Case Study of Prior Consultation Concerning Mergers & Acquisitions

FY2004 TRAINING COURSE ON COMPETITION LAW AND POLICY Materials/data for “Case examples of prior consultation system relating to enterprise combination plans”

Reference 1 Flowchart of the statutory procedures regarding enterprise combination plans Reference 2 Flowchart of the handling of prior consultations relating to enterprise combination plans Reference 3 Flowchart of JFTC's Approach to Merger Assessment

Case example 1 Business assignment of glass substrates for magnetic disk from Nippon Sheet Glass Co., Ltd to Hoya Corporation

Case example 2 Integration of management between Yuasa Corporation and Japan Storage Battery Case example 3 Integration of soda ash import/sale businesses between Sumitomo Corporation and Asahi Glass Co., Ltd.

Case example 4 Management integration between the Hokuriku Bank, Ltd. and the Hokkaido Bank, Ltd.

（Reference 1 ）Flowchart of the statutory procedures regarding enterprise combination plans

Receipt of the M&A, etc. notification

When there is an When per the investigation Within 30 days Antimonopoly Act issue additional reports, etc. are required

Recommendation or Decision Request for reports etc. There is not an to initiate hearing required for the examination Antimonopoly Act issue

(Materials will generally be submitted within 3 to 4 weeks)

Receipt of reports etc.

Within 90 days

Recommendation or Decision There is not an to initiate hearing Antimonopoly Act issue

Recommendation decision or Consent decision or Hearing decision

Appeal for withdrawal (lawsuit) Termination （Reference 2） Flowchart of the handling of prior consultations relating to enterprise combination plans

Inquiry prior to the initiation of prior consultations

Application for prior consultations = submission of materials showing the concrete nature of the enterprise combination plan = initiation of the documentary examination

Within 30 days

Response to the effect that there Notification to the effect that a detailed examination is not an Antimonopoly Act issue is required = Request for the submission of materials required for the detailed examination

Public announcement to the effect that the undertaking of a detailed examination is required

(Individuals with an opinion may (Materials will generally be submit a written opinion within 30 Initiation of the detailed submitted within 3 to 4 weeks) days following the announcement examination that a detailed examination is being undertaken)

Submission of the materials required for the detailed examination

Within 90 days

Response to the effect that there Response to the effect that there is an is not an Antimonopoly Act issue Antimonopoly Act issue

Within 1 week

Public announcement of the contents of the response and of the contents of the prior consultations

(Note) In the event that a response is given to the effect that there is an Antimonopoly Act issue, when there is a proposal from the interested companies for alleviating the Antimonopoly issue, a response based upon the contents of this proposal will be made.

JFTC's Approach to Merger Assessment

Identification of Merger Subject to Review

· Stockholdings, interlocking directorates, mergers, divestitures, acquisitions are relevant. Merger Subject to Review Irrelevant Merger Situations (Example) (Example) · Mergers, divestitures, or acquisitions (See the right column) · Mergers, divestitures, or acquisitions between a parent firm · Stockholding such that the voting right ratio exceeds 50% · Interlocking directorates such that the officers or employees of and its subsidiary, etc. one company comprise a majority of the total number of officers · Stockholdings not exceeding 10% of the total voting right of another company, etc. without interlocking directorates

No further investigation

Determination of Relevant Markets · Demand substitution is the key to determine the boundary of a relevant market. · Product Market + Geographical Market => Relevant Market · Price discrimination and supply substitution are considered.

Assessment of the Effects of a Merger on Competition (Horizontal Merger Case) · Since horizontal, vertical, and conglomerate mergers differently affect market competition, they must beseparately assessed. · One of horizontal, vertical, and conglomerate mergers, or some of them may be involved in a relevant merger situation. Common Safe Harbor Pass A merging parties combined market share is 10% or less, or 25% or less with the HHI being below 1000.

Not Pass (Both assessments are required) Non-coordinated Effects Coordinated Effects · Analysis of various types of non-collusive oligopolies · Analysis of collusive oligopolies · Safe harbor => Comprehensive examination · Comprehensive examination Safe Harbor Comprehensive Examination · A merging parties' combined market share is 25% or less, at least · The number of participants, similarity one rival's market share is 10% or more, and the HHI is below 1800. Pass in product and cost structure, pre-merger · A merging parties' combined market share is 35% or less, at least rivalries among the merging parties, two rivals' market shares are 10% or more, and the HHI is below excess capacity for supply. 1800. · Transparency in business transactions, · An increment in HHI is below 100, and at least one rival's market is 10% or more. frequency and size of orders, stability and maturity in demand, the speed of Not Pass technological development, pre-merger Comprehensive Examination competitiveness. · Merging parties' market shares, market share ranks, pre-merger · Import and entry, the presence of rivalries. adjacent product or geographic markets, · Non-merging firms' market shares, differences in market share from a merged firm, excess capacity for supply, degree of product competitiveness in vertically related differentiation. markets. · Import and entry, the presence of adjacent product and · Efficiency and viability of merging geographic markets, competitiveness in vertically related markets. · Efficiency and viability of merging parties. parties Not Pass Not Pass

Substantially to Restrain Competition Substantially to Restrain Competition

Remedial Actions Remedial Actions Not Pass Not Pass Prohibition of the relevant merger Prohibition of the relevant merger

NOT Substantially to Restrain Competition Case example 1: Business assignment of glass substrates for magnetic disk from Nippon Sheet Glass Co., Ltd to Hoya Corporation

1. Outlines of the case in question On March 1, 2004, HOYA plans to take over the businesses of manufacture and sale of glass substrates from Nippon Sheet Glass upon its withdrawal from these business segments.

