1. Competition Law
The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (the “Antimonopoly Act” or “AMA”), came into effect in July 1947.
The purpose of the AMA is to promote fair and free competition, stimulate the creative initiative of enterprises, encourage business activity, heighten the level of employment and actual national income, and thereby promote the democratic and wholesome development of the national economy as well as secure the interests of general consumers (Article 1 of the AMA).
The AMA regulates private monopolisation, unreasonable restraint of trade such as cartels and bid-rigging, business combinations as well as other offences such as unfair trade practices (including abuse of superior bargaining position, refusal to trade, discriminatory consideration, unjust low price sales, resale price maintenance, etc.) - It should be noted that these are not covered here
.
In this document, the “Anti-competitive Agreements” section focuses only on the regulation of unreasonable restraint of trade and resale price maintenance which is one of the unfair trade practices. The “Abuse of Dominance” section only describes the regulation of private monopolisation. The “Mergers” section introduces the regulation of business combinations. Please refer to the JFTC’s booklet and related documents on the JFTC’s website to understand the whole picture of the AMA. http://www.jftc.go.jp/en/about_jftc/role.html
General exclusion: No sectors are excluded or exempted from the application of the AMA. State-owned enterprises are not exempt from the application of the AMA when conducting commercial activities in competition with private firms.
Extra-territorial application: The AMA does not include any particular provision as regards its jurisdictional reach and it has been interpreted to apply to conduct that causes substantial effects on the Japanese market, irrespective of where it takes place.
2. Japan Fair Trade Commission
The Japan Fair Trade Commission (the “JFTC”) is an independent administrative commission and the competition law enforcer of Japan’s competition law (Chapter VIII AMA). Article 28 of the AMA stipulates that “the chairman and the commissioners of the Fair Trade Commission shall perform their authority independently.”
The JFTC’s main function is the enforcement of the AMA and the Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractor (the “Subcontract Act”).
Organisational structure of the JFTC: The JFTC, whose headquarters is located in Tokyo, has 840 employees as of December, 2016. It had a budget in 2016 of €93.4 million (JPY 11 billion). The JFTC prepares a draft budget. It is finally approved in the Diet, after examination by Ministry of Finance.
It has a secretariat, 2 bureaus (Economic Affairs Bureau which has Trade Practices Department and Investigation Bureau which has Criminal Investigation Department) and 7 regional offices in Hokkaido, Tohoku, Chubu, Kinki, Chugoku, Shikoku, and Kyusyu.
Article 29 of the AMA sets out that the JFTC consists of a chairman and 4 commissioners, who are appointed by the Prime Minister with the consent of both Houses of the Diet from among persons aged thirty five or above who have knowledge and experience in law or economics. The appointment and dismissal of the chairman is certified by the Emperor.
According to the AMA, the chairman or a commissioner may not be dismissed from office against the chairman's will, except in the circumstances specified by Article 31 of the AMA (e.g., has a decision to commence bankruptcy proceedings).
Other regulators with competition powers: There are no sector regulators that have competition powers.
Competition advocacy: Competition assessment is conducted by government ministries and agencies when a regulation is established, amended or abolished. Government ministries and agencies fill a checklist for competition assessment. It is a part of Regulatory Impact Analysis managed by Ministry of Internal Affairs and Communications. The JFTC designed the checklist and gives advice to ministries and agencies to support the assessment.
The JFTC may undertake market studies, and it may issue recommendations to the relevant government agency when it identifies competition concerns. The recipient government agency, with discretion, determines whether or not to take action based on the recommendations.
International co operation: The JFTC has concluded many international co operation agreements or MoUs with foreign competition authorities such as those of Australia, Korea, Canada, China, EU, Mongolia, the Philippines, Singapore, the US, Vietnam, and so on. Full texts of these agreements are available at the JFTC’s website.
3. Investigation
Initiation of investigation: An investigation may be initiated either by a complaint or by the JFTC’s own initiative.
Powers of investigation: The JFTC officials may conduct either administrative investigations or, compulsory investigations of criminal cases in order to obtain evidence of violations of the AMA.
Administrative investigations
For administrative investigations, Article 47 of the AMA grants the JFTC the power to carry out necessary investigations against suspected violations of the AMA. This authority includes on-site inspections to the premises of entrepreneurs, etc., orders to submit the related materials, retention (seizure) of the submitted materials, appearance orders and interrogation, and report orders (Article 47 of the AMA).
In the case of an administrative investigation, private locations such as residences, automobiles can be inspected by the JFTC, but if the party concerned refuses to accept the investigation, the JFTC is not able to directly or physically exercise its power. The investigation does not require a warrant issued by a judge.
The JFTC has a policy to accuse the cases where administrative measures are not enough to attain their objectives, such as vicious and serious violations or repeated violations.
When necessary to investigate a criminal case, Article 101 of the AMA stipulates that a staff member of the JFTC may request a criminal suspect or witness to appear before the JFTC, question the person, inspect an object possessed or abandoned by the person, and may retain an object voluntarily submitted or abandoned by the person.
