A r t

Competition law i c l

and policy in e by Toshiko Murata

INTRODUCTION Occupation policy after World War II Japanese is centered around the Anti- After WWII Allied forces occupied Japan, they carried monopoly Act (AMA) which was enacted in 1947. But out their occupation policy of “economic during its rather long history, its status as the fundamental democratization”. This policy included drastic reform. law for an economic order has not been secured. If we look Land was taken away from landlords and given to the at the year, 1947, it was the time when Japan was occupied farmers, and trade unions were legalized. In industry, by the US after WWII. As a result of this, the AMA was groups were dismantled, several big companies modeled after US antitrust law and its content seems were subdivided, and private controlling associations were similar to the US style, but its enforcement over the years dissolved. After all those structural measures, the Anti- has been different. The concept “competition is good” was monopoly Act was enacted to keep the democratic unfamiliar to Japanese society at that time, and so it took economy in order. time for society to accept this act. Development This article looks at the Act’s history, its content, and its The AMA lost ground for the first half of its history, and enforcement. then it gathered momentum and is actively enforced today. Its history can be divided into four periods: retreat, HISTORY OF THE AMA reassessment, amendment and active enforcement. Background to the Act Retreat Modernization of Japan During the first few years, the AMA was enforced In order to really understand the background of the actively because the occupation forces were still in Japan, AMA, we need to go back to the modernization of Japan, but the situation changed with Japan’s independence. The which started around 1868. At that time, the Japanese recovery of industry was given top priority, and for this government was surprised to see the high level of purpose the government used the old familiar technique. technology and power in Europe and the US, and became The AMA was amended to allow depression cartels and worried about colonization. So, it adopted “ catch up ” rationalization cartels. Even in the time of depression, policies which introduced many new laws, mainly modeled output cartels found it difficult to succeed because of on the German example. The government introduced coordination problems and cheating. Therefore, the MITI technology from foreign countries and helped industry (Ministry of International Trade and Industry) advised grow. producers to reduce their output, and in practice Before and during World War II coordinated cartels. In the 1960s, Japanese business faced Before and during WWII, Japanese economy had two the threat of liberalization of capital and trade. In order to main problems in terms of its competition policy. The first compete with big foreign companies, government problem was that of concentration. A handful of encouraged many mergers. conglomerated groups called “zaibatsu” controlled the In this climate, the competition authority could not play whole Japanese economy. The Zaibatsu groups grew by an active role in cartel and merger control. However, the cooperating with the government and used holding competition authority found its way in the field of companies to control a lot of large and influential consumer protection and protection of small companies companies in important industries. from their big trading partners. The second problem was that of cartels. In order to Reassessment control economic activity leading up to the war, the The AMA was presented with two opportunities to government did not only permit cartels among further the interests of consumers in general. The first competitors, but used them to their own advantage by chance was the so-called False Beef Can case in 1960. A creating private controlling associations in each industry consumer bought a can of cooked beef, and found a fly and letting them control the products and prices of their inside. She complained to the company but it didn’t members. respond properly. She then complained to the authority. It 25