2. Glass substrate Glass substrates are raw flat glass plates processed to a disk-shape by grinding/buffing, some of which are used as magnetic disks built into hard disk drives (hereinafter, “HDDs”) after being coated with magnetic material. Such glass substrates can be divided into two categories; (i) those of chemical strengthening types, and (ii) those of crystallization types, and both of the companies in question engage in the manufacture and sale of the former type only. The glass substrates built into HDDs are further divided into two groups depending on difference in the application of the HDDs; (i) those for mobile-based devices (Note 1) and those for stationary devices (Note 2). The mobile-based devices use glass substrate only, while stationary devices use aluminum-made substrate (hereinafter, “aluminum substrate”) in addition to the glass substrate.

(Note 1) Products such as laptop/notebook PCs, etc., which are expected to move from place to place in use. (Note 2) Products such as desktop PCs, servers, etc., which are not expected to move in use.

3. Approach to the case in compliance with the Antimonopoly Act (1) Relevant markets The JFTC judged that “relevant markets” are formed in the entire manufacture/sale business segment of glass substrates used for mobile-based devices, including those of chemical strengthening types and crystallization types, on the grounds that, whereas both companies in question engage in the manufacture and sale of chemical strengthening type glass substrates only, users can use crystallization type glass substrates as well, even in the market of mobile-based devices that use only glass substrates as mentioned above. Likewise, the JFTC judged that “relevant markets” are formed in the entire manufacture/sale business segment of substrates used for stationary devices, including both glass and aluminum substrates, on the grounds that such aluminum substrates are available for stationary devices, and are actually used by users in addition to the glass substrates. With respect to geographic market, the JFTC demarcated both markets as being a national market.

(2) Investigation targets The JFTC executed investigations focusing on glass substrates for mobile-based devices from among the business segment demarcated in the preceding subpara (3) 1 that were likely to exert great effects upon competition when considering factors such as the share of sales figures and rank orders after the assignment in question.

(3) Market conditions Domestic market size of glass substrates for mobile-based devices in FY2002 is approx. 10 billion yen. Also, the combined share of sales figures/rank order of the companies in question in the market of glass substrates for mobile-based devices will be approx. 50%, the first rank, due to the assignment in question.

Rank order Company names Share 1st Nippon Sheet Glass Approx. 40% 2nd A Inc. Approx. 35% 3rd B Inc. Approx. 15% 4th HOYA Approx. 10% Total 100% (1) Combined share of the companies in question Approx. 50% (Source：Date prepared by the JFTC based on its survey results)

(4) Factors considered a. Existence of powerful competitors Even after the activity in question, there is still a competitor holding approx. 35％ share of sales in addition to the other competitor which has a share exceeding 10%. It is believed that such competitors have sufficient product supply capacity.

b. User’s bargaining power in price negotiations Transactions between glass substrate manufacturers and HDD manufacturers, the users, are not based on long-term contracts in most cases, but are those in which each HDD model change may cause changing contractual counterparties. Users have strong bargaining power in price negotiations because it is easy for them to change substrate suppliers, they can diversify suppliers in order to secure stable supply at a low price, and they are able to increase or decrease order quantities depending mainly on transaction prices in purchasing substrates.

c. Competitive pressure from downstream markets Due to the extremely acute competition in the PC market PCs, the end products of substrates, sales prices of such PCs have significantly fallen. Under such competitive conditions of the end product market, glass substrate manufacturers have severe demands placed upon them to reduce prices by HDD manufacturers, who are under the same pressure from PC manufacturers. Thus, sales prices of glass substrate have been consistently falling. Therefore it is considered that strong competitive pressure from downstream markets is functioning consistently.

d. Withdrawal from market Since Nippon Sheet Glass has already decided to withdraw from the glass substrate business, there are no manufacturers but HOYA, whose taking over the glass substrate business segment of Nippon Sheet Glass exerts the least effects upon competition (increase in share).

e. Circumstances constraining concerted activities attempted among competitors It is believed that substrate manufacturers are unlikely to attempt any concerted price action due to the strong bargaining power of users in price negotiations, and to the functioning of strong competitive pressure from downstream markets. Furthermore, as glass substrates are products characterized by frequent innovations and a short product-life cycle, and, consequently, the lowering price thereof is highly likely to enable increases in sales. Thus, the JFTC evaluated that it is unlikely that the glass substrate manufacturers will attempt any concerted act.

4. Measures and possible effects thereby planned and submitted by the companies in question (1) Through the processes of the JFTC’s investigation, HOYA submitted a notification including the following contents as measures that HOYA is to take regarding the assignment plan in question:

a. Although HOYA has entered a business transfer agreement with Nippon Sheet Glass pertaining to the manufacture/sale of raw flat glass, the material of glass substrates, a clause of which originally stipulates that Nippon Sheet Glass shall not, directly or indirectly, manufacture and/or supply such raw flat glass for/to any company but HOYA, this clause will be repealed not later than the day of assignment in question.

b. HOYA will accept requests for licensing patents related to the target businesses of the assignment in question from other companies, if any, under appropriate terms and conditions as specified in its policy. Further, HOYA will conclude contracts for such patent licensing issues currently under negotiation not later than September 30, 2004.

(2) If HOYA takes the measures described above, the measure of 4.(1).a. will enable Nippon Sheet Glass to manufacture/sell raw flat glass to any company other than HOYA, and, consequently, new entries into the glass substrate manufacture/sale business will be facilitated. Also, the companies to be licensed as the result of the measure of 4.(1).b. will be able to manufacture/sell chemical strengthening type glass substrates. Therefore, it is believed that users will be able to gain a wider choice of trade partners.

