The Fair Trade Commission released on July 9 its draft guideline for prohibited cases of holding companies under the revised Antimonopoly Law.
The revised law, to take effect before the end of the year, basically allows the formation of holding companies, but it will continue to prohibit cases in which “excessive concentration” of economic power is likely. The FTC is to finalize its guidelines, including a specific definition of excessive concentration, by the time the law takes effect, which will be no later than six months from its promulgation June 18.
The draft proposal provides definitions for three types of prohibited cases. First, it prohibits the formation of holding companies when groupwide total assets exceed 15 trillion yen and the group already has major firms in five or more main business fields.
A major firm is defined as a company with total assets exceeding 300 billion yen, while a main business field is an industry with total shipments of more than 600 billion yen. The second prohibited case is the formation of a holding company that controls a major financial institution with more than 15 trillion yen in total assets together with an ordinary company with total assets worth more than 300 billion yen.
Long-Term Credit Bank of Japan and Industrial Bank of Japan and all city banks except Hokkaido Takushoku Bank are among those regarded as major financial institutions, according to FTC officials. The third type of excessive concentration, according to the draft guideline, is the formation of a holding company that has major firms in five or more main and closely related business fields.
For instance, auto and auto parts manufacturing is regarded as having a close relationship with such fields as tires and tubes, plastics, electrical devices and parts, according to the officials. In the case of financial businesses, which are “extremely big” in scale, the guideline says the number of major firms to be held under a single holding company will be limited to three, instead of five.
Meanwhile, concerning the so-called 5 percent and 10 percent rules which respectively limit banks and insurance firms in their holding shares in other companies, the FTC said the rules should apply only when a financial institution holds shares in an ordinary company, not in other financial institutions. mFTC officials said they will gather opinions from experts and the general public up until Sept. 10 and reflect them in the final guideline.