Kirin-Suntory merger may be delayed

If the deal goes through, it will have big implications for corporate Japan. As The Economist observes, the Kirin-Suntory talks are notable because they underscore a new appreciation that success in Japan is no longer enough, that firms need to compete on a global scale, and thus need to be bigger.

The domestic market is shrinking as the population ages and declines. Firms will have to go abroad for growth and will need domestic scale to be able to achieve this.

Still, a merger would be difficult – for the companies themselves and for the competition watchdogs. Firstly, Kirin’s culture as a public company tied to Mitsubishi, a big conglomerate, clashes with that of Suntory, a private, family firm. Achieving the usual cost savings would mean closing factories and shedding staff – something Japanese bosses loathe doing.

Secondly, the merged company would enjoy a domestic market-share of 50 percent for beer and nearly 80 percent for whisky, which puts the Japan Fair Trade Commission in an awkward spot. While it has historically focused on domestic market power when reviewing mergers in an effort to prevent the formation of monopoly-like structures, it is now under pressure from the trade ministry to allow dominant firms to form, to foster the creation of global champions.

Which way will the competition authorities decide?