5. Conclusion The JFTC concluded that the assignment in question would not substantially constrain competition in relevant markets when reviewing the content of voluntary measures outlined by the companies in question, as well as the factors described in 3.(4) above.

Case example 2. Integration of management between Yuasa Corporation and Japan Storage Battery

FIRST Companies in question Yuasa Corporation (hereinafter, “Yuasa”) is a company engaging in the manufacture and sale of storage batteries and other items. Japan Storage Battery Co., Ltd. (hereinafter, “Japan Storage Battery”) is also a company engaging in the manufacture and sale of storage batteries and other items.

SECOND Outline of integration and related laws The two companies in question plan to integrate management by establishing a holding company together (GS Yuasa Corporation), in April 2004.

The applicable law of the integration in question is the Antimonopoly Act, Art. 10.

THIRD Purpose of integration The two companies in question plan the integration in question in order to reduce manufacture/development costs, and to enhance technological development capacity for the next generation of battery businesses, in response to the harsh business conditions that lead-acid batteries, their core products, are suffering from sluggish demand and falling prices.

FOURTH Relevant markets With respect to the case in question, the JFTC reviewed competition between lead-acid battery products that the companies in question manufacture and sell (Note 1). 1 Outlines of products There are two types of batteries: (i) primary -- those that cannot be reused, and (ii) secondary -- those that can be reused. Lead-acid batteries fall into the latter category, being characterized by low-priced lead as a raw material for electrodes, and by easy setting of storage capacity. Furthermore, lead-acid batteries are further divided into three groups depending on application: (i) automobile-use lead-acid batteries, (ii) industrial-use lead-acid batteries, and (iii) small-sized sealed lead-acid batteries. (Outlines of each product are as per attached.)

2 Relevant markets The JFTC has, after reviewing whether the lead-acid batteries in question have the same functions/utility, etc. for users, demarcated the manufacture/sale business segment of the six types of lead-acid batteries within Japan, listed below, as the relevant markets. Specifically, industrial lead-acid batteries and small-sized sealed lead-acid batteries were categorized as they now are. However, lead-acid batteries for automobile use (main application thereof), no substitutability was found between them due to different standards, customer segment, price range, etc. Therefore, the JFTC separated them into two categories: four-wheel vehicle use and two-wheel vehicle use, then further subcategorized them into two more groups: new vehicle use and repair use, in order to demarcate the relevant markets of such batteries. With respect to geographic market, the JFTC demarcated these markets as a national market.

Relevant markets of products involved in the case in question 1 Lead-acid batteries for four-wheel vehicles (for new vehicles) 2 Lead-acid batteries for four-wheel vehicles (for repairs) 3 Lead-acid batteries for new vehicles (for new vehicles) 4 Lead-acid batteries for new vehicles (for repairs) 5 Industrial lead-acid batteries 6 Small-sized sealed lead-acid batteries (Note 1) With respect to power supply units, another product that the companies in question manufacture/sell, the JFTC determined that detailed review would be unnecessary when taking into account the small combined share after management integration.

FIFTH Market-specific review 1 Lead-acid batteries for four-wheel vehicles (for new vehicles, for repairs) (1) Market conditions Domestic demand for lead-acid batteries for four-wheel vehicles is leveling off. Domestic market size in 2002 remained at approx. 89 billion yen. The integration in question will enable the companies in question to raise their rank order of combined sales figure share of such batteries to approx. 30% in the new vehicle segment, and approx. 40 % in the repairs segment, both of which will be the leading share.

(Lead-acid batteries for new vehicles) (Lead-acid batteries for repairs) Rank Rank Manufacturers Share Manufacturers Share order order 1 A Inc. Approx. 30% 1 Japan Storage Battery Approx. 25% 2 Japan Storage Battery Approx. 20% 2 Import products Approx. 20% 3 B Inc. Approx. 20% 3 Yuasa Approx. 20% 4 C Inc. Approx. 20% 4 D Inc. Approx. 15% 5 Yuasa Approx. 10% 5 E Inc. Approx. 10% 6 Import products 0 - 5% 6 F Inc. Approx. 10% Companies in question Companies in (１) Approx. 30% (１) Approx. 40% combined question combined Total 100% Total 100% * Since the above numbers are calculated by half-adjust, they do not always coincide with total number of percentage. (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

(2) Factors considered a. Ease in changing trading counterparts The JFTC acknowledged that it is easy for users to change trading counterparts, on the grounds that there are multiple powerful competitors with sales figure shares exceeding 10%, such as A Inc., B Inc., and C Inc., in the market of lead-acid batteries for four-wheel vehicles (new vehicles), and D Inc., E Inc., and F Inc. in the market of those for four-wheel vehicles (for repairs). Additionally differences in quality are hardly noticeable between Japanese/overseas manufacturers due to difficult differentiation of these products.

b. User’s procurement policy After bringing manufacturers into competition through competitive pricing, multiple suppliers, etc., as mentioned in the above subpara., most users have, in practice, adopted a procurement policy to purchase products from the manufacturer offering the lowest price

c. Competitive pressure from downstream markets (a) The JFTC acknowledged that competitive pressure from downstream markets is effectively functioning in the market of lead-acid batteries for four-wheel vehicles (for new vehicles), in which ongoing intense competition causes the downward trend of vehicle sales prices, and consequent pressure for cost reduction.

