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In brief

On 28 January 2022, the Japan Fair Trade Commission (JFTC) published a report warning that setting offering prices1 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.

  • Information exchange, etc. on underwriting commission rates by securities companies

Arrangements by competing securities companies on the underwriting commission rate may constitute an unreasonable restraint of trade (i.e., a cartel) under the JAA. Any exchange of information on underwriting commissions by securities companies — even without a clear agreement — invites the risk of a violation of the JAA. Securities companies are expected to refrain from engaging in such information exchanges and to fairly compete on underwriting commission rates and service content.

  • Abusing the disparity in bargaining power with a startup company to unjustly disadvantage it by unilaterally setting an offering price

Where a lead underwriter with a superior bargaining position to a startup sets a low assumed offering price without sufficient explanation or reasonable grounds (e.g., an “IPO discount2“), it may constitute an abuse of superior bargaining position under the JAA.

In order to avoid concerns under the JAA, securities companies should observe the following throughout the IPO process when setting an offering price: (i) set the assumed offering price based on sufficient discussion with the startup company; (ii) allow other securities companies to act as joint lead underwriters or change the lead underwriter at the startup company’s request; and (iii) do not prevent the startup company from seeking a second opinion with respect to the proposed IPO.

Recommended actions

The JFTC’s report announces that it will vigorously investigate future transactions involving IPOs for JAA concerns. Securities companies are strongly advised to investigate and, if necessary, rectify any potentially problematic IPO-related trade practices.

1 Offering price means the price at which startups sell their shares to investors before listing.

2 The report defines “IPO discounts” as, “discounts given to increase the enforceability of IPO projects based on discussions between the lead underwriter and the startup company, taking into consideration the difficulty of collecting corporate information on newly listed companies and predicting the liquidity of the stock value, etc.”


Dr. Inoue is a partner at Baker McKenzie's Tokyo office, and has been handling cross-border antitrust cases for more than 20 years. He is highly respected for his knowledge of antitrust and competition law, giving presentations at numerous events and having authored 10 books and more than 102 articles on the subject. The government frequently seeks his opinions on competition policy and government reports often cite his articles. Dr. Inoue has been serving Japanese companies as lead defense counsel since becoming involved in the international vitamin cartel case. Most recently, he successfully secured compliance credit for only the second time in the history of antitrust practice and won a 40% fine reduction. He is further distinguished as the sole member of the steering committee of Baker McKenzie's Global Antitrust & Competition Group from the Asia Pacific region. Dr. Inoue has been recognized as a “Leading Individual” by Chambers Asia-Pacific (2010-2022), Legal 500 (2019-2022), Who’s Who Legal (2016-2021), Asia Business Law Journal List of Japan's Top 100 Lawyers (2020) and Best Lawyers in Japan (2017-2020). He is recognized at the lawyer ranking published by Nikkei News Paper (2018).


Hiroaki Nagahashi is a member of the Firm's Antitrust & Competition Law group, Corporate/ M&A group and Dispute Resolution group in Tokyo. He is seasoned in the areas of M&A, competition law (including the Antimonopoly Act, among others), consumer protection law (including the False Labeling Prevention Act, Food Labeling Act and other advertising & labeling regulations, domestic and international litigation and general corporate law. He is admitted to practice in Japan and New York and certified as a Food Labeling Consultant by the Food Labeling Testing Institute.

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