s? Seisaku ni Kansuru Kent?kai Saish? H?kokusho [Final Report of the Study Group on Innovation and Competition Policy] (June 28, 2024). We agree. The JFTC should demand comparable objective evidence for predicted harm.

The Draft Guidelines permit forward-looking assessments of import pressure, entry, competitive pressure from related markets and users, efficiencies, financial condition, and market size. Benefits should receive the same temporal scope as harms and countervailing factors. Allowing the JFTC to project harm while demanding that parties establish benefits with greater reliability would create an asymmetric inquiry.

The assessment should weigh likelihood and magnitude together. It also should not discount procompetitive effects solely because they resist precise quantification. Innovation and resilience effects rarely permit precise numerical estimates. Coordinated-effects and foreclosure theories often present the same difficulty, and the Draft Guidelines routinely assess them through qualitative evidence. The JFTC should apply comparable evidentiary standards to predicted harms and benefits.

The Draft Guidelines should explain how the JFTC will weigh likelihood and magnitude, what qualitative evidence it will accept when precise quantification is unavailable, and how it will discount benefits expected over longer periods.

Recommendation: Replace “must be reliably brought about” with language matching the probabilistic threshold established by the Antimonopoly Act. The Draft Guidelines should state expressly that the same temporal horizon, standard of proof, admissible evidence, and expectations about quantification apply to procompetitive effects and theories of harm. Admissible evidence should include internal documents and forward-looking business projections.

B. Clarify the ‘Returned to Users’ Requirement

Part IV, 2(7)(iii) requires that the outcome of efficiency improvements “must be returned to users.” The Draft Guidelines add improved supply security and environmental performance to the recognized categories of efficiency. They also incorporate the JFTC’s Guidelines Concerning the Activities of Enterprises, etc. Toward the Realization of a Green Society (Green Guidelines), which address the procompetitive effects of business combinations that advance environmental goals

That cross-reference leaves the “returned to users” condition unchanged. The business-combination section of the Green Guidelines restates the existing framework and identifies certain environmental outcomes as procompetitive effects. It provides no separate test, burden of proof, or method for weighing those effects against competitive harm. Any claimed benefit therefore must improve the welfare of users in the particular field of trade and within the period covered by the competitive-effects analysis.

Parties will often struggle to prove that connection. Supply-resilience and emissions-reduction benefits frequently accrue to different groups or arise later than the alleged price effects. A combination that diversifies procurement may protect users several years later against a disruption that has yet to occur. A combination that finances lower-emissions products may increase near-term costs while producing a different or improved product later. A narrow interpretation of “returned to users” would prevent the JFTC from crediting these benefits and render the new efficiency categories largely inoperative.

The JFTC’s only published application of the Green Guidelines’ business-combination provision illustrates the problem. The JFTC recognized a substantial reduction in carbon dioxide emissions because it could characterize the reduction as an improvement in the quality of the product supplied to the same users. The JFTC should not exclude benefits solely because they cannot be characterized in those terms.

The Draft Guidelines already recognize forward-looking benefit accounting. Note 12 states that “improvement of security of supply includes maintaining such security of supply in cases where it would otherwise deteriorate.” This is a counterfactual benefit measured against future deterioration that the combination would prevent. The JFTC should apply that reasoning consistently to other procompetitive effects.

Two clarifications would help. First, the JFTC should explain why environmental performance and supply security qualify as efficiencies. Suppliers may compete on those dimensions, or the improvements may increase product quality. Both fit within the conventional assessment of effects on users. A broader public-benefit category would require the JFTC to weigh objectives that users have not expressed through their choices. Such benefits fall outside ordinary merger analysis.

Second, environmental performance and supply resilience require distinct treatment. Environmental attributes can often be tied to demonstrated user preferences, as the JFTC’s treatment of reduced carbon dioxide emissions as a quality improvement illustrates. Supply-resilience benefits may instead accrue primarily to the national interest without benefiting identifiable purchasers. To that extent, they belong within policy instruments designed to protect supply security.