(b) In the market of lead-acid batteries for four-wheel vehicles (for repairs), generally general consumers (end users) buy lead-acid batteries at mass stores of auto supplies, and, accordingly, such mass stores themselves set the prices of batteries in most cases, taking into account prices offered by other stores. Also, there is a tendency for prices quoted at gas stations and auto dealers shops to follow the price trends of such mass stores of auto supplies. Thus, the JFTC acknowledged that competitive pressure from retailers in downstream markets is functioning effectively.

d. Existence of import pressure It is acknowledged that in the lead-acid batteries for four-wheel vehicles (for repairs)market, import products develop a tendency to increase as a response to price advantages therein, and that overseas manufacturers have no difficulties in their supply capacity margin. Further, users adopting such import products state that there are no qualitative constraints or difficulties caused by delivery. Thus, the JFTC acknowledged that competitive pressure arising from import products is functioning effectively.

(3) Evaluation in line with the Antimonopoly Act Users can easily change trading counterparts since there exist multiple powerful competitors, and there is no quality difference between products. In addition, car manufacturers and mass merchandisers of auto supplies have strong bargaining power in price negotiations as users. Competitive pressure from downstream is also functioning. Further, import products function as competitive pressure on the domestic market in lead-acid batteries for four-wheel vehicles (for repairs). Taking into account such factors, the JFTC does not consider that the integration in question will substantially constrain competition.

2 Lead-acid batteries for two-wheel vehicles (for new vehicles/repairs) (1) Market conditions Domestic demand for lead-acid batteries for two-wheel vehicles is leveling off. Domestic market size in 2002 remained at approx. 85 billion yen.

The integration in question will enable the companies in question to raise their rank order of combined sales figure share of such batteries to approx. 85% in the new vehicle segment, and approx. 70 % in the repairs segment, both of which will be the leading share.

(For new vehicles) (For repairs) Rank Manufacturers Rank Manufacturers Share Share order order 1 Yuasa Approx. 65% 1 Yuasa Approx. 50% Japan Storage Battery Japan Storage 2 Approx. 20% 2 Approx. 20% Battery 3 A Inc. Approx. 15% 3 B Inc. Approx. 20% 4 Import products 0 - 5% 4 Import products Approx. 10% Companies in question C Inc. 0 - 5% (1) Approx. 85% 5 combined Total companies in 100% (1) Approx. 70% question combined Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

(2) Factors considered a. Almost all users of lead-acid batteries for two-wheel vehicles (new vehicles) are major two-wheel vehicle manufacturers, who decide purchasing ratio, etc., from suppliers after bringing them into competition through competitive pricing, evaluation of supplier’s amelioration programs, etc. Therefore, it is believed that user’s bargaining power in price negotiations is strong.

b. Lead-acid batteries for two-wheel vehicles (for repairs) When taking into account that mass merchandisers of auto supplies, among the users, purchase lead-acid batteries through competitive pricing in the same way as in the case of those for four-wheel vehicles, it is acknowledged that competitive pressure from the retail segment is functioning to a certain degree. Further, it is acknowledged that such mass merchandisers of auto supplies mainly use a proportion of import products.

(3) Evaluation in line with the Antimonopoly Act a. The market of the lead-acid batteries for two-wheel vehicles (new vehicles) will become a duopoly in which the companies in question will have a large share, since there will be only one competitor (A Inc.) left after the integration in question. Also, when considering the unprofitable conditions of the market, other lead-acid batteries manufacturers are unlikely to go out of their way to enter it. In addition, as import products are adopted less, they cannot be considered as an effective brake on such duopoly. In this market, accordingly, the integration in question could cause substantial constraints upon competition due to difficulties in securing alternative supplies, despite the fact that the bargaining power of users in price negotiations is strong (Note 2). b. The market of lead-acid batteries for two-wheel vehicles (for repairs) will also

become a duopoly in which the companies in question will have a large share, since there will be only one competitor (B Inc.) left after the integration in question. Further, new entries are unexpected (low probability) on the same grounds as those of the market for new vehicles, described above. Further, since approx. 70% of total sales in this market are made mainly by small-sized two-wheel vehicle dealers to general consumers, competitive pressure from retail segments is not necessarily sufficient. Import products are also too restrictive to function as a brake on such a duopoly when considering the distribution channel structure. Accordingly, this market will become a duopoly after the integration, in which the companies in question will have a large share. Moreover, the integration could cause substantial constraints upon competition under the circumstances that neither new entries, nor competitive pressure from downstream markets, are expected (Note 2).

(Note 2) The companies in question proposed voluntary measures to be taken pertaining to lead-acid batteries for two-wheel vehicles (See SIXTH described later).

3 Industrial lead-acid battery (1) Market conditions Domestic demand for industrial lead-acid batteries is leveling off. Domestic market size in 2002 remained at approx. 41 billion yen. The integration in question will enable the companies in question to raise their rank order of combined sales figure share of the market to approx. 55%, which will be the leading share.

Rank order Manufacturers Share 1 Japan Storage Battery Approx. 35% 2 Yuasa Approx. 20% 3 A Inc. Approx. 20% 4 B Inc. Approx. 10% 5 C Inc. Approx. 10% 6 Import products Approx. 5% (1) Companies in question combined Approx. 55% Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

(2) Factors considered a. Ease in changing trading counterparts In this market, there are many competitors including A Inc., the most powerful competitor, in addition to B Inc., and C Inc. As these competitors are capable of increasing production by using existing facilities, it is believed that competitors reserve supply capacity. Further, as to replacement demand of industrial lead-acid batteries, it is acknowledged that users can easily change trading counterparts on the grounds that there is no qualitative difference in such batteries, and, accordingly, there is no need for the users to pay attention to whether or not quality of a manufacturer’s product has been proved. b. User’s bargaining power in price negotiations 9

Main users in this market are heavy electric machinery manufacturers manufacturing power supply equipment, or major general constructors undertaking building construction. These users are mostly powerful negotiators in transactions, as they usually deal with entire electric facilities for end users (especially for each industry of electricity, transportation, and communication), as well as selecting suppliers through competitive pricing. It is therefore obvious that users in this market have strong bargaining power in price negotiations.

c. Competitive pressure from downstream markets There is intensive competition for contracts between heavy electric machinery manufacturers, or between major general constructors, pursuing the end user’s moves toward investment in facilities, or relating to construction demand. Thus, it is acknowledged that competitive pressure from downstream markets is functioning through parts procurement aiming at funding costs reduction.

