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Japan: Competition Authority Publishes Report On IPO Pricing Practices

 |  March 4, 2022

By: Akira Inoue & Hiroaki Nagahashi (Global Compliance News)

On 28 January 2022, the Japan Fair Trade Commission (JFTC) published a report warning that setting offering prices for startup companies without sufficient explanation or reasonable grounds may give rise to concerns under the Japanese Anti-Monopoly Act (JAA).

Given the authority’s close scrutiny of such transactions, securities companies involved in initial public offerings (IPOs) are strongly advised to review their offering price-setting processes, including whether sufficient discussions have been held with the startup companies, to ensure that they are not setting prices unilaterally.

The JFTC’s report sets out the specific antitrust and competition law issues it considers may arise from IPO price setting processes, amongst other related issues, under the JAA. The JFTC is expected to focus on these issues in the near future, making it necessary for companies to identify and rectify problematic practices as soon as possible.

The report points out the following as potential violations of the JAA:

  • Requests for the assignment of a specific securities company as lead underwriter and unjust interference with efforts by other securities companies to serve as lead underwriter

Unjust interference by a securities company in the efforts of other securities companies to serve as lead underwriter (eg, by pressuring the startup company via its affiliated banks and venture capital companies) may give rise to concerns under the JAA. Securities companies are expected to fairly compete for the role of lead underwriter by appropriately explaining their services to the startup company.