From the enforcer: Fair Trade Commission

Japan: from the enforcer

Contacts

FURUYA Kazuyuki
Chair

YAMAMOTO Takashi
Commissioner

MIMURA Akiko
Commissioner

AOKI Reiko
Commissioner

OJIMA Yoshiharu
Commissioner

SUGAHISA Shuichi
Secretary General

SUGIYAMA Yukinari
Senior Deputy Secretary General

TANABE Osamu
Senior Deputy Secretary General for Policy Management

OGO Masaru
Deputy Secretary General for International Affairs

SHINAGAWA Takeshi
Deputy Secretary General for Mergers and Acquisitions

KOBAYASHI Wataru
Director General, Economic Affairs Bureau

IWANARI Hiroo
Director General, Trade Practices Department

FUJIMOTO Tetsuya
Director General, Investigation Bureau

FUJII Nobuaki
Deputy Director General, Investigation Bureau

OMOTO Shinji
Deputy Director General, Investigation Bureau

SUWAZONO Sadaaki
Director General, Criminal Investigation Department

Email: [email protected]

Questions and answers

How long is the head of agency’s term of office?

The Antimonopoly Act (AMA) provides that the term of office of the chair shall be five years.

Reappointment is allowed, but the chair shall retire from the office upon reaching the age of 70 (article 30 of the AMA).

When is he or she due for reappointment?

The term of office as chair expires in March 2023.

Which posts within the organisation are political appointments?

the chair and commissioners are appointed by the Prime Minister with the consent of both houses of the Diet. The appointment or dismissal of the chair is certified by the Emperor (article 29 of the AMA).

What is the agency’s annual budget?

The budget was ¥11.462 billion for the financial year of 2021 (April 2021 to March 2022).

How many staff are employed by the agency?

A total of 842 staff work in the General Secretariat of the Japan Fair Trade Commission (JFTC) (for the financial year 2020). Despite the government policy of reducing costs, the total number of employees at the General Secretariat has increased from 564 in financial year 2000 to 842 in financial year 2020. Approximately two- thirds of employees engage in investigation of anticompetitive activities, including merger review.

To whom does the head of the agency report?

The JFTC submits to the Diet, through the Prime Minister, an Annual Report on efforts by the JFTC.

Just to be clear, under article 28 of the AMA, the chair and the commissioners of the JFTC exercise their authority independently.

Do any industry-specific regulators have competition powers?

No industry-specific regulators have the authority to enforce the AMA.

If so, how do these relate to your agency’s role?

Not applicable.

May politicians overrule or disregard authority’s decisions? If they have ever exercised this right, describe the most recent example.

No. The AMA clearly stipulates that the chair and the commissioners of the JFTC shall perform their authority independently (article 28 of the AMA), and may not, against their will, be dismissed from office (article 31 of the AMA).

Does the law allow non-competition aims to be considered when your agency takes decisions?

The purpose of the AMA is ‘to promote fair and free competition, and thereby to promote democratic and wholesome development of the national economy as well as to assure the interests of general consumers’, by prohibiting private monopolisation, unreasonable restraint of trade and unfair trade practices (article 1 of the AMA). The latter objectives, ‘democratic and wholesome development of the national economy’ and assurance ‘of the interests of general consumers’, are regarded as ultimate goals pursued through promotion of ‘fair and free competition’. In addition, the AMA describes, for example, that private monopolisation and unreasonable restraint of trade are conducts substantially restraining competition in a particular field of trade contrary to the public interest that is defined in the Supreme Court decision of 1984 as, in principle, an economic environment with free competition. Accordingly, when determining illegality of conduct restraining competition, purposes other than promoting fair and free competition, such as protection of specific industries, for example, would never be considered.

Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?

Administrative measures taken by the JFTC are subject to judicial review. Administrative review under the JFTC has been abolished by the 2013 AMA revision, which took effect in 2015. After the revision, those dissatisfied with the JFTC’s administrative measures may directly file a suit. At this point, only pending cases are still going through the administrative review pursuant to the by-laws of the said revision.

In 2020, the Tokyo High Court rendered one judgment that supported the JFTC’s decision and one judgment that did not support the JFTC’s decision under the previous track, in which the JFTC firstly reviews its administrative measure – and judicial review would apply only after that.

Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.

As a result of review in 2016, the JFTC challenged the proposed merger of Lam Research Corporation/KLA-Tencor Corporation, and the filing was abandoned.

Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.

In 2021, Google LLC & Fitbit, Inc proposed remedial measures to resolve competitive concerns pointed out by the JFTC.

Has the authority conducted a phase two investigation in any of its merger filings? If yes, please provide the most recent instances.

The JFTC opened one Phase II investigation in 2021: The most recent one is Global Wafers GmbH and Siltronic AG.

Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.