Recommendation: State that the JFTC may consider procompetitive effects arising outside the particular field of trade in which harm is alleged or accruing over a longer period than the predicted price effects. Such benefits should have a competitive character and a causal connection to the combination. Confirm that efficiencies may accrue to different users or over a longer period.

For each asserted benefit, the parties should identify the relevant market and beneficiaries, the causal mechanism, and the expected timing, likelihood, and magnitude. They should also present evidence supporting the benefit and explain how it will reach users. The Draft Guidelines should explain how the JFTC will compare effects on price, quantity, quality, innovation, environmental performance, and supply resilience.

C. Merger Specificity Requires Realistic Alternatives

Part IV, 2(7)(i) requires that the expected efficiencies “cannot be achieved by other means that are less restrictive on competition.” Merger specificity asks whether the transaction is reasonably necessary to produce the claimed efficiencies. If the provision requires parties to disprove every conceivable alternative, few efficiencies will qualify. Parties can almost always imagine some contractual or collaborative arrangement after the fact.

Organizational economics supports a practical inquiry. Contracts, licenses, joint ventures, and integration impose different costs and risks. Contracts require negotiation, implementation, and monitoring. They may also create dependence on jointly developed assets and require parties to specify knowledge or future contingencies that remain difficult to anticipate. Firms generally choose contracts when contracting is more efficient and mergers when integration is more efficient. Contractual alternatives may also create liability under the Antimonopoly Act, and that legal risk may make integration more attractive. (Geoffrey A. Manne & Kristian Stout, Comments of the International Center for Law & Economics on the Draft Vertical Merger Guidelines, Matter No. P810034, https://laweconcenter.org/resources/comments-of-icle-on-the-draft-vertical-merger-guidelines-matter-number-p810034.)

The Draft Guidelines also contain an internal tension. Part VII treats long-term supply agreements at cost-based prices and nondiscrimination commitments as capable of replacing the competitive constraint imposed by an independent rival. For merger-specificity purposes, Part IV may treat contractual arrangements as capable of reproducing the efficiencies of common ownership. These propositions rely on conflicting assumptions about what contracts can accomplish. At least one requires qualification.

Recommendation: Ask whether the claimed efficiencies could realistically or reasonably be achieved through materially less restrictive means. That assessment should account for timing, execution risk, legal risk, and the transaction costs of the proposed alternative.

III. Data Accumulation and User Lock-In

Part VI, 2(3) (p. 64) adds a theory of harm for conglomerate business combinations, which join firms offering complementary or otherwise noncompeting products. The provision applies even when the combination creates no foreclosure or exclusion and eliminates no potential competition:

[I]f the accumulation of data or the lock-in of users resulting from the conglomerate business combination causes the overall business capabilities of the company group to increase and its competitiveness to rise significantly, making it difficult for competitors to take competitive action, the impact of this on competition shall be examined.

User lock-in commonly refers to costs or frictions that discourage users from switching suppliers. This provision raises our most serious concerns. It lacks a defined theory of harm, omits the statutory substantial-restraint requirement, and finds no stated support in the JFTC’s experience, cited policy documents, or economic literature. These defects are cumulative.

The provision conflicts with Part VI’s structure. Part VI, 1(1) explains that a conglomerate combination does not reduce the number of competitive units and ordinarily will not substantially restrain competition unless it causes foreclosure, eliminates potential competition, or facilitates coordinated conduct. The new note applies expressly when neither foreclosure nor the elimination of potential competition occurs. It therefore creates an additional theory of harm without defining its elements. It also places that theory in a note instead of the operative text.

It omits the substantial-restraint requirement. The new text asks whether the company group’s competitiveness will rise “significantly” and whether competitors will find it “difficult to take competitive action.” The Antimonopoly Act asks whether the combination may substantially restrain competition. Any acquisition that improves a firm’s capabilities may make its rivals’ task more difficult. That consequence alone does not satisfy the statutory standard.

The substantial-restraint requirement distinguishes merger control from a general prohibition on combinations. Courts ordinarily presume that different language serves a different function. The new formulations could therefore be read to reach transactions that fall below the Act’s primary standard.

