Competition Law Reform in Britain and Japan What drives the reform of competition law in Britain and Japan? As market competition replaces state regulation in many economic fields, competition policy has become an area of increasing significance. Against this background, Suzuki highlights the importance of the domestic political structure for competition policy. He does this through the comparative analysis of compe- tition law reforms in Britain and Japan. He argues – controversially – that a country’s domestic political structure should be considered a major factor in causing the reform of competition law, and modifies the established view that it is necessarily a result of changes in international economic and political conditions. The book outlines the history of competition law reform in Britain and Japan throughout the post-war period, and also contains case studies of the most remarkable reforms of the 1970s and the 1990s. Suzuki uses the policy network approach in order to understand the domestic political structure, viewing the policy-making process as the interaction of relevant parties with their own inter- ests and power resources. Thus he interprets competition law reform as the result of interactions between ‘core actors’, such as leading business organisations, government politicians and public officials in charge of industrial policy, and existing competition policy. Competition Law Reform in Britain and Japan makes comparisons based on over half a century of competition law reform, demonstrating that while British and Japanese competition policies are apparently following the same trend of inter- national convergence, the interests and power relations of the core actors in the competition policy network are quite different. This innovative book brings to the fore the political aspects of competition policy rather than the more usual legal and economic concerns. It is the only book to compare Britain and Japan’s competition law reform in depth. Kenji Suzuki is a political scientist and an assistant professor at the European Institute of Japanese Studies, Stockholm School of Economics, Sweden. He was educated at the University of Tokyo, the London School of Economics and the University of Warwick. European Institute of Japanese Studies East Asian Economics and Business Series Edited by Marie Söderberg University of Stockholm, Sweden This series presents cutting-edge research on recent developments in business and economics in East Asia. National, regional and international perspectives are employed to examine this dynamic and fast-moving area. 1 The Business of Japanese Foreign Aid Five case studies from Asia Edited by Marie Söderberg 2Chinese Legal Reform The case of foreign investment law Yan Wang 3 Chinese–Japanese Relations in the Twenty-first Century Complementarity and conflict Edited by Marie Söderberg 4 Competition Law Reform in Britain and Japan Comparative analysis of policy networks Kenji Suzuki Competition Law Reform in Britain and Japan Comparative analysis of policy networks Kenji Suzuki London and New York First published 2002 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint ofthe Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004. © 2002 Kenji Suzuki All rights reserved. No part ofthis book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Suzuki, Kenji, 1968– Competition law reform in Britain and Japan : comparative analysis of policy networks Kenji Suzuki. p. cm. Includes bibliographical references and index. 1. Antitrust law–Japan. 2. Antitrust law–Great Britain. I. Title. K3850 .S89 2002 343.42~0721–dc21 2001048818 ISBN 0-203-16694-9 Master e-book ISBN ISBN 0-203-26171-2 (Adobe eReader Format) ISBN 0–415–25587–2 (Print Edition) To my family Contents List of illustrations x Preface xii List of abbreviations xiv 1 Introduction: international convergence and policy network of competition law 1 Comparison across countries and times 2 Political analysis of competition law reform 3 Approach to the comparative analysis of the policy-making process of competition law reform 5 The aim, structure and methodology of the study 7 2 Early history and cases of invention-type policy innovation in the 1970s 9 Historical development of British competition law 9 British policy reforms of the 1970s: the Commission for Industry and Manpower and the Fair Trading Act 14 Historical development of Japanese competition law 18 The Japanese case in the 1970s: the 1977 amendment of the Anti-monopoly Act 22 Conclusion 26 3 Actor interests and cohesion in the competition policy network of the 1970s 28 Business preferences for inter-firm collusion and industrial concentration 28 The context of party politics and industrial policy 42 Policy implementation of competition law 50 Conclusion 58 viii Contents 4 Distribution of power resources in the competition policy network of the 1970s 59 Businesses: power resources of the CBI and Keidanren 59 Politicians: relational structure within and between major parties 63 National models of the triangular relationship between businesses, politicians and public officials 67 Competition policy officials: relational power and human resources 74 Conclusion: the power of business in the competition policy network in the 1970s 79 5 External changes and the reform of British and Japanese competition law in the 1990s 82 The progress of economic and political internationalisation 82 The development of European competition policy and the reform of British competition law in the 1990s 87 Political pressure from the United States and the reform of Japanese competition law 93 Conclusion 101 6 Interests of the core actors in the competition policy network of the 1990s 104 Changes in the economic conditions and business preferences for inter-firm collusion and industrial concentration 104 Changes in political attitudes and industrial policy towards competition policy 112 Development of competition policy and the position of competition policy officials 121 Conclusion 129 7 Changes in the distribution of power resources from the 1970s to the 1990s 131 Changes in the leading business organisations and their strategy in the policy-making process 131 The organisational/relational structure of political parties in the 1990s 134 Changes in the triangular relationship between business, politicians and public officials 137 Competition policy officials: relational power and human resources in the 1990s 144 Conclusion 152 Contents ix 8 Conclusion: the reform of competition law and development of the competition policy network in Britain and Japan 155 Britain’s competition policy network in the 1970s 155 Japan’s competition policy network in the 1970s 158 Britain’s competition policy network in the 1990s 160 Japan’s competition policy network in the 1990s 162 British and Japanese competition policy: recent changes and future prospects 164 Notes 168 Bibliography 187 Index 199 Illustrations Tables 3.1 Major merger cases in the 1960s/1970s 38 3.2 Financial structure of companies in merger cases beyond the sphere of one business group 39 3.3 Restrictive practices regulation in Britain, 1956–72 51 3.4 Merger references to the Monopolies Commission, 1965–73 53 3.5 The number of authorised cartels in Japan, 1955–74 55 4.1 Financial resources of the CBI/Keidanren in 1973 61 4.2 The number of retired officials going into the private sector in the 1970s 73 4.3 The Chairman and commissioners of the Fair Trade Commission in 1974 78 5.1 Committee recommendations adopted by the OECD Council 86 5.2 The influence of non-tariff barriers in the Japanese market 94 5.3 The change in the administrative surcharge system in 1991 97 6.1 Real growth of gross domestic product, 1970–99 105 6.2 Real growth of gross domestic product, selected sectors, 1970–99 105 6.3 Trends in registered and Section 21(2) agreements 123 6.4 Qualifying cases and referrals of mergers, 1965–98 123 7.1 Presidents of the Keidanren and their main career 133 7.2 Total number of FTC staff and of staff in the Investigation Division, 1989–99 147 Figures 3.1 Acquired companies in Britain, 1955–73 31 3.2 Share of the largest 100 firms in manufacturing net output in Britain, 1907–78 31 3.3 Notified M&As in Japan, 1950–75 36 3.4 Share of the largest 100 firms in manufacturing net output in Japan, 1950–80 40 3.5 The growth rate of consumer prices in Britain, 1954–73 46 3.6 The growth rate of GDP/consumer prices in Japan, 1961–77 48 Illustrations xi 3.7 The number of exempted cartels other than depression cartels and rationalisation cartels in Japan, 1955–74 55 4.1 Seats in the House of Representatives, 1967–79 66 5.1 Exports and imports of industrial countries, 1980–98 83 5.2 Flow of outward/inward investment from/to industrial countries, 1980–98 84 5.3 Stock of outward and inward investment in industrial countries, 1987–97 85 5.4 Cross-border mergers and acquisitions: sales from/purchases by developed countries 85 5.5 Britain’s exports and imports to/from Europe 88 5.6 Britain’s outward/inward direct investment (stock)