Since 2008, the JFTC has taken legal measures against foreign business entities involving in cartels; those entities are as follows:

  • manufacturers of marine hoses (United Kingdom, France and Italy);
  • manufacturers of CRT TVs (Korea, Thailand, Malaysia, Indonesia and Taiwan);
  • an operator of international ocean shipping services for automobiles (Norway); and
  • manufacturers of suspensions for hard disk drives (China) in 2018; this is the most recent.

Do you operate an immunity and leniency program? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?

Yes. Potential applicants should contact the section in charge of the leniency programme via telephone on +81 3 3581 2100 or email on [email protected].

The reduction rates shall be determined according to (1) and (2).

(1) the order of the application for the leniency programme

(2) the degree of contribution to revealing the case: the Reduction System for Cooperation in Investigation

(1) The order of the application for the leniency programme

Before the investigation start date, the reduction rates for surcharges are full immunity for the first applicant, a 20 per cent reduction for the second applicant, a 10 per cent reduction for the third to fifth applicants and a 5 per cent reduction for the sixth and after.

On or after the investigation start date, a 10 percent reduction for the applicants (up to three enterprises.) and a 5 per cent reduction for the other than the above.

(2) The degree of contribution to revealing the case: the Reduction System for Cooperation in Investigation

Additional reduction rates apply to those of the leniency programme, where the reduction rates are set based on the order of the application, according to the degree of enterprises' cooperation to reveal the case.

The content of an enterprise's cooperation and the corresponding reduction rate are decided through a conference and an agreement between the enterprise and the JFTC.

Before the investigation start date, the reduction rate according to the degree of contribution to revealing the truth of the case is at most an additional 40 percent reduction for the applicants.

On or after the investigation start date, the reduction rate according to the degree of contribution to revealing the truth of the case is at most an additional 20 percent reduction for the applicants.

The enterprise which first applies for the leniency programme (before the Investigation Start Date) is not subject to the Reduction System for Cooperation in Investigation.

The upper limit on the number of enterprises which may apply for the leniency programme was abolished.

The total number of leniency applications in financial year 2020 was 33. For the past five years, the leniency programme has been applied in 32 cases out of the 44 legal measures subject to the leniency programme. Further, applications in at least 28 cases were submitted before the investigation start dates. These numbers show that the leniency program contributes greatly to investigation activities of the JFTC.

The AMA was recently amended to introduce the new leniency programme, which took effect on 25 December 2020.

Is there a criminal enforcement track? If so, who is responsible for it?

Yes. With respect to serious cases of AMA violations, including cartels and bid riggings, the JFTC files an accusation with the prosecutor general to seek criminal penalties. The JFTC has a special department for criminal investigation in the Investigation Bureau.

In December 2020, the JFTC filed a criminal accusation with the prosecutor general against three pharmaceutical wholesalers and seven individuals over bid-rigging on the pharmaceutical procurement of the Japan Community Health Care Organisation.

Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?

Yes. With respect to serious cases of AMA violations, including cartels and bid-riggings, the JFTC files an accusation with the prosecutor general to seek criminal penalties.

Are there any plans to reform the competition law?

No.

When did the last review of the law occur?

The bill to amend the AMA was passed on 19 June and promulgated on 26 June 2019. The purpose of the amendment is to deter ‘unreasonable restraint of trade’, etc, effectively, invigorate the economy and enhance consumer interests by fair and free competition, through increasing incentives for enterprises to cooperate in the JFTC’s investigation and imposing an appropriate amount of surcharges according to the nature and extent of the violation. The changes are outlined as follows:

  • amendment of leniency programme:
    • introducing a system that allows the JFTC to reduce the amount of surcharges when enterprises submit information and documents that contribute to the fact finding of the case, in addition to the reduction according to the order of application; and
    • abolishing the current limit on the number of applicants in the leniency programme;
  • revision of the calculation methods:
    • addition of the basis of calculation of surcharges; and
    • extension of the calculation term, etc; and
  • revision of penal provisions, raising the limit of the amount of criminal fine for juridical person charged with the offense of obstructing investigation.

The amendment came into effect on 25 December 2020.

The JFTC also introduced a new procedure, in accordance with the Rules on Investigations by the Fair Trade Commission established pursuant to the provision of article 76, paragraph 1 of the AMA, from the perspective of making the new leniency programme more effective, etc.; the new procedure sets forth that investigators will not access documents containing confidential communication between an enterprise and an attorney regarding the legal advice on unreasonable restraint of trade, if certain conditions are confirmed to be met pursuant to the prescribed procedures.

Do you have a separate economics team? If so please give details.

The JFTC does not have a separate economic unit. However, in April 2016, an Economic Analysis Team, which consists of the JFTC officials with economic expertise engaging in other main duties, was launched within the JFTC. The team supports divisions or offices on the basis of knowledge of economics or statistics when making policy, enforcing law and conducting market surveys, etc.

Moreover, the JFTC operates the Competition Policy Research Center (CPRC) to strengthen the theoretical foundation for enforcement, planning and assessment of competition law and policy. The external economists and experts on competition law are appointed to the Director and the Chief Researchers of the CPRC.

