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The Japan Fair Trade Commission (JFTC) will start having hearings with BHP Billiton and Rio Tinto shortly to investigate the proposed alliance between the two companies, a JFTC official told dealReporter. The move follows the Japan Iron and Steel Federation’s (JISF) request last week to JFTC to “take appropriate actions” in order to block BHP’s proposed takeover of Rio Tinto.
The JFTC official in charge of corporate mergers said: “There is a possibility of blocking the deal. We must examine Japanese law to find out whether we can really do this because the two companies have no operational bases (in Japan).”
A couple of Tokyo-based anti-trust lawyers said, meanwhile, it would be difficult for JFTC to block the deal. “I think it is legally possible to order BHP to stop the deal, but the problem is that BHP may not follow the order,” said Kenji Ito, an anti-trust lawyer at Mori Hamada & Matsumoto.
“If violated, JFTC will impose penalties. But the companies with no presence in Japan may force through the deal,” Ito said. Yoshihiko Fuchibe, a lawyer at TMI Associates, said he thinks it would be difficult to block the deal.
The JFTC official said the commission will shortly start holding hearings with BHP Billiton, Rio Tinto, their competitors and users.
Under normal share-exchange situations, JFTC requires relevant parties to submit ex post facto (retroactive) reporting instead of prior notification. “But it is not possible to wait that long. What I can say at the moment is that we will examine the situation while talking to our overseas counterparts,” the official said. He said JFTC has already been talking to the Australian competition authorities and the European Commission.
The official said JFTC has no precedent of ever blocking deals under similar circumstances. In 1969, the commission issued an emergency order to stop the attempted merger of Fuji Steel with Yahata Steel to create Nippon Steel. But it was not necessary to enforce the order because the steel makers postponed the merger schedule.
A spokesperson at the JISF said the federation had asked JFTC to examine the proposed merger as a third-party situation. The federation also urged JFTC to co-ordinate with its overseas counterparts in the event JFTC does not have the authority to block the deal. The spokesperson said JISF had already made similar requests to the Australian authority and the European Commission. Rio Tinto has a market capitalization of GBP 73.5bn.
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