Amicus Curiae Issue 61 September/October 2005 ; f e I s a o h d t is l e o re t . by it ad he he bl no 81 (in ir are are are me has is y ke not a rs e v ion. T T h hig te s o nary s doe nds e is n ublic t is s mo n st e t d re e v s it ate riv ate riv ate riv cart d e at C E bro which a t p co nduct; so p p p his t marke minant include it law t co liz h s case conduct , st e ) r e in rd s e s urs. re he itio co . s. rie t i he st te rea s doe o s t as t t 3 similar do e t st re inte it and is his ct: icle nt th nt me re The ignat t d re he e the w are t ” de of ne fin wit ), th go ls rte is t s r he un rt a is is e s ice s fe xclusio e s cas lic t me aw nop nd o ca A me t de int ine firs rpre tra de l st by e mp ctice , t e a b a s This pre uire whe (2), a 2(6 pe st s ca er la 2 f nd, q te th te t whe tra d, ne to co ? ract u cond mo ny 8 o 1 y he ty pu king be se tion the pra ” inte t s. her p re MA nd ed co a ition). 8 a l mo T C t d ntre s n a the xp e ions e und s re ar te A i ion, rary e ma two rt t C E nforce to er (ca onl , a liz S ntio ins l and int s. io de firs de the ou se e v e rte ite is se E r ec pos cond t y ct o b e he st u t n, d ) ra po h tit (s ct ail ) re ca c s nde t e me se tra in to T l r he id. 3 simil cont stra are priv stra t e If Which 9 ca e Third, u rtica . o tio who The t I ), , r othe . in s finit de ir s ot ndu e re v t de re rticl th is rohib i owe ffe e ry tel) wil e be he is a v rticle l EC 81, 1 ), s caug to st. (5 t” v p A l , r s y . ry y co T r a n.) t A n two mono l a As l nfa t le r 2 y is te the it (9 l re he it compe te minant s de e the b u t s y . we of io (C s re go ntra nduct ). third 2 t stifica me Unfair t rke of e tio le uc u la te is r s n. ctice no are ir ical u s ev onl s b te a do d his Mos j sa t e ta co for inl co de de ntia with nd which Ho tic fa ct, n v tion firs ma . pe T xcl d s ice is inte f a ca pe sona y s e n the ta pra hibit ow is e st The ec fa of t . rity o a tra tion of tra mat ie ty titio a e ma s co s els priv Ar d. ty l l l the ic ca t ct, de re s rpre te bs H ec it f ( the to his of onl ract nfair” . e e or this in pro nt. t o bl de re t (s e whe tho nre ire he uire in r pp of se u is p u su n tion. . rte h n t a nd e car s a one he a u the u mpe q ) u s “ a yp iv to d ndu t inte a int es third a n t pu “u tra l q ca re – b me 3 f it t tio is It iz ma for nd it: ints the is re de t, re ( co us r n ra as wit o a me tic co “imp re t (a titio n . A ct and ck fie e b r c ir no y iz itio fo y e re ntrol to f he t a o tra the t es l , st sts ir pol the . io de s e hat 1 r stra t r ba tha ion ion ion, 2 o to Firs t whe t T ril dl wide pra is ag fa ct te te the co nfa la re ir AMA, e r re 8 no ed tit re mpe at at at tra l thre s to . compa t cts a u is s. C8 d or b id go r de e C ie r ie nopo f ssa de iz it iz iz ffe nd e or is condu roa rohib n). E a t a ch l l l e al s s e co icu o de o sha a E e s r te u s s t . mono as b whe t p r n two f h yp first spe ce unfa t are nsi io rt t u m mpe nce e o cts ct e t nt , ry t a e su c t t la t re o a po po po e s t e y rary e a mpar co e y e o t u e ion r he int s ne u nd b co p co cl he rict ct; o s ea w nt it no no no ll icle ail s e impe t ra ir fa r t g e rp e s re e t o riz Le The Co In If The nd ntra ntra o t iva lo rti he re he hras at riv os y co e e hre he o yp hird t es can t t de no many t Un t b t much ho al s int s re “co A p int co T mo re diffe (co co r marke Un much cat co p marke mo p will t t whe ffe e any mainl Art r P T m , , a d it is ly (I ss in se re he he d e be no nd ). e ase in g t t the the the but ade was a one like The The al se ne n the 990 we nd t fA r te ction tr tail de at crisis sine , r final 1 a re a e v had to d, nd fly . rticl pa this, ting rke tions. at. nctions a nt. was a nt e v r incre ns tha re bu n The i a Ja Japane 1, MA blic re trigge prohibits oil sa bout ho lesom e surcharge ook assu ma l was A me ca a and l s companie nfla rs e rs rge me ly “ e z w pu i co ntr oll nfa fore e more a AMA the this was he the m b the u isis howe to re he f mal on MA found MA. to T he nt nme u d nce he ble in ction ion s It in e t y T o : nd cr he d r d hrough A e a A f e be ali re s s and t n e T . only a nticeme a spre wide e horse se an u T ct from me nforce e d t fining s. . e v e nit s ut an , y s ca o s not onl e e s, and nd op ar t oil cons rs. criminal ce ar l e re he l ions in su or was ion a go the cl ic t p e t infl or ors d nt ” wa o st wa is rt s d e n aine d t to ve s nd l ta l me cog e l ting se a e not e v oil imil tit l l a , e ra t r ca ti s condu nfor nt n ng ition. u 5 0 0 2 e e lic hist disr S duct rt ntra prohibit s t US e ion aine su os as t obs . nsu ki xp e ep . r me ta nta wha wa rting tio gh ocia f ub cribe s w nt e 70 ch re to crimina u s l” rp e it inst to ta l clining its p co ec two is 9 he nta cu in conomy s po a se intro cont su t mong ra e d y comp 1 ga er dem oc d e e s de be pu de conce a from e se rime a A ion nd hrou in l e l compe e ntia up cont e one cons t d a is s t ly rpo e re rte ls h of ne e rose at r me of t a bov t can a thos m un d de g t de his on ir p conta from an ar ling a te ote enforceme its d ctiv came t ct d p e pu AM f nly ul st d e iona a fa p ecaus mong (which infl he A was ol ap o in mo t y as te t to a e be n y b time of e car rio onsu tion, emen s was the tober September/Oc nclu g re en b ls nat e be a nt i t rs ls a we nt nme C re we misr pa th f il the HE pe pr o the the l e th , y r e v star d le and w o t o main a inste “ ls Ja rte T to f contr f ntr rte 1 6 ct te v chie outcr v e re v n ngthe such e isis. the first d mise e a e the ct enforc o l o In t a , ca ) e ppl which F tha chance ca rt e e o ro ntial ong nduc t cr nt me d e use go a l v e n t re nme rs. unco of d ne hich treng s p du nsume ur r fr d O a stre pro law Issue ca hose n, to he t e e v r e o c r the tation.