Has the authority conducted a dawn raid?

Yes. Dawn raids are made on companies suspected of illegal acts and others related to illegal acts to collect and investigate accounting books and related documents.

Has the authority imposed penalties on officers / directors of companies for offences committed by the company?

No. However, in criminal cases, a person who has violated AMA is punished and the JFTC has exclusive power to file a criminal accusation to the Public Prosecutor General. In March 2018, the JFTC filed a criminal accusation with the Prosecutor General against four companies, Taisei Corporation (Taisei), Kajima Corporation (Kajima), Obayashi Corporation (Obayashi) and Shimizu Corporation (Shimizu), and two related executives in Taisei and Kajima over coordination of bids in the Maglev railway construction project. The four companies and the two executives were indicted by the Tokyo district Public Prosecutor’s Office. In October 2018, Obayashi and Shimizu were imposed a penalty in the Tokyo District Court. As of August 2020, the litigation against the remaining two companies and two executives is pending in the Tokyo District Court.

What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?

The JFTC sets several notification thresholds according to the types of mergers, such as shareholding (article 10), merger (article 15), company split (article 15-2), joint share transfer (article 15-3) and acquisition of business (article 16). As an example, concerning a share acquisition (paragraph (2), article 10), if the following three conditions are met, a plan of the proposed share acquisition has to be filed with the JFTC within 30 days prior to the date of the acquisition. The three conditions are:

  • if the total amount of domestic sales of the company intending to acquire the shares and the companies other than the said company in a combined group of companies to which the said company belongs exceeds ¥20 billion;
  • if the total amount of domestic sales of a share- issuing company (a company whose shares are to be acquired) and its subsidiaries exceed ¥5 billion; and
  • if the ratio of the total number of voting rights of the shares of the share-issuing company to be held by the share-acquiring company and companies in the combined group of companies to which the share-acquiring company belongs to the number of voting rights held by all shareholders of the share-issuing company exceeds 20 per cent or 50 per cent after acquiring the shares.

Are there any restrictions on investments that involve less than a majority stake in the business?

As mentioned above, a party acquiring more than 20 per cent of the acquired party’s shares is required to file a notification to the JFTC.

Japan: from the enforcer's competition economists

The Handbook of Competition Economics

How many economists do you employ? How many have PhDs in industrial organisation?

The JFTC has three full-time economists who have a PhD in economics or related to economics.

In addition to the above, three economists with PhDs are working as the director and the chief researchers at the Competition Policy Research Center (CPRC) of the JFTC. The CPRC is led by distinguished economist Professor Noriaki MATSUSHIMA, who has been the Director of the CPRC since April 2020.

Do you have a separate economics unit, or ‘bureau’?

The JFTC does not have a separate economic unit. However, in April 2016, the Economic Analysis Team, which consists of the JFTC officials with economic expertise engaging in other main duties, was launched within the JFTC. The team supports divisions or offices on the basis of knowledge of economics or statistics when making policy, enforcing law, conducting market surveys, etc.

Moreover, the JFTC operates the Competition Policy Research Center (CPRC) to strengthen the theoretical foundation for enforcement, planning and assessment of competition law and policy. The external economists and experts on competition law are appointed to the Director and the Chief Researchers of the CPRC.

Do you have a chief economist?

No, the JFTC does not have an institutional position of chief economist in the same way as the DG Competition in the European Commission. However, the Economic Analysis Team has a team leader.

To whom does the chief economist report?

The team leader of the Economic Analysis Team summarises the discussion and gives advice or opinions to divisions that consult with the Economic Analysis Team. (Reports drafted by the study groups and discussion papers produced by researchers at the CPRC are shared with the JFTC. These reports are published after approval by the Director of the CPRC.)

Does the chief economist have the power to hire his/her own staff?

No, the team leader of the Economic Analysis Team does not have the power to hire his or her own staff.

To what degree is the economics unit called on to be a ‘second pair of eyes’ during cases – is it one of the agency’s checks and balances?

As mentioned above, the JFTC does not have a separate economics unit but it has the Economic Analysis Team. At the request from the case team, two or three members from the Economic Analysis Team, depending on the complexity of the case, are assigned to the case to check the theory of harms, evaluate the conduct concerned, conduct analysis, etc, from the viewpoint of economics. Particularly, for merger review cases, the Economic Analysis Team members in the M&A division review all case reports drafted by the case team, and join the case team when the case requires in-depth economic analysis.

Does the agency include a specialist economist on every case team? If not, why?

No. The Economic Analysis Team basically gets involved in the cases which require economic analysis for the efficient use of human resources, etc.

How much economics work is outsourced? What type of work is outsourced?

The JFTC has secured a certain amount of funds in the financial year 2021 budget for outsourcing economic analysis in merger investigations. Currently, we are proceeding with the plan of outsourcing economic analysis on certain merger cases to economic consulting firms for the first time.

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