(3) Evaluation in line with the Antimonopoly Act It is believed that substation of supply substitution is possible within a relatively short time frame, on the grounds that competitors are, without expanding current production facilities, capable of supplying more than half the total volume supplied by the two companies in question. Further, users procure industrial lead-acid batteries as part of an entire electric facilities contract by bringing the manufacturers thereof into competition, in order to reduce funding costs. Taking into consideration such circumstances, the JFTC believes that the integration in question will not substantially constrain competition in this market.

4. Small-sized sealed lead-acid battery (1) Market conditions Domestic demand for small-sized sealed lead-acid batteries is declining. Domestic market size in 2002 remained at approx. 12 billion yen. The integration in question will enable the companies in question to raise their rank order of combined sales figure share of this market to approx. 30%, which will be the second share.

Rank order Manufacturers Share 1 A Inc. Approx. 35% 2 Import products Approx. 25% 3 Japan Storage Battery Approx. 20% 4 Yuasa Approx. 10% 5 B Inc. Approx. 5% 6 C Inc. Approx. 5% (2) Companies in question combined Approx. 30% Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

(2) Factors considered a. Existence of import pressure and competitive pressure from downstream markets It is acknowledged that import products are functioning as competitive pressure on the domestic market on the grounds that the share of import products is increasing, and that overseas manufacturers are considered to reserve supply capacity. Furthermore, small-sized AC Uninterruptible Power Supply (hereinafter, “UPS”) using small-sized sealed lead-acid batteries, currently being imported, act as a substitute in meeting the demand for small-sized sealed lead-acid batteries, while promoting competition among UPS manufacturers in the downstream markets. Thus, it is acknowledged that competitive pressure from downstream markets is functioning.

b. Ease in changing trading counterparts In this market, there are many competitors including A Inc., the most powerful competitor, in addition to B Inc., and C Inc. Further, small-sized sealed lead-acid batteries are a general purpose product, the quality of which does not differ between domestic/overseas manufacturers. Thus, it is acknowledged that users can change trading counterparts without difficulty.

c. User’s bargaining power in price negotiations It is believed that the user’s bargaining power in price negotiations is strong in this market on the grounds that such users, including UPS manufacturers, after bringing manufacturers into competition through competitive pricing, multiple suppliers, etc, have adopted a procurement policy to purchase products from the manufacturer offering the lowest price.

(3) Evaluation in line with the Antimonopoly Act Taking into account two factors: (i) ease in changing trading counterparts supported by the existence of powerful competitor(s) and increase in import products, and (ii) many imported small-sized UPS in downstream markets, the JFTC believes that the integration in question will not substantially constrain competition in this market.

5. Concerted acts between competitors Since hearing results show that lead-acid batteries manufacturers have heretofore competed actively with each other in every relevant market, and that competitive price setting is likely to continue even after the integration in question, the JFTC believes that the probability of concerted acts taken by competitors in this market after the integration in question is extremely low.

SIXTH Voluntary measures proposed by the companies in question regarding lead-acid batteries for two-wheel vehicles (for new vehicles/repairs each), and evaluation thereof 1 Voluntary measures proposed by the companies in question In a reviewing process implemented by the JFTC for the case in question, the companies in question proposed the following rough measures regarding lead-acid batteries for two-wheel vehicle issues (for new vehicles/repairs each):

a. Within two years after the establishment of the new integrated company, the companies in question shall grant companies attempting to newly operate business in the manufacture/sale of lead-acid batteries for two-wheel vehicles (including competitive manufacturers and trading companies engaging in sale only) the cost-based operations undertaking rights (long-term supply rights), not exceeding the amount equivalent to the sales figures of lead-acid batteries for two-wheel vehicles achieved by the two companies in question in the domestic market in FY2002, whichever is smaller.

b. The companies in question shall provide information about major trading counterparts, outline of the market in question, etc. to the operations undertaking rights holders upon requested.

c. The companies in question shall, upon request, provide to operations undertaking rights holders, at actual cost, physical distribution service that they manage.

d. The companies in question shall make detailed reports on the particulars of conditions and operations of such measures to the JFTC beforehand, in order to assure proper operations of the measures. The companies shall also report to the JFTC, upon request, pertaining to implementation status of all those measures.

2 JFTC’s judgment taking into consideration the measures described in the preceding paragraph As the measures to solve the problems involving the integration in question, separation of the lead-acid batteries for two-wheel vehicles business from the integration scheme or partial assignment thereof may be possible. However, due to the unprofitability of lead-acid batteries for two-wheel vehicles themselves, and to the improbability that such batteries may spring up as a single business, it is unlikely that a company hoping to take over such business will readily appear. Thus, it is considered in terms of feasibility a proper measure for the companies in question to set the cost-based operation undertaking rights for third parties. If those measures are taken, then, (i) supply equivalent to a competitive unit that is to be diminished by the integration in question will be independently secured, and (ii) new entries into the market become possible without making further investments in production facilities, etc. Accordingly, through those processes, new competitive units capable of exerting significant effects upon sales prices of the companies in question may be produced as an effective brake against such companies after the integration in question. Taking into consideration such circumstances, the JFTC believes that, if the measures described above are satisfactorily implemented, the integration in question may not substantially constrain competition in the market of lead-acid batteries for two-wheel vehicles.). In this connection, the JFTC will, as the need arises, continue to observe the execution status of the measures proposed by the companies in question by implementing hearings from them, and other procedures, as well as sufficiently gain understanding of /monitor the competitive status in the product market, the problems of which have been discussed above.

