The Japan Enforcement Agency
The substantive provisions of Japan’s competition rules are contained in the Antimonopoly Act of Japan (AMA). The Japan Fair Trade Commission (JFTC), composed of a chairman and four commissioners, is the principal enforcement agency set up as an independent administrative office with broad powers to enforce the AMA. The AMA comprises four major categories of regulations:
- prohibition of unreasonable restraint of trade (for example, cartels and bid-rigging);
- prohibition of private monopolisation;
- prohibition of unfair trade practices; and
- regulation of business combinations (for example, via mergers and acquisitions).
The JFTC is the sole enforcement agency except with respect to criminal investigations, in which case the JFTC will make a submission to the prosecutor general setting out its criminal accusation, whereupon the public prosecutor’s office takes charge of criminal prosecution matters.
The amendment to the AMA to adopt the commitment procedure came into force on 30 December 2018 as a part of the laws related to the Trans-Pacific Partnership Agreement. This amendment introduced a procedure to resolve alleged violations of the AMA by voluntary consent between the JFTC and the party subject to the JFTC’s investigation, called the commitment procedure. For the purpose of clarifying the details of the commitment procedure, the JFTC enacted the Rules on Commitment Procedure of the JFTC in January 2017. Further, for the purpose of ensuring transparency of enforcement for the amended act and predictability for businesses, the JFTC published Policies Concerning Commitment Procedures in September 2018.
Private monopolisation and unfair trade practices
No new orders were issued for private monopolisation in 2018.
As to unfair trade practices, the JFTC issued two cease-and-desist orders in 2018. It is interesting to note, however, that in 2018 the JFTC closed three investigations on suspected violations of the AMA by unilateral conducts without issuing formal administrative orders (cease-and-desist orders or surcharge payment orders) when the target companies of the investigations voluntarily promised to take measures to eliminate the suspected violation. The target companies in the investigations include Airbnb Ireland UC (and Airbnb Japan KK) and Apple Inc (and Apple Japan GK).
The JFTC has shown strong interest in, among other issues, the IT and digital sector, such as with the digital platform operators and the mobile phone market. The JFTC’s flexible disposal of the above mentioned cases in 2018, as well as similar closure of investigations against Amazon Japan GK and Amazon Services International, Inc in 2017, seem to reflect their awareness of the rapidly advancing digitalisation of the economy and the need to quickly restore the environment for fair competition. As to digital platforms, the JFTC published an interim report on 12 December 2018 on the results of a joint study carried out together with the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications (MIC). In this report, they raised possible issues on digital platform businesses in the national economy and the necessity of international harmonisation of public policies regarding digital platforms. Based on this report, the three authorities jointly published ‘Fundamental Principles for Rule Making to Address the Rise of Platform Businesses’ on 18 December 2018. As to the mobile phone market, the JFTC has continued its study together with the MIC and published a ‘Report on Competition Policy Challenges in the Mobile Phone Market’ on 28 June 2018, discussing the conditions that could restrict fair competition among network operators as well as new entries into the market. In November 2018, MIC solicited public opinions on their ‘Urgent Proposal for Optimizing Mobile Services’ and the result therefrom was published on 17 January 2019.
On 15 February 2018, the JFTC issued the ‘Report on Study Group on Human Resource and Competition Policy’ where the JFTC reconsidered its continued policy since the Second World War and discussed the possibility of applying the AMA in the labour market. In particular, the JFTC analysed competition in obtaining human resources at freelance jobs, entertainment businesses and in the sports industry. The JFTC gathered public opinion on this report.
The JFTC issued 16 cease-and-desist orders and 14 surcharge payment orders for cartel or bid-rigging cases in 2018. All 16 cases pertain only to the Japanese domestic market. The total amount of surcharges imposed in 2018 was ¥2.15 billion, significantly lower than ¥7.5 billion in 2017. The amount of surcharges levied in cartel cases is calculated as a certain percentage of total sales of the relevant products or services during the period of infringement, extending retrospectively up to three years from the date when the conduct ceased. The percentage rate is usually levied at a base rate of 10 per cent, but will depend on the circumstances and may be increased to 15 per cent if repeated within 10 years under certain conditions.
As to leniency, 103 filings were made in the 2017 fiscal year (ending March 2018).
As to criminal accusations, the JFTC’s policy is to proactively file criminal accusations in cases that are serious, malicious and likely to broadly affect people’s lives, or cases involving companies that have repeatedly breached the AMA or failed to comply with a cease-and-desist order if administrative orders alone are not sufficient to achieve the purpose of the AMA. In March 2018, the JFTC filed a criminal accusation with the prosecutor general against the four biggest construction companies in Japan on the account of bid-rigging in relation to construction of terminal stations for the maglev railway that was put out for tender by Central Japan Railway Company.
A total of 306 merger notifications were made in the 2017 fiscal year. The JFTC cleared 299 cases without a Phase II review and, of those, the 30-day waiting period, during which the notified transaction cannot be closed, was shortened in 193. Of the 306 cases, only one transitioned to a Phase II review (joint share transfer by the Daishi Bank, Ltd and The Hokuetsu Bank, Ltd).
Mergers, business transfers, corporate splits (or demergers), joint share transfers and share acquisitions (including joint ventures) require prior notification under the AMA where they will exceed certain thresholds, even in some cases of foreign-to-foreign mergers between undertakings that have no Japanese subsidiary or branch office in Japan.
Review of surcharge system
The JFTC established a ‘Study Group on the Antimonopoly Act’ in February 2016 to review the current surcharge system, under which surcharge amounts are uniformly calculated by multiplying total sales of the relevant products or services by a certain percentage, and to consider the possibility of introducing a more flexible surcharge system. The study group issued a report proposing revisions to the current surcharge system in April 2017 and the JFTC has been working to amend the AMA based on the report. In response to comments on the report from various parties concerned, the JFTC is considering measures to implement attorney–client privilege in relation to investigations concerning unreasonable restraint of trade as well.