Japan: Fair Trade Commission

As the guardian of the market, the Japan Fair Trade Commission (JFTC) has been playing an important role in eliminating anticompetitive acts that would harm economic growth and consumer benefits. Our enforcement activities motto is ‘No competition, no economic growth’; that is, free and fair competition is a very important engine for steady economic growth. Responding to the dynamic change of the global economy and rapid technological progress, we are determined to fulfil our mission, which is to make sure the market force works freely and fairly by keeping our market competitive.

Law enforcement

The JFTC has vigorously enforced the Antimonopoly Act (AMA) against anticompetitive activities and practices. During 2016, the JFTC issued 10 cease-and-desist orders and the total amount of surcharge payment order reached 9.1 billion yen, including such noticeable administrative cases as the price-fixing cartel conducted by manufacturers selling electrolytic capacitors. Some of these cases were investigated by other foreign authorities and the JFTC cooperated with them in proceeding the investigation.

Furthermore, the JFTC filed a criminal complaint with the Public Prosecutor General in Bid Rigging Concerning the Disaster Restoration Paving Works Ordered by the East Nippon Expressway Company Ltd. This bid rigging was closely related to the restoration project after the Great East Japan earthquake, so the government of Japan suffered from a huge pecuniary damage by the bid rigging. Against this backdrop, we judged that the bid rigging had significantly damaging and serious effects on people’s lives. The court ordered the criminal charges against 11 persons and 10 companies.

Merger review

The JFTC endeavours to operate business combination regulations in an appropriate manner to ensure a competitive market structure in Japan. During 2016, the JFTC received 326 merger case applications. Five cases were proceeded to secondary review and two of these were closed with some remedy measures. Particularly, the JFTC has established international relationships with other foreign authorities to reinforce our review procedure and shorten review time. For example, in October 2016, we reviewed the proposed business integration between Lam Research Corporation (a leading supplier of semiconductor fabrication equipment) and KLA-Tencor Corporation (a leading supplier of metrology and inspection equipment), which was a big cross-border transaction, with the US DOJ and other authorities. We had concerns that it would substantially restrain competition in the market for semiconductor fabrication equipment. The JFTC cooperated with the US DOJ by exchanging information during the investigation and told the parties about our concern. As a result, they announced that they abandoned their proposed business integration plan and withdrew their filing.

Also, in December 2016, the JFTC closed the secondary review on two cases: the proposed acquisition of shares of Showa Shell Sekiyu by Idemitsu Kosan and Tonen General Sekiyu by JX Holdings. Although these acquisitions had a large impact on the oil industry in Japan, we concluded to approve them given the remedies such as promoting oil import by other companies.

Guidelines and market surveys

It is also our task to make and revise guidelines to catch up with the changes in the economy and society in order to enhance predictability for enterprises and raise awareness of competition law and policy. In 2016, we revised or established several guidelines as follows:

• Revised ‘Guidelines for the Use of Intellectual Property under the Antimonopoly Act’ – The issues related to the standard-essential patent under competition law have become recognised all over the world. To clarify how the AMA treated these issues, the JFTC added descriptions to the Guidelines about how to judge conducts by standard-essential patent holders, such as bringing an injunction that seemed to be the exercising of the right on its face, but might actually be anticompetitive.
• Established ‘Guidelines of the Concept of Public Support for Revitalisation in view of Competition Policy’ – These Guidelines proposed what factors supporting organisations should be aware of when providing public supports to revitalise failing companies. From the viewpoint of competition policy, the guidelines highlight three principles: complementary, minimum necessary and transparent.
• Revised ‘Guidelines Concerning Distribution Systems and Business Practices under the Antimonopoly Act’ – These Guidelines provide the criteria or requisites as to so-called safe harbour. The JFTC conducted a review on these safe harbours and revised part of them. Plus, with a view to giving necessary consideration for the recent changes in distributions and trade practices, including the development of e-commerce, the JFTC held a study group of experts from various fields in order to give necessary considerations for the review of these Guidelines. The study group published a report in December 2016 to continue to review these Guidelines.