SEVENTH Conclusion Taking into consideration the above circumstances, the JFTC concluded that the integration in question is unlikely to substantially constrain competition in relevant markets, including those of lead-acid batteries for four-wheel vehicles (for new

vehicles/repairs), industrial lead-acid batteries, and of small-sized sealed lead-acid batteries, and that there are no problems in terms of the Antimonopoly Act. Likewise, with respect to lead-acid batteries for two-wheel vehicles, the JFTC concluded that the integration in question is unlikely to place substantial constraints on competition in either markets of those for new vehicles, or for repairs; provided that the measures proposed by the companies in question are satisfactorily executed.

Attached paper Product outline of lead-acid batteries Product markets Outlines (Characteristics) The most common is the 12V type comprising six 2V-batteries, with electrical capacity up to

Lead 176 Ah. It also enables instantaneous high-current discharge.

(Main application) - acid batteries for four These batteries are usually built into automobiles as the power supply for electric/electronic equipment to control engine startup, automatic windows, air conditioner, etc. (Main users ) vehicles For new Four-wheel vehicle manufacturers (Dealing condition)

Direct deal with four-wheel vehicle manufacturers in both commercial and physical -

wheel vehicles distribution (Main users ) Mass merchandisers of auto supplies, four-wheel vehicle dealers, maintenance shops, DIY For repairs

Lead stores, gas stations, etc. End users are mostly general consumers.

- acid batteries for automobiles (Dealing condition)

Generally, direct deal is applied to large users, and indirect deal to small users via distributors, in both commercial and physical distribution (Characteristics) The most common are 6V and 12V-types comprising individual 2V-batteries. They also enable instantaneous high-current discharge. Additionally, they are highly vibration-resistant,

Lead light, and compact. (Main applications) - acid batteries for two These batteries are usually built into two-wheel vehicles as the power supply for

electric/electronic equipment to control engine startup, etc. (Main users ) veh For new Two-wheel vehicle manufacturers icles (Dealing condition)

Direct deal with two-wheel vehicle manufacturers in both commercial and physical -

wheel vehicles distribution (Main users ) Two-wheel vehicle dealers，mass merchandisers of auto supplies，maintenance shops，DIY

For repairs stores , etc. End users are mostly general consumers.

(Dealing condition)

Generally, direct deal is applied to large users, and indirect deal to small users via distributors, in both commercial and physical distribution. N.B.70% of total lead-acid batteries for two-wheel vehicles for repair are distributed to small users via distributors. (Characteristics) Some types, combining individual 2V-batteries, have an electrical capacity up to 3,000Ah. The large capacity is a result of combining many batteries. Industrial lead-acid batteries

(Main applications) These batteries are usually built into the power supply equipment of communication facilities, or public facilities, as an emergency power supply against power outage/failure, transport, and communication services. (Dealing condition) There are two sales channels: (i) direct sale/delivery to private sector firms of power supply. (Main users) Heavy electric manufacturers，power supply facilities manufacturers, etc. End users are mostly public institutions and private sector firms such as power supply, equipment, into which industrial lead-acid batteries are built, and (ii) indirect sale, through which the industrial lead-acid batteries are sold to heavy electric manufacturers, etc., and delivered to/installed at user’s (private sector firms, etc.) premises by the companies in question. (Characteristics) The most common are 6V and 12V compact types. As they seal up electrolytic solution by infiltration of cotton-like glass fiber, no resupply is necessary. (Main applications) These batteries are a general-purpose item widely used for the UPS (uninterruptible power supply) for small-sized computers, or as the backup power supply for medical equipment. Small-sized sealed (Main users ) lead-acid batteries UPS manufacturers, security/disaster-prevention equipment manufacturers, etc. End users are public institutions, private sector firms, and general consumers (Dealing condition) There are two sales channels: (i) direct sale/delivery to private sector firms of power supply equipment, into which small-sized sealed lead-acid batteries are built, and (ii) such batteries are sold/delivered to UPS manufacturers, etc., built into power supply units as a part, then sold to end users. (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

Case example 3 Integration of soda ash import/sale businesses between Sumitomo Corporation and Asahi Glass Co., Ltd.

FIRST Outline of the case in question, etc. 1. Outline of the case in question Sumitomo Corporation (hereinafter, “Sumitomo Corporation”) and Asahi Glass Co., Ltd. (hereinafter, “Asahi Glass”) plan to integrate their import/sale business of soda ash produced in the USA in order to address increasingly deteriorating operating revenue caused by intensifying competition, by newly establishing a joint company (“Soda Ash Japan Co., Ltd.”), aiming at cost reduction. Also, of the companies in question, Asahi Glass is engaging in the manufacture/sale businesses of sheet glass and other glass products (glass for cathode-ray tubes, etc.) that are made using soda ash. Applicable law of the case in question is the Antimonopoly Act, Art. 10 and 16.

2. Outline of products Soda ash is the common name of sodium carbonate (Na2CO3), which is a white powder, or aggregated alkaline compound. It is generally used as the main raw material of sheet glass and other glass products. Further, soda ash can be divided into two categories depending on manufacturing processes: (i) natural soda ash obtained by melting/refining naturally produced trona ore, and (ii) “synthetic soda ash” obtained through artificial chemosynthesis.