The provision treats competitive success as a source of concern. Accumulated data, scale, and customer retention often result from investment and commercial success that users have rewarded. Making rivals’ difficulty competing a trigger for review risks insulating those rivals from competition. The Introduction itself identifies the combination of complementary capabilities as an important way for business combinations to promote innovation and address identified challenges. The new note subjects the resulting capability gains to additional scrutiny. The Draft Guidelines should reconcile those positions.

The cited policy statement provides no support. The Introduction cites the JFTC’s Jan. 28, 2026, policy statement on promoting innovation as support for the revision. That document contains no economic citations or data. It mentions business-combination review once as one item in a list of JFTC activities. It does not discuss data accumulation, user lock-in, interconnected product systems, or overall business capabilities. It mentions only network effects, or the tendency for a service’s value to increase as more people use it. (See Japan Fair Trade Commission, Proactive Development of Competition Policy for Promotion of Innovation—Roles of the Japan Fair Trade Commission in Our Changing Times (Jan. 28, 2026), https://www.jftc.go.jp/en/about_jftc/Innovation2.pdf.)

The JFTC’s summary of the revision omits the provision. The explanatory document accompanying the Draft Guidelines identifies three areas of change. They concern procompetitive effects involving supply stability, environmental performance, and innovation, assessments over longer periods, and additions based on recent cases and other jurisdictions’ guidelines. It does not mention Part VI or conglomerate combinations. We also found no discussion of the provision in the secretary-general’s remarks previewing the revision.

No expert study group examined the theory. The JFTC convened a study group before the 2019 revision but not before this one. The most relevant panel, the Study Group on Innovation and Competition Policy, reported in June 2024. It examined mechanisms through which transactions affect incentives to invest in research and development. It developed no theory of harm based on data accumulation or user lock-in in conglomerate combinations.

The JFTC’s case record supports established theories. Every conglomerate combination in which the JFTC identified a competitive concern involved foreclosure or exclusivity.^[3] Every case that considered data accumulation, user lock-in, or network effects as independent concerns resulted in clearance, usually without remedies.^[4] In one prominent transaction, the JFTC considered whether combining the parties’ data would confer a competitive advantage and found that the data lacked distinctive competitive value.^[5]

Two cases are particularly instructive. In the only conglomerate case in which the JFTC used the phrase “overall business capabilities,” it used those capabilities to establish entry pressure. An operator with such capabilities planned to enter an adjacent business, and the JFTC treated that prospect as a competitive constraint supporting clearance.

In a 2025 conglomerate case, the JFTC attributed the acquirer’s high share in a data-intensive service to its having offered the service since the 1970s, ahead of other suppliers. It also found that competing services adequately met users’ needs. The JFTC treated accumulated data and the installed user base as explanations for the firm’s market share and found no resulting restraint of competition (Sysmex Corp./BioMajesty (2025)).

The new use of “overall business capabilities” lacks the safeguards applied in horizontal cases. The concept already appears in Part IV’s analysis of unilateral effects in horizontal combinations. There, the JFTC considers it alongside market shares, the closeness of competition between the parties, competitors’ positions, and the countervailing factors in Part IV, 2(2) to (9). The new note uses the same concept in Part VI without any of that context. The Draft Guidelines do not explain why a factor requiring contextual analysis in horizontal cases can operate independently in conglomerate cases.

The provision treats cross-market harms and benefits asymmetrically. Conglomerate and adjacent-market combinations connect different markets, so their benefits and alleged harms may arise in different places. The new note would count capability gains across markets as potential harm, while the “returned to users” requirement may exclude benefits arising outside the market where harm is alleged. If the JFTC retains the provision, it should apply the same cross-market treatment to harms and benefits. Equal treatment would substantially narrow the provision’s reach, indicating that its current breadth depends materially on this asymmetry.

Existing conduct rules address exclusionary practices. If a firm uses accumulated data or user relationships after a combination to engage in exclusionary conduct, Articles 3 and 19 of the Antimonopoly Act address that conduct. The Mobile Software Competition Act also applies in the sectors it covers. Those provisions allow the JFTC to assess conduct on an actual record and avoid a speculative merger forecast.

