OECD kpcdb

1. Scope

 

Article 3 of the AMA regulates anticompetitive agreements, prescribing that “an enterprise must not effect…unreasonable restraint of trade.”

 

“Unreasonable restraint of trade” includes cartel conduct and is defined by Article 2 (6) of the AMA and means “such business activities, by which any enterprise, by contract, agreement or any other means irrespective of its name, in concert with other enterprises, mutually restrict or conduct their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade”.

 

Vertical restraints may be subject to Article 19 of the AMA regulating unfair trade practices as unilateral conduct. In the JFTC guidelines, some types of conduct are categorised as “Vertical Restraints” such as resale price maintenance, single branding, and exclusive territory. The following sections focus on resale price maintenance.

2. Assessment

Unreasonable restraint of trade

 

The AMA explicitly requires ‘substantial restraint of competition’ in any particular field of trade as an element to establish the illegality of cartels, and thus technically cartels are not per se illegal in Japan and are subject to the JFTC demonstrating the effects of the alleged agreement.

 

Unfair trade practices

 

Detailed explanation about how to assess whether vertical restraints fall into unfair trade practices is provided for in the Guidelines Concerning Distribution Systems and Business Practices.

For example, restrictions by a manufacture of resale price of distributors (RPM) are in principle illegal as unfair trade practices unless there are “justifiable grounds”.

3. Remedies and sanctions

Administrative measures are generally imposed against a violation of the AMA. However, in some cases, criminal sanctions are imposed against a violation of unreasonable restraint of trade. The JFTC does not have a settlement process at its disposal.

 

Remedies and administrative sanctions:

Unreasonable restraint of trade

Article 7 of the AMA stipulates that an act in violation of Article 3 of the AMA shall face a cease and desist order.

 

Article 7-2 of the AMA provides that the JFTC shall order surcharge payments for anti-competitive agreements. Surcharge payment orders are of administrative in nature.

 

As per Article 7-2 (1) of the AMA, the amount of the surcharge is stipulated as an amount equivalent to a certain calculation rate (depends on the type of conduct in question, operation scales and industry) of the sales amount of the relevant goods or services during the period of implementation of the unreasonable restraint of trade (up to a maximum of 3 years). The JFTC does not have the discretion on whether or not to order payment or the amount of the surcharge to be imposed.

 

The calculation rate for the surcharge will be increased by 50 per cent from the original rate if the relevant company has, in the previous 10 years, already been subject to a previous payment order for surcharge due to an unreasonable restraint of trade.

 

Further, the calculation rate for the surcharge will also be increased by 50 per cent from the original rate if the company played a leading role in the unreasonable restraint of trade. These factors are cumulative, thus should these two circumstances apply to a given company the surcharge will be doubled, compared to the amount calculated by the original rate.

 

On the other hand, the calculation rate for the surcharge will be reduced by 20 percent if a company ceases its violation one month before the JFTC commences an investigation.

 

In case a criminal sanction is also imposed in the same case, the amount corresponding to half the amount of fine is deducted from the surcharge amount (Article 7-2(19) of the AMA).

 

Unfair trade practices (RPM)

An enterprise is subject to a cease and desist order if it commits an unfair trade practice (Article 20(1) of the AMA). An enterprise is subject to a surcharge payment order, if it repeats a similar violation within 10 years after receiving a cease and desist order (Article 20-5 of the AMA).

 

Criminal sanctions:

Unreasonable restraint of trade (Article 3 of the AMA) is subject to criminal sanctions.

 

An individual shall be punished by a fine of not more than five million yen or imprisonment of up to 5 years (Article 89 of the AMA) if he/she has engaged in a cartel or bid rigging.

 

Any enterprise shall be punished by a fine of not more than five hundred million yen. (Article 95 of the AMA). If a representative of an enterprise failed to take the necessary measures to prevent the violation despite the knowledge of the plan for the violation of the AMA, such as cartels / bid rigging, a fine of not more than 5 million yen may be imposed on such a representative (Article 95-2 of the AMA).

 

Criminal sanctions shall be imposed only when a criminal accusation is filed by the JFTC (Article 96 of the AMA). The JFTC has a policy to accuse cases where administrative measures are not enough to attain their objectives, such as vicious and serious violations or repeated violations.

 

The choice and extent of the criminal sanction is determined by the court.

4. Leniency

Japan’s leniency programme provides for full immunity or reduction of surcharges to enterprises that voluntarily report cartels and bid rigging (Unreasonable restraint of trade) they have been involved in.

 

The leniency programme is set out in Article 7-2 of the AMA, whilst the practical procedure for the programme is stipulated in the Rules on Reporting and Submission of Materials Regarding Immunity from or Reduction of Surcharges

 

The first leniency applicant before the investigation starts may be granted full immunity from surcharges and the second applicant may be granted a 50% reduction in surcharges. Should they submit such an application after the investigation has started then they only be granted 30% reduction in the surcharge. The third to fifth applicants that apply on and after the investigation start date may be granted a 30% reduction. Up to 5 applicants before, during and after the investigation start date may be granted surcharge immunity or reductions in total (up to 3 applicants on and after the investigation start date may be granted surcharge reductions).

 

The JFTC has no discretion to determine the reduction rate by taking into account the degree of co‑operation from the applicants or the added value of the evidence submitted.

 

As criminal sanctions require the accusation of the JFTC, the successful first leniency applicant will not have an accusation filed against it. The JFTC decides case-by-case basis regarding subsequent applicants as to whether to bring criminal charges.

 

There are over 1,000 leniency applications from January 2006, when the leniency programme was introduced.

 

There is no “amnesty plus”.

 

 

* This information is based on Competition Law in Asia-Pacific: A Guide to Selected Jurisdictions (2018).