Article 102 of the AMA, provides for compulsory investigations granting JFTC staff the powers when necessary to investigate a criminal case to conduct an on-site inspection, search and seize with a warrant issued in advance by a judge of the Tokyo District Court or the Tokyo Summary Court. Private locations such as residences, automobiles can be visited and searched with a warrant issued by a judge by staff members designated by the JFTC.
Article 103 of the AMA sets forth that whenever necessary in the investigation of a criminal case, after receipt of a warrant, an JFTC staff may seize postal items, correspondence or documents related to telegrams that are sent by or to a criminal suspect and stored or possessed by persons handling communications affairs pursuant to the provisions of laws and regulations.
Procedural fairness:
The JFTC provides parties under investigation for an antitrust infringement with opportunities to consult with the JFTC with regards to significant legal, factual or procedural issues during the course of investigation.
Parties have the right to be heard and present evidence before the imposition of any sanctions or remedies for having committed an antitrust infringement under Article 49 of the AMA. Article 50 of the AMA provides that the JFTC shall notify the expected contents of the order to be issued and other matters, including the facts found by the JFTC, the application of laws and regulations, and principal evidence etc. to the would-be addressee by a reasonable period of time prior to the date of hearing and the would-be addressee may express his/her opinion and produce evidence etc. on the date of hearing of opinions.
Article 52 of the AMA provides that the party concerned may request to the JFTC to inspect or copy the evidence proving the facts found by the JFTC with respect to the case for hearing of opinions.
Investigative measures: Article 22 of the Rules on Administrative Investigation provides that (1) Any person, who was subject to the administrative investigations (Article 47(1) of the AMA), may object to the JTFC within one week from the day when such investigation is conducted, and when the JFTC reject the objection, the JFTC shall notify such a result with its reason. On the other hand, when recognising that there are grounds for the objection, the JFTC shall order the investigator to withdraw, cancel, or change the said measure.
Confidentiality: Article 39 of the AMA sets out that the chairman, the commissioners and the staff members of the JFTC, or any person who once held such position, shall not divulge or make surreptitious use of trade secrets of enterprises which came to their knowledge in the course of their duties.
A violation of Article 39 of the AMA is punishable by imprisonment of not more than one year or by a fine of not more than one million yen (Article 93 of the AMA).
According to judicial precedent, trade secrets of enterprises mean “non-public facts which the enterprise wants to keep secret and which have objective and reasonable grounds for keeping secret” (Judgment of Tokyo District Court, July 28, 1978).
Further procedural guidelines and rules explaining the investigative procedures are contained in the Rules on Administrative Investigations by the Fair Trade Commission, Rules on Reporting and Submission of Materials Regarding Immunity from or Reduction of Surcharges, and Rules on Compulsory Investigation of Criminal Cases by the Fair Trade Commission, amongst others.
4. Remedies and Sanctions
The AMA provides for both administrative measures and criminal sanctions.
Remedies and administrative sanctions: For administrative measures, cease and desist orders and surcharge payment orders, amongst others, are issued.
Article 7-2 of the AMA sets out how monetary sanctions for antitrust infringements are set by the JFTC. The surcharges are calculated on the basis of the sales amount or purchase amount of the products or services in question during the period of the violations (3 years maximum) by multiplying such amount by calculation rates, where these rates are diverse depending on the type of the conduct in question as well as the operation scales and business categories of the enterprises.
Criminal sanctions: Criminal sanctions are available for certain types of violations of the AMA. Details of criminal sanctions are set out in Sections II, III below.
5. Appeal
Under Article 85 of the AMA, parties may appeal decisions of the JFTC to the Tokyo District Court, and then if dissatisfied with the rulings of the court, subsequently to the Tokyo High Court and then the Supreme Court (Article 87 of the AMA).
The grounds of appeal to the Tokyo District Court are the illegality of the orders, including mistake of factual findings, mistake of applications of laws and breaches of procedural requirements.
6 Private enforcement
Damages claims: Antitrust damage claims in Japan are available to victims in two ways: claims can be brought either under the Article 25 of the AMA or under the general civil law provisions (pursuant to Article 709 of the Civil Code).
Victims can file claims under both legal bases if the respective requirements are met.
Actions under Article 25 of the AMA require a final and binding decision by the JFTC. Therefore, Article 25 of the AMA claims can only be follow-on actions brought to the Tokyo District Court (which has the exclusive jurisdiction on Article 25 of the AMA claim cases). In Article 25 of the AMA claim cases, the standard of review of case will be “liability without fault”. In other words, the plaintiff is not required to prove the defendant’s intent or negligence (Article 26 of the AMA). To the knowledge of the JFTC, over 90 claims for damages have been filed to date based on the Article 25 of the AMA.
Stand-alone claims pursuant to the Article 709 of the Civil Code claims will be heard by the district court jurisdictionally competent for the case under the general civil procedural rules. Unlike under Article 25 of the AMA the plaintiff is required to prove that the defendant’s intentional misconduct or negligence for a claim under Article 709 of the Civil Code.
Injunction claims: Under Article 24 of the AMA, a person whose interest is infringed upon or likely to be infringed upon, due to violations of Article 19 (unfair trade practices) of the AMA, and who is thereby suffering or likely to suffer extreme damages as a result, is entitled to seek the suspension or prevention of such infringements from the enterprise that infringes or is likely to infringe upon such interests.