Japan threatens sanctions over Rio Tinto takeover

The Japan Fair Trade Commission, the competition enforcer in that country, has issued BHP with a reporting order demanding information on the takeover.

News of the move comes the same week the European Commission raised antitrust objections to the deal, boosting speculation BHP may have to sell assets to complete the hostile takeover.

The JFTC has given BHP until November 17 to provide information about the takeover, after requesting BHP to hand over the information voluntarily.

A BHP spokesman said the company had noted the request and was considering its position.

BHP does not have a substantial physical presence in Japan, but does have a marketing office in Tokyo, according to its latest annual report. Japan contributed about $US6.8 billion ($A9.9 billion) of BHP's almost $US60 billion revenue in 2008, making it the company's third-biggest source of customers after Europe and China.

The JFTC does not have the power to block the deal, unlike the EC. BHP listed EU clearance as a formal precondition of the takeover, along with clearance in other jurisdictions, but did not cite a need for JFTC acceptance. The two companies control about 60% of Japan's iron ore supplies.

The JFTC action comes after outcry against the takeover by Japanese steel makers and other business leaders who, like their counterparts in China, are concerned that a combined BHP-Rio would have the power to demand ever-higher prices for materials, especially iron ore.

BHP has rejected such arguments, saying the merger would benefit its customers by allowing greater production at faster rates. The merger of the two groups' operations in iron ore - the main ingredient in steel - is central to the $3.7 billion in annual synergies BHP hopes to glean from the takeover.

Katsunori Inaguma, the JFTC's chief investigator of the case, said that under Japanese antitrust laws it was possible to take criminal sanctions against both executives of the company and the company itself if they refused orders to provide information.

The JFTC first ramped up its action on the merger by launching a formal investigation in September.

Mr Inaguma said the Japanese agency had "exchanged information" with the EC and other competition authorities around the world. The JFTC has reportedly been pressing the EC to closely examine the bid.

The Australian Competition and Consumer Commission and the US competition regulator have approved the deal.

KEY POINTS

The Japan Fair Trade Commission has issued BHP with a reporting order.

JFTC says it is possible to take criminal sanctions against company executives.