Sumitomo Mitsui Banking CorporationIssued Administrative OrdersBy The Financial Services Agency(4/4)

Provisional translation of the original Japanese version
（Supplement）

The Method of Making a Judgment on“Abuse of Dominant Bargaining Position”
(Overview)

1.Requirements for ”Abuse of Dominant Bargaining Position”

(1) Following requirements must be met in order to assume that ”Abuse of Dominant Bargaining Position” under the Japanese Antimonopoly Act (“ACT”). (Sec. 2-9-5, General Designation No. 14) exists in certain transactions:

i　Requirement of Position

One of the parties to the transaction has Dominant Bargaining Position to the other.

ii　Requirement of Abuse

One of the parties to the transaction presumably took advantage of the Dominant Bargaining Position over the other to cause unfair disadvantages to the other party. (specifically, taking actions described in General Designation No 14 item 1 to 5 of the Act.）

iii　Requirement of Impediment to Fair Competition

One of the parties to the transaction presumably abused the Dominant Bargaining Position in such a manner that appears unfair from the view point of common market practice.

If certain transaction fails to meet any of the above requirements, no “Abuse of Dominant Bargaining Position” is presumed to exist in the transaction.

(2) Requirement of Position is met, in short, when one party is dependent on the other in conducting businesses; In the case of SMBC, the criteria to determine if certain transaction meets Requirement of Position is whether it is deemed difficult for the client of SMBC to procure necessary fund from financial institutions other than SMBC. The availability of necessary funds from other financial institutions as described above should be judged in light of the client’s business relations with SMBC and other financial institutions, its business performance, financial conditions, and so forth.

(3) Requirements of Abuse is met, in short, when one party took advantage of the stronger position (=dominant bargaining position) to force unfair disadvantage on the other. In the case of SMBC, the criteria to determine if Requirement of Abuse is satisfied is whether, in order to force the client to purchase interest rate swap, the officer of SMBC took advantage of the client’s situation that he has no choice but to borrow from SMBC, “explicitly stating” or “implying” that the “loan is conditioned on the purchase of interest rate swap” or the “refusal to purchase interest rate swap would result in unfavorable lending conditions”. In order to determine whether there was such an “explicit statement” or an “implication”, such factors shall be taken into consideration as details of the process of entering into an interest rate swap agreement, frequency of meetings with the client, attendance of senior officer of SMBC at the meetings, and effectiveness of the interest rate swap to the client.

(4) Requirement of Impediment to Fair Competition is met when free and fair competition is deemed undermined due to involuntary transactions. This requirement is usually satisfied if Requirement of Position and Requirement of Abuse are both satisfied.

2.Method of Judgment Employed

(1) In the process of investigation, the Committee made a judgment on Requirement of Position and Requirement of Abuse in every case. The Committee gave a priority to Requirement of Position because Requirement of Position must be met in order to meet Requirement of Abuse of Dominant Bargaining Position and it is possible to make a judgment on Requirement of Position to considerable extent by examining objective information on business relations, business performances, financial conditions, etc. It should be noted that the Committee took a conservative approach in making a judgment on Requirement of Position because whether the requirement is met or not can be a crucial factor in the final judgment, and, accordingly, all the cases that could possibly meet Requirement of Position were referred to the step (2).

(2) The Committee examined Requirement of Abuse when Requirement of Position was deemed or could possibly be satisfied.

(3) The Committee categorized such cases into “The Cases of Abuse of Dominant Bargaining Position” or “The Cases of Possible Abuse of Dominant Bargaining Position” that satisfied or could possibly satisfy Requirement of Position and Requirement of Abuse. Also, the Committee categorized such cases into “The Cases of Possible Legal Liabilities” (The Cases Requiring Further Investigation) that presumably failed to meet Requirement of Position but, as a result of further investigation of the process of entering into interest rate swap agreement, turned out to be in violation of any laws or regulations such as breach of duty to make sufficient explanation to the client.

(4) In the foregoing process, two lawyers of the Committee examined and made a judgment on every single case. If the conclusions of the two lawyers differ from each other, they made a final judgment after thorough discussion. Also, in case the lawyers need additional information, they asked Antimonopoly Monitoring Office of SMBC to conduct an additional research and made a judgment based on the result of the research.

（Over）