SECOND Approach to the case in accordance with the Antimonopoly Act 1 Relevant markets Both companies in question have engaged in import/sale business of soda ash produced in the USA. Despite being categorized into natural soda ash and synthetic soda depending on manufacturing processes, each kind of soda ash does not differ very much in function, utility, and price. Both types of soda ash can be used for the same applications. Of the two companies in question, Asahi Glass is engaging in the manufacture/sale businesses of sheet glass, and other glass products (glass for cathode-ray tubes, etc.) as well, that are made using soda ash, while Sumitomo Corporation sells soda ash to certain glass products manufacturers. Taking into consideration the above circumstances, the JFTC described the relevant markets that are formed in the case in question as follows: (i) Soda ash sales segment, in terms of the horizontal business combination, (ii) Soda ash purchase/sales segment, in terms of the vertical business combination, and, (iii) Manufacture/sale segments of sheet glass and other glass products using soda ash as raw material, in terms of business combination

2 Effects upon competition (1) Market conditions a. Sales segment of soda ash The integration in question will enable the companies in question to raise their rank order of combined sales figures share to approx. 30%, the leading share. Also, the cumulative share of top three companies will be approx. 75％.

Rank order Company names/Country of origin Share 1 A Inc. Domestic Approx. 25％ 2 B Inc. Domestic Approx. 20％ 3 Asahi Glass USA Approx. 20％ 4 Sumitomo Corporation USA Approx. 10％ C Inc., D Inc. USA Approx. 10％ Others China Approx. 15％ Companies in question (1) - Approx. 30 % combined Grand total - 100％ (Source：Date prepared by the JFTC based on the materials/data submitted by the companies in question)

b. Soda ash purchase/sale segment and manufacture/sale segment of sheet glass and other glass products using soda ash as raw material In the soda ash purchase segment, there exist manufacturers of sheet glass and other glass products, including Asahi Glass. With respect to the soda ash sales segment, the situation is the same as above 2 (1) a. Further, manufacturers of sheet glass and other glass products manufacturers including, Asahi Glass, exist in the manufacture/sale segment of sheet glass and other glass products.

(2) Factors considered a. Sales segment of soda ash (horizontal business combination) (a) Non-concerted substantial constraints on competition ① Existence of powerful competitors There are powerful domestic competitors, such as A Inc and B Inc., while importers of soda ash produced in China are increasing market share in recent years by taking advantage of improving quality and low prices.

② User’s bargaining power in price negotiations User’s bargaining power in price negotiations have become increasingly stronger in this market, on the grounds that such users, after bringing manufacturers into competition through competitive pricing, multiple suppliers, etc, have adopted a procurement policy to purchase products from the soda ash manufacturer offering the lowest price.

③ Existence of competitive pressure from adjacent markets There are competitive products, such as caustic soda and others in some soda ash applications (pulp, paper, inorganic chemical, and iron & steel), so users can select the raw materials used in their products by weighing the advantages and disadvantages of prices and performance of soda ash and competitive products.

④ New entries It is easy to enter the soda ash import business, in which there are no legal restrictions on entry, and the minimum investment necessary for the entry is rather

small. In recent years, in fact, a company has newly entered the import business of Chinese soda ash.

(b) Substantial constraints on competitions by concerted acts ① Existence of competitive pressure from adjacent markets Same as (a) ③ above.

② New entries Same as (a) ④ above.

③ Competition conditions in the past Market shares have fluctuated intensely in this market in the past. Also, in fact, no domestic manufacturers and importers have committed concerted acts relating to soda ash price revision since the Soda Ash Import Cartel Case in 1983. b. Purchase/sale segment of soda ash and manufacture/sale segment of sheet glass and other glass products using soda ash as a raw material (vertical business combination)

(a) Non-concerted substantial constraints on competition Since Asahi Glass has imported soda ash it consumes directly (not via importer), the integration in question will not lead to removal of any other soda ash dealers from the soda ash business. Also, despite the fact that some sheet glass manufacturers and other glass products manufacturers among those competing with Asahi Glass have had business relations with Sumitomo Corporation in the past, it would not appear that such manufacturers would be unable to obtain soda ash anymore, taking into account the existence of many powerful competitors. Considering such circumstances, the JFTC believes that the integration in question will not substantially constrain competition in this market.

(b) Substantial constraints on competition by concerted acts Soda ash is merely a portion of the materials used in producing glass materials, and the proportion of the purchase price to product sales price is extremely small. Therefore, even if Asahi Glass could gain information about the soda ash purchase price of other glass manufacturers, etc. after the case in question is approved, it will not lead to Asahi Glass being able to grasp the cost structure of the other manufacturers. Thus, it would not appear that glass products manufacturers, including Asahi Glass, will commit any concerted acts.

(3) Evaluation in line with the Antimonopoly Act Competition is active in the sales segment of soda ash due to the existence of many powerful competitors, the strong bargaining power of users in price negotiations, and intense fluctuation of market share. Therefore, in the

purchase/sale segment of soda ash, and the manufacture/sale segment of glass products, it is believed that transactions will not face the problems of exclusivity /closed business practices, and that it is impossible to grasp the cost structure of the other glass products manufacturers. Accordingly, no concerted acts are likely to be attempted by glass products manufacturers including Asahi Glass. Assuming that the explanations given by the companies in question are correct, the JFTC believes that the integration in question will not substantially constrain competition in each relevant market.

Case example 4. Management integration between the Hokuriku Bank, Ltd. and the Hokkaido Bank, Ltd.