Recommendation: Delete the note. If the JFTC retains a provision addressing data accumulation or user lock-in, it should require all the following elements:

1. Durable, preexisting market power in a properly defined market, established without aggregating positions across markets.
2. Acquired data or other assets that are genuinely scarce and cannot reasonably be replicated by competitors.
3. An identified mechanism specific to the combination through which competitors will be excluded or their costs raised.
4. A likelihood that the mechanism will substantially restrain competition in a particular field of trade to the detriment of users.
5. Recognition of integration efficiencies, including efficiencies arising in other markets, under the same evidentiary standards applied to the alleged harm.

The final Guidelines or the JFTC’s response to comments should also identify the merger-review experience that the provision addresses.

IV. Nonprice Parameters Should Reflect User Choice

The The Draft Guidelines identify several “other terms” over which a company group may acquire greater latitude. These include payment terms, supply-security conditions such as timing, volume, and product variety, environmental performance such as greenhouse-gas emissions, protection of personal information, and other attributes users value when choosing products.

We agree with much of this approach. Firms compete on price, delivery reliability, product range, payment terms, environmental attributes, and other dimensions. Recognizing those forms of competition also provides the necessary counterpart to the expanded efficiency provisions discussed above.

The Draft Guidelines need a limiting principle. Attributes on which firms compete for users belong in merger analysis. Broader social objectives that users do not express through their choices belong to policymaking under the statutes designed to address them.

Philadelphia National Bank drew this distinction correctly. The Supreme Court declined to weigh civic and regional-development benefits against lost competition because courts lack the institutional competence to rank those objectives. The Court based that conclusion on institutional competence, independent of the market in which the asserted benefits arose. Social objectives ultimately require value judgments and political tradeoffs that competition authorities are poorly equipped to make.

Three consequences follow.

First, nonprice parameters operate in both directions, which the Draft Guidelines do not make clear. If improved environmental performance can constitute a procompetitive effect, deterioration may constitute competitive harm. If supply security is a parameter of competition, a combination that reduces it may substantially restrain competition on that basis alone. The Draft Guidelines should state expressly whether a nonprice parameter can independently support a finding of substantial restraint. The answer will materially affect the scope of Japanese merger control.

Second, Japan already addresses these objectives through specialized laws. The Foreign Exchange and Foreign Trade Act and the Act on the Promotion of Ensuring Security by Integrated Implementation of Economic Measures address supply security. The Act on the Protection of Personal Information governs personal data, while environmental regulations govern emissions. Asking the JFTC to rank social objectives that lack a common measure would expand its discretion, reduce predictability, and duplicate reviews conducted by authorities with more suitable legal tools.

Third, expressly naming environmental performance and supply security while describing other procompetitive effects only in general terms creates two tiers of benefits. Parties may frame transactions to fit the named categories. A general principle covering all verifiable procompetitive effects would better serve the JFTC’s purpose, with environmental performance and supply security presented as illustrations.

The Draft Guidelines should also clarify how the incorporated Green Guidelines affect market definition. The business-combination section of the Green Guidelines principally considers environmental differentiation when defining markets. It permits separate or overlapping fields of trade when users distinguish among products based on emissions characteristics. That approach can narrow the relevant market and increase measured market shares.

The Draft Guidelines incorporate the Green Guidelines’ treatment of environmental benefits in the efficiency analysis but do not address their use in market definition. The JFTC should apply environmental attributes consistently in both inquiries.

Recommendation: State that nonprice parameters are relevant when suppliers compete on those attributes for users, as shown by users’ choices among suppliers. Clarify whether a nonprice parameter may independently support a finding that competition may be substantially restrained. Recast the listed parameters as illustrations of a general principle applicable to all verifiable procompetitive effects

V. Distinguish Monopsony from Bargaining Power

The Draft Guidelines apply the framework for defining a particular field of trade and assessing competitive effects to transactions in which the company group purchases raw materials or other inputs. We agree that the Antimonopoly Act protects competition among buyers as well as competition among sellers. The Draft Guidelines should explain more clearly what constitutes buyer-side harm.