In addition, the JFTC conducts market surveys and examinations of issues concerning competition policy in individual sectors. Based on the surveys, the JFTC has published reports including what activities to be prohibited under the AMA, what practices to be desirable and how regulations are to be relaxed in the view of competition policy. In 2016, we conducted surveys on the mobile phone market, gasoline transaction and the nursing service market.

International cooperation

Facing the globalisation of markets, supply chain and business activities, the JFTC is constructing international frameworks for further proceeding cooperation and information sharing with foreign authorities in case of investigations and merger reviews by expanding cooperation agreements, EPAs and memoranda that have attained a number of successful results in our enforcement activities. We also put weight on multilateral frameworks, such as the OECD, the International Competition Network and UNCTAD, and keep playing an active role in those frameworks.

In 2016, the JFTC concluded two memoranda of understanding with the Ministry of Commerce of the People’s Republic of China and the Competition Authority of Kenya, and we continue to make efforts to build new memoranda of understanding with other foreign authorities. We also began preparatory works for an amendment of the anticompetitive cooperation agreement between the European Union and Japan. This amendment will enable us to exchange information obtained from enterprises during the course of an investigation with the EU and will facilitate our collaborative investigation into anticompetitive activities.

Furthermore, the JFTC has brought focus on technical assistance to younger competition authorities in foreign countries. In particular, the JFTC has mainly supported the competition authorities in east Asia, and last year we launched a new technical assistance project under Japan-ASEAN Integration Fund for further assistance, and also new projects for some African countries.

Amendment to Antimonopoly Act

Last year, the amendment bill of the AMA was passed by the Diet of Japan. This amendment was based on the Trans-Pacific Partnership (TPP) agreement, which was signed in February 2016 by 12 countries, including Japan. The Competition Chapter of the Agreement has an article that says ‘Each Party shall authorise its national competition authorities to resolve alleged violations voluntarily by consent of the authority and the person subject to the enforcement action.’ Because the current AMA does not have such a voluntary consent system, the so-called ‘commitment procedure’, the Government of Japan submitted the amendment bill to the Diet to introduce the system. Then, it passed the Diet in December 2016. This amendment will become effective in accordance with TPP’s entry into force, although it has become quite unclear. Believing we will be able to deal with more case investigations efficiently by this new procedure, we expect the other countries complete their national procedure to ratify the Agreement.

In addition, the JFTC has endeavoured to make a comprehensive review of our enforcement tool, the surcharge payment order, by holding a study group on the Antimonopoly Act since February 2016, with the aim of resolving problems of the current system where the JFTC calculates and imposes surcharges on every company uniformly under the calculation method stipulated by law. The main resulting problems are: (i) the JFTC cannot properly consider the appropriate amount of surcharge responding to the business activities and corporate structures that are getting globalised, diversified and complicated; (ii) the current surcharge system cannot give enterprises enough incentive to cooperate with the JFTC’s investigation and disincentives to obstruct our investigation procedure because of the non-flexible current surcharge system; and (iii) the current surcharge system is not consistent with the fine systems of the other major competition authorities in some points. This study group compiled the summary that listed the issues to be discussed in July 2016. Based on it, the JFTC conducted a public consultation to hear the opinion from all of the stakeholders. The study group is making efforts to discuss each issue in detail based on this summary, taking submitted comments into account to get to conclusions as soon as possible.

Our priority in 2017

The JFTC will further accelerate competition policy for realising vigorous economy based on free trade activities and innovation, and fulfilling consumers’ benefits, considering that it will become more important to promote innovation through dynamic competition and encourage sustainable economic growth. In 2017, the JFTC will continue all its efforts to ensure ‘fair and free competition’ as a competition authority, paying more attention to the development of digital economies.