FIRST Outline of the case in question The Hokuriku Bank, Ltd. (hereinafter, “the Hokuriku Bank”), a regional bank having its operating bases in the Hokuriku and Hokkaido district, and the Hokkaido Bank, Ltd. (hereinafter, “the Hokkaido Bank”), another regional bank having its operating bases in the Hokkaido district, plan to integrate their businesses in the form of the Hokkaido Bank’s affiliation with the Hokugin Financial Group, Inc., the holding/parent company of the Hokuriku Bank in September 2004, in order to increase business efficiency, and to strengthen sales capability. In this connection, applicable law of the case in question is the Antimonopoly Act, Art. 9 and 10.

SECOND Approach to the case in accordance with the Antimonopoly Act 1 Relevant markets (1) Service scope Taking into account the integration in question, the parties concerned, which are both banking companies, the JFTC judged that, in this case, a relevant market is formed in each deposit operations and loan operations.

(2) Geographical scope The Hokuriku Bank has its operating bases mainly in Toyama, Ishikawa, Fukui and Hokkaido prefectures, while the Hokkaido Bank has its operating bases mainly in Hokkaido. Accordingly, it is believed that a relevant market is formed in the entire area of Hokkaido, in which those two banks are competing with one another. In addition, taking into account the actual status of operation areas and the bloc economy of each bank, the JFTC judged that bloc-specific relevant markets are further formed in Hokkaido.

2 Effects upon competition (1) Deposit operations The combined share of the two banks in Hokkaido will be approx. 10%, and the rank order will be the third after the integration in question When reviewing deposit operations with respect to each area in Hokkaido, it is acknowledged that users tend to use a financial institution having branches in the scope of their economic activities, and that relevant markets are formed in such scope of each economic bloc. However, there is no economic bloc in which the combined share of the two banks will be able to lead. Even in the Sapporo city-based bloc, in which the two banks will gain the highest share, the share will stay at approx. 15%, with the third rank order. It is acknowledged that, in this bloc, there exists a powerful competitor commanding a share exceeding that of these two banks, in addition to many other competitors, such as urban banks, credit associations, agricultural cooperatives, etc., who are actively competing with each other.

(2) Loan operations

a. Market conditions in entire regions of Hokkaido The combined share of the two banks in entire regions of Hokkaido will be approx. 20%，and the rank order thereof will be second.

Outstanding lending share within entire Hokkaido Rank Company names Share order 1 A Inc. Approx. 30% 2 Hokkaido Bank Approx. 15% 3 B Inc. Approx. 10% 4 Hokuriku Bank Approx. 5% 5 C Inc. Approx. 5% Other financial institutions Approx. 35% (2) Combined share of the two banks Approx. 20% Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the two banks)

However, in the loan operations segment in entire regions of Hokkaido, it is acknowledged that there exists a powerful competitor with a market share exceeding that of these two banks, in addition to many other competitors such as urban banks, credit associations, credit cooperatives, agricultural cooperatives, etc., who are actively competing with each other. b. Regional market conditions within Hokkaido When reviewing loan operations with respect to each area in Hokkaido, it is acknowledged that borrowers tend to use a financial institution with branches in the scope of their economic activities, and that relevant markets are formed in such scope of each economic bloc. From among those blocs, the JFTC implemented examination focusing on the Hakodate city-based economic bloc (hereinafter, “Hakodate economic bloc”), in which the combined share of the two banks will rise, and the Kushiro city-based economic bloc (hereinafter, “Kushiro economic bloc”).

(a) Hakodate economic bloc The combined share of the two banks in the Hakodate economic bloc will be approx. 30 % with the leading rank order. However, the following conditions are acknowledged: ① There exists a powerful competitor with a market share of approx. 25% holding the second rank order, in addition to many competitors including other regional banks，credit associations，agricultural cooperatives, etc. who are actively competing with each other. ② Since most companies borrowing money transact with multiple financial institutions, they can refinance loans with other financial institutions. ③ It is difficult for those competing financial institutions to commit concerted acts due to the difference in the type of operations, such as organization size or fundraising method, and to keen customer acquisition competitions by individual negotiation with client companies.

Outstanding lending share within Hakodate economic bloc Rank Company names Share order 1 A Inc. Approx. 25% 2 the Hokkaido Bank Approx. 20% 3 Hokuriku Bank Approx. 10% 4 B Inc. Approx. 10% 5 C Inc. Approx. 10% Other financial institutions Approx. 25% (1) Combined share of the two banks Approx. 30% Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the two banks)

(b) Kushiro economic bloc The combined share of the two banks’ Kushiro economic bloc will be approx. 25% with the second rank order. However, the following conditions are acknowledged: ① There exists a powerful competitor holding a market share of approx. 25% and the leading rank order, in addition to many competitors including other regional banks, credit associations, agricultural cooperatives, etc. who are actively competing with each other. ② Since most companies borrowing money transact with multiple financial institutions, they can refinance loans with other financial institutions. ③ It is difficult for those competing financial institutions to commit concerted acts due to the difference in the type of operations, such as organization size or fundraising method, and to keen customer acquisition competitions by individual negotiation with client companies.

Outstanding lending share within Kushiro economic bloc Rank Company names Share order 1 A Inc. Approx. 25% 2 the Hokkaido Bank Approx. 15% 3 Hokuriku Bank Approx. 10% 4 B Inc. Approx. 10% 5 C Inc. Approx. 10% Other financial institutions Approx. 30% (2) Combined share of the two banks Approx. 25% Total 100% (Source：Date prepared by the JFTC based on the materials/data submitted by the two banks)

3 Conclusion Assuming that the data/materials submitted by the two banks are correct, the JFTC judged that, under the circumstances described above, the integration in question will not substantially constrain competition in the deposit and loan operations segment in entire/each region of Hokkaido.