The primary concern in a purchasing market is monopsony. A buyer exercises monopsony power when it profitably reduces purchases below the competitive level, harming suppliers and ultimately downstream users. Greater bargaining power presents a different issue. If a combined firm negotiates lower input prices while maintaining its purchase volume, the gain represents a transfer from suppliers.

Productive efficiencies improve the use of resources through measures such as better logistics, lower transaction costs, or the integration of complementary assets. Their productive character may also make them specific to the combination. Lower prices attributable solely to greater bargaining power do not establish such an improvement.

A transfer may still benefit downstream users if the combined firm passes on the lower input prices. Intervention ordinarily will not be warranted when purchasing competition and output remain unchanged and downstream users suffer no harm. That conclusion follows from the absence of competitive harm rather than proof of an efficiency.

The Draft Guidelines already treat users’ countervailing bargaining power as a factor that mitigates competitive harm. The same economic principles apply when the company group exercises bargaining power as a purchaser.

Recommendation: Define buyer-side harm and explain how the JFTC will adapt the tools in Parts II and IV to purchasing markets. The analysis should address supplier substitution, alternative sales opportunities, switching and search costs, geographic constraints, procurement shares, and suppliers’ capacity to expand.

Classify procurement savings as efficiencies when they result from a productive improvement specific to the combination. Treat lower prices attributable solely to greater bargaining power as a transfer. Confirm that a substantial restraint in a purchasing market requires an identified mechanism that impairs competition among buyers. A likely reduction in purchase volumes should serve as the principal evidence of such harm, though other evidence may also support the finding.

VI. Clarify Diversion Ratios and Upward Pricing Pressure

We welcome Note 9’s introduction of diversion ratios and upward pricing pressure measures. A diversion ratio estimates the share of sales lost by one product that shifts to another. Upward pricing pressure uses diversion, margins, and efficiencies to estimate how a merger may change pricing incentives. These measures can improve the rigor and transparency of unilateral-effects analysis and align JFTC practice with that of other major jurisdictions. Four clarifications would improve the provision.

First, these measures are screening tools. Diversion-based measures estimate the merged firm’s incentive to raise prices based on assumptions about margins and substitution patterns. They do not incorporate repositioning by the parties or their rivals, entry, countervailing buyer power, or the pass-through of merger-specific cost reductions. They can identify transactions that merit closer examination, but they cannot establish by themselves that competition may be substantially restrained. The Draft Guidelines already treat concentration thresholds as screens and should give these measures the same treatment.

Second, the efficiency credit remains unspecified. Note 9 describes upward pricing pressure as an index from which “the efficiency improvement effect from the business combination” is subtracted. It does not identify the efficiency credit that the JFTC will apply. The measure’s original formulation proposed a default credit because transaction-by-transaction proof of merger-specific marginal-cost reductions is difficult.^[6]

We take no position on the amount of any default credit. The Draft Guidelines should state whether the reported measure includes efficiencies, what credit the JFTC will assume, and what empirical evidence supports that choice. Without clarification, the efficiency credit may become zero in practice, converting the measure into a gross index that omits efficiencies.

Third, diversion may also identify potential efficiencies. Note 9 correctly observes that a higher diversion ratio indicates closer competition between the parties and a potentially greater competitive effect. The same closeness of substitution may create opportunities for merger-specific efficiencies. Firms producing close substitutes may have overlapping assets or activities that integration could combine or streamline.

A higher diversion ratio does not establish greater efficiencies as a general rule. The JFTC should examine the possibility in each transaction. Treating diversion solely as evidence of harm ignores information that may bear on efficiencies.

Fourth, the Draft Guidelines should specify the relationship with market definition and provide exact formulas. Diversion-based measures do not require a completed market definition. Economists developed them partly to supplement or replace concentration-based analysis. Note 9 nonetheless calculates them within a defined particular field of trade. Attaching consequences to threshold values makes the result more sensitive to market definition, which remains among the least determinate parts of competition analysis. The JFTC should explain how diversion-based measures interact with market definition and other evidence of unilateral effects.