w the a me t ls. e ctive nd r conce tha d t oil to nd w lprit co d nt ’s A on a a ye r rce gov d to pote te a to ow,ever n rpose t c ca Be e f t ul , d r : te cov n uld and alise ations, icult , NT gainst cu M an a nt c se o that iate H cart n se e a t fo for co se the pu bu A use d. co re con ua co d t rke 1989–90 impro Curiae rt s ces two

orde the st as pr agr d e inflatio . nme d de TE i oun st no ca whal omy ntr e h the m romo f pr e ai n also ussio lic ndme ibited h c po n lopme e ure s re e p , re ma in e liz rse e q de re e s 77, r b ring er) In The The The In v n act r pe v rt re y v a ste nd es ON MA MA urpose f ut co v ov ppro lso ga n me at to a us Amic this ro P C a wa AMA k c che pu thods. me a misr A pr o re that hy whic Ame A re b that, du (a 19 e mo r P l main sy a e de ha pu ce co marke g disc ina P int 6 Article 2 A r

1. Conduct which impedes fair competition by impeding company is a market leader, or whether it co-operates with t free competition (eg RPM, territorial restriction, price investigators. i discrimination, and refusal to deal). Procedures and appeal c 2. Conduct which impedes fair competition through As a formal procedure, the JFTC makes decisions to l unfair competitive methods (eg predatory pricing, issue the above orders after the hearing procedure, which e tying, and deceptive enticement by misrepresentation is similar to a trial. The decisions of the commission are or excessive premiums). subject to judicial review by the Tokyo High Court and can possibly reach as high as the Supreme Court. The third 3. Conduct which impedes fair competition because it party does not have standing to appeal the decision of the impedes the basic structure of free competition (eg JFTC. abuse of dominant bargaining position). Civil remedies ENFORCEMENT OF THE AMA There are two types of remedies within the AMA; In order to enforce the AMA, the Japan Fair Trade damage claims and actions for injunction. Commission (JFTC) was created and modeled after the US FTC. (It has one chairperson and four commissioners. It Damages (section 25) carries out its duty independently. Its decisions are made The AMA has a special damage claim system, which by majority vote. The commission has three powers; reduces the burden of proof. The plaintiff does not have to administrative power, quasi-judicial power, and quasi- prove willful conduct or negligence, and therefore the legislative power). defendants cannot escape from liability by claiming that they are not willful or negligent. Such special damage The AMA has three enforcement measures; claims are only available after the JFTC has made a administrative measures by the JFTC, civil remedies, and decision. criminal sanctions. The feature of the enforcement in Japan is that the JFTC plays the central role. It takes not This system appears to help private damages suits, but in only administrative measures but also plays an important reality has not been very supportive. One reason is that role in civil remedies and criminal sanctions. courts adopted very stringent requirements concerning proof of damage and causation, and in the case of the oil Administrative measures cartels mentioned earlier ,consumers brought actions but failed. Administrative measures are the most important measures. The JFTC can issue two types of orders. The Recently, there have been two pieces of good news. First, first is the “cease and desist” order, to stop illegal conducts. the civil case procedure act was amended to ease the proof of damages. Thanks to this, a victim of a cartel won their The second is the “payment of surcharge” order. This damage suit. Second, the JFTC announced its new policy order can be issued only in cases of certain cartels and is to help civil damage suits, so damage claims can be used usually after the first order. The amount of surcharge expected to increase in the future. is calculated by multiplying the sale of the product in issue by certain rates. In cases of big manufacturers, the rate is Injunction (section 24) In 2000, the AMA was amended to introduce a new 6%. (In cases of small companies, or wholesaler or retailers injunction system. Persons who suffer or probably suffer lower rates are applied). The central feature of the “substantial damage” (from breach of the AMA) can take surcharge system in Japan is that the JFTC does not have an action for an injunction. The important point here is discretion to reduce or increase the amount according to that plaintiffs do not have to wait until the JFTC takes how cooperative the breaching company is, or how severe action. the cartel is. There is a reason for this. However, there are limits for this injunction system. As I explained earlier, the surcharge system was First, an injunction is limited only for unfair trade introduced in 1977. At that time, the AMA already practices, such as refusal to deal, predatory pricing and contained claims for damages and a fine as a criminal tying. Second, consumer groups are not given standing. sanction. The surcharge should not be a sanction because Thus, the effectiveness of the injunction system is not clear constitutional law prohibits double jeopardy. Therefore, so far. the nature of the surcharge was planned solely to repeal illegally gained profits made by cartels, and the upper rate Criminal sanctions? of the surcharge was set at 6%. The amount of surcharge is just an assumed profit (maybe much smaller than the real Cartels and private monopolization are subject to the profit) and not high enough to restrain cartels effectively. following three categories of criminal sanctions: The surcharge is not therefore, a sanction, as the amount 1. Individuals can face a fine up to £25,000 pounds and does not change according to such factors as whether the imprisonment for up to three years. 27