The English translation also leaves a term undefined. It describes one measure using the other party’s “margin” and another using the “margin rate” together with the price ratio between the parties’ products. These formulations match the standard definitions only if “margin” means the absolute margin, calculated as price minus marginal cost, and “margin rate” means the percentage margin. The final Guidelines should provide the formulas expressly, including the direction of the price ratio and the units used for the efficiency credit.

The Guidelines should also identify the data period and source and explain how the JFTC will estimate diversion, incremental cost, and margins. They should specify whether the JFTC will examine diversion in both directions and across all materially affected products. The methodology should address missing data, promotions, multiproduct pricing, and pass-through, and should state whether each reported measure includes efficiencies. Subject to appropriate confidentiality protections, the parties should receive the material assumptions and calculations with enough time to test them and submit a reasoned response.

VII. Preserve Predictability Through Clear Limits and Safe Harbors

The Draft Guidelines provide that when competitive conditions would change independently of the combination, the JFTC should compare the transaction against those expected future conditions. Note 11 extends this forward-looking counterfactual to import pressure, entry, competitive pressure from related markets and users, efficiencies, financial condition, and market size. It retains approximately two years as a guideline while allowing consideration of later developments.

We support this approach. It asks the correct question and recognizes that current conditions may provide a misleading benchmark in an economy undergoing the structural changes described in the Introduction.

The framework should operate symmetrically. A contracting market or expected structural change may support clearance, as Part IV, 2(9) recognizes. A prediction that the target would have entered or that the market would have become contested may support intervention. Note 11 relaxes the two-year guideline without supplying another limiting principle. That flexibility can improve the analysis of countervailing factors, but it should not permit indefinite projections of harm.

A potential-competition theory should require three cumulative showings:

1. Objective evidence that the target was uniquely positioned and likely to enter.
2. An absence of other plausible entrants, since the incumbent cannot profitably acquire every potential entrant.
3. Evidence that the combined firm would profitably discontinue or degrade the target’s activity.

The JFTC should also discount the predicted harm for uncertainty and the timing of entry. A potential competitor ordinarily constrains prices less than an actual competitor.

Recommendation: Apply the same standard of proof and temporal horizon whether the future counterfactual supports intervention or clearance. The party relying on a departure from pre-combination conditions should bear the burden of substantiating that departure.

A. Reaffirm the Safe Harbors

Concentration hresholds serve as screening devices that direct JFTC resources toward transactions most likely to warrant scrutiny. Safe harbors, meaning thresholds below which transactions ordinarily raise no competitive concern, provide value only when parties can rely on them.

The final Guidelines should state expressly that transactions falling within the safe harbors carry a strong practical expectation of clearance. That clarification would preserve the JFTC’s enforcement discretion while giving parties greater predictability.

B. Narrow the Important-Assets Exception

Note 6 permits the JFTC to depart from the horizontal safe harbors when the parties hold “certain important assets for competition purposes such as data or intellectual property rights.” Read together with the new text in Part VI, this provision makes data a general basis for extending scrutiny to horizontal, vertical, and conglomerate combinations without defining a limiting criterion.

Data is an intangible asset comparable to reputation, know-how, or brand value. It is often nonrival, meaning one firm’s use does not reduce its availability to others. Data may also be replicable and subject to diminishing returns as additional quantities provide progressively less value.

Note 6 should apply only when the assets are scarce and cannot readily be replicated. The JFTC should also require transaction-specific evidence showing how those assets affect competition in the particular field of trade. It should not presume competitive significance from the existence of data or intellectual property alone.

C. Link Safe Harbors to Shortened Review

The Attachment permits the JFTC to shorten the waiting period when it is evident that a transaction may not substantially restrain competition. It also recognizes that transactions satisfying the safe-harbor criteria are highly likely to meet that standard. For those transactions, the JFTC should make shortened review automatic upon written request. This procedural benefit would accelerate review without compromising enforcement and would advance the Introduction’s emphasis on predictability.

The JFTC should also reconsider whether the vertical and conglomerate safe harbors remain appropriately calibrated. Those thresholds require a market share of 10% or a Herfindahl-Hirschman Index (HHI), a measure of market concentration, of 2,500 combined with a market share of 25%. The empirical literature on vertical integration is markedly more favorable than the literature on horizontal combinations, which may support broader safe harbors.

VIII. Calibrate Remedies to the Identified Risk

The remedies revisions are welcome in principle, but several new default rules appear disproportionate. We support the Draft Guidelines’ recognition that structural relief, such as divestiture, may be unavailable or inappropriate. We also support their formal recognition of nondiscrimination commitments and measures that limit the exchange of competitively sensitive information. Three default rules require further calibration.

Prior approval of the purchaser. The Draft Guidelines require JFTC approval when the purchaser of a transferred business will be selected after the review concludes. That requirement is difficult to reconcile with the Draft Guidelines’ acknowledgment that finding a purchaser may prove difficult when demand is declining. In a market with few potential purchasers, an upfront-purchaser requirement may make divestiture impracticable and lead to prohibition of the transaction. The JFTC should reserve prior approval for cases presenting a material risk that the parties will fail to find a suitable and viable purchaser.

Monitoring by an independent third party. The Draft Guidelines state that an independent third-party monitor is “in principle required” to oversee implementation. The JFTC has properly appointed monitoring trustees when circumstances warrant. A default requirement would impose disproportionate costs on a straightforward divestiture of a discrete business to an identified and capable purchaser. Third-party monitoring adds little assurance when few parties are affected and those parties have strong commercial incentives to report noncompliance. The JFTC should require a monitor only when the remedy’s complexity, duration, or enforcement risks justify the cost.

Mandatory information-blocking measures. The Draft Guidelines state that information-blocking measures “are required” when a remedy involves cost-based purchasing rights, measures promoting imports or entry, or nondiscrimination commitments. Such safeguards will often be appropriate, but a mandatory rule would prevent case-specific calibration. The final Guidelines should state that the JFTC may require information-blocking measures when necessary to address an identified risk.

The expanded behavioral-remedy toolkit also requires safeguards. Nondiscrimination commitments, restrictions on personnel transfers and information sharing, and long-term supply obligations at production-cost-equivalent prices require the JFTC to supervise the merged firm’s conduct over time.

Requiring supply at cost-based prices constitutes price regulation. It may weaken incentives to invest in the affected assets. Transparent and stable input costs for rivals may also facilitate coordination. Behavioral remedies should therefore have defined durations and scheduled review periods. The JFTC should conduct those reviews on its own initiative. The Draft Guidelines currently permit review only upon a party’s application.

IX. Priority Recommendations

In order of priority, ICLE respectfully recommends that the JFTC:

• Replace the requirement that procompetitive effects be “reliably brought about” with language matching the probabilistic threshold established by the Antimonopoly Act. Apply the same temporal horizon, standard of proof, admissible evidence, and expectations about quantification to procompetitive effects and theories of harm.
• Delete the new note at the end of Part VI, 2(3). If the JFTC retains a provision, require the five cumulative elements identified above and explain which merger-review experience supports it.
• Confirm that the JFTC may consider procompetitive effects arising outside the particular field of trade in which harm is alleged or accruing over a longer period than predicted price effects, provided they are competitive in character and causally connected to the combination.
• Revise the merger-specificity condition to ask whether the claimed efficiencies could realistically be achieved through materially less restrictive means. Consider the alternative’s timing, execution risk, legal risk, and transaction costs.
• Limit the nonprice parameters in Part III to attributes on which suppliers compete for users, as demonstrated by users’ choices. State expressly whether those parameters may independently support a finding that competition may be substantially restrained.
• Clarify that the diversion ratios and upward pricing pressure measures in Note 9 are screening tools and cannot independently establish a substantial restraint of competition. Specify the efficiency credit, state whether the reported measures include efficiencies, and provide formulas consistent with standard definitions.
• Reaffirm the safe harbors and state that transactions satisfying them carry a strong practical expectation of clearance. Limit Note 6 to assets that are scarce and cannot readily be replicated. Make shortening of the waiting period automatic upon written request for transactions within the safe harbors.
• Apply the same standard of proof and temporal horizon to a forward-looking counterfactual whether the expected future conditions support intervention or clearance.
• Require an identified mechanism that impairs competition among buyers before finding a substantial restraint in a purchasing market. Treat a likely reduction in purchases as the principal evidence of such harm, while allowing other evidence. Classify improved purchasing terms obtained without a reduction in purchases as a transfer.
• Require prior approval of a remedy purchaser, independent third-party monitoring, and information-blocking measures only when the corresponding enforcement risk is material.