Amicus Curiae Issue 61 September/October 2005 a y a o t to ad tl , re ain the the 14, pay b h as en at as e hav rt ce fo re e but oug t urr s damage is r imila s anie n c to s e ions Th d re no d, y March y e s d, e s i ll te m. n. e liv onl us comp t on which high funct ste tio do de ntia ly t y a cre a s en he s n, t t pp s m no re . y s not a stitu b die tio was rge a se rnm ste n re is ctu re iz (su m e Stu ca sy l ca l in ove nt we te e e it Univers urcharge g a u ch al urcha s ys fit s rg g tion s su ns nopo e mo e kuen Le n itu io a a he pro th t I t rg the rcharg G rcha mo s from . d d f o , nct e su he su o re te n t sa rg , ine rcha nce yot K ore a ses, ke nt a the l d. g su o a riv nd ef ta se a , w a p fine dv y form rcha l L er l A nge a is urp the re a su to of m pre ga p Th n a e or of Third, l cha s aid crimina gra s the he . il . he icle e s not p t nd ls el te urat M a s W ha pro art rof P . te the nd and ring 5 s) art n te nd, a n. f nie titu c a ractical car a o s io ge o hik io p oci l e s co e a 200 Ins This at st r e ims S nside mp os T As ncy nie ama la s itu anct • co a cart t de le s c s d co for mo t a e e 0 id ct e are rge the d th win ,00 be thre JFTC l of subj 25 riminal and you se , difficul al r the whe £ he re nt. nme f surcha t ca I the inish. d e to dge cannot ace re y f . l n might v gov he is non-c us pl t s cide s e up ou is rte k y is 000. will de tiv nd whe ou , the it , a ca y n e knowle one y too m fine 00 s nta r which , e he a 5 MA om d ct t te eal is onl ms e £ nt me A s e fr se cau S any ha ce 5 0 0 2 o or e it. ur pr t ca be obl fa re e he e a t re p yo abl cut pr iv condu op d, th he u s t onor e il nforce t comp e can a st a e n e t. em al of H nd the us g a av che In f be s e to no nt e fine le pros o o big syst s rs , ve r a e t n e il a tiv cing s e re l e or a a re br fa b ge a ye da ry res . The pr e nt tober September/Oc l ntly ce u r numbe r r e asu face ns e v ny ar nt se Howe w kne m e a Me re as s pplie n ra e f 1 6 a h c me v ne tion. pre o ca the obl me h has the v se has re y the ny sur pr usa Issue compa has sanctio a e r uct s. nt

indictme if e or nt f fo that whic n any s anie acc ke th a ds r the which n e hird or ta f cond your main , t side e e a rm. eme o Curiae

ov s l if ion, ot oun pr m, rc t hon fo e p n p om C omp C pr o ga t, mak r The riminal C First The ndidate nc ste le f nf o to make t Bu the 3. us Amic sa the Issue 2. o ca il sy e 8 Article 2