If the JFTC retains a provision addressing capability gains in conglomerate combinations, it should apply only under the cumulative conditions identified above. The firm must possess durable, preexisting market power in a properly defined market. The acquired assets must be genuinely scarce and incapable of reasonable replication. The JFTC must identify a merger-specific mechanism through which competitors would be excluded or their costs raised. The predicted restraint must be substantial and detrimental to users. The analysis must credit integration efficiencies, including those arising in other markets, under the same evidentiary standards applied to the alleged harm.

A provision confined in this manner would reach transactions that genuinely warrant concern while avoiding the defects discussed in these comments.

ICLE appreciates the opportunity to comment on the Draft Guidelines and would welcome the opportunity to provide further analysis.

We also thank Professor Toshiaki Takigawa for his helpful comments on an earlier draft of this submission.

^[1] See, e.g., Geoffrey A. Manne et al., Comments of the International Center for Law & Economics on the FTC & DOJ Draft Merger Guidelines, Docket No. FTC-2023-0043-0001 (Int’l Ctr. for L. & Econ. Sept. 18, 2023); Geoffrey A. Manne et al., Comments of the International Center for Law & Economics: EU Draft Merger Guidelines—Public Consultation (Int’l Ctr. for L. & Econ. June 22, 2026); Dirk Auer, Selcukhan Ünekbas & Mario A. Zúñiga, Comments of the International Center for Law & Economics: UK Competition and Markets Authority Call for Evidence for Merger Efficiencies Review (Int’l Ctr. for L. & Econ. Feb. 25, 2026); Ian Adams et al., Comments of the International Center for Law & Economics to the Competition Bureau Canada: Proposed Merger Enforcement Guidelines (Int’l Ctr. for L. & Econ. Feb. 10, 2026); Geoffrey A. Manne, Dirk Auer & Lazar Radic, Comment of the International Center for Law & Economics Concerning the Proposed Amendments to Korea’s Merger Review Guidelines (Int’l Ctr. for L. & Econ. Dec. 5, 2023).

^[2] Dirk Auer et al., Comments of the International Center for Law & Economics to the Japan Fair Trade Commission on the Mobile Software Competition Act (Int’l Ctr. for L. & Econ.).

^[3] Qualcomm Inc./NXP Semiconductors N.V. (2017); Broadcom Ltd./Brocade Communications Systems, Inc. (2017); M3, Inc./Nihon Ultmarc, Inc. (2019); Google LLC/Fitbit, Inc. (2020). Each transaction presented concerns about foreclosure or exclusivity, and the JFTC accepted remedies tailored to those concerns.

^[4] Salesforce.com, Inc./Slack Technologies, Inc. (2021); Microsoft Corp./Activision Blizzard, Inc. (2022); Sumitomo Mitsui Financial Group, Inc./Sumitomo Mitsui Card Co./CCCMK Holdings, Inc. (2022); Sysmex Corp./BioMajesty (2025); Google LLC/Wiz, Inc. (2025).

^[5] Z Holdings Corp./LINE Corp. (2020). The JFTC considered whether combining the parties’ data would confer a competitive advantage and found that the data lacked distinctive competitive value. It accepted remedies addressing a horizontal overlap in code-payment services.

^[6] Joseph Farrell & Carl Shapiro, Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition, 10 B.E. J. Theoretical Econ. art. 9 (2010), https://doi.org/10.2202/1935-1704.1563 (proposing a default credit for merger-specific reductions in marginal costs because case-by-case proof is difficult).