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Antitrust and Competition Issues in JapanTOSHIO Kobayashi of Tokyo-based Kobayashi & Todo Law Offices discusses antitrust and competition issues in Japan, and how they affect both domestic and international clients ANTITRUST ENFORCEMENT IN JAPAN HAS BEEN CONSIDERED WEAK IN THE PAST. IS THIS STILL THE CASE, AND IF SO, WHY? To a certain extent, this is the case, although this is only true for some aspects. Today, the Act is strongly enforced in some types of unfair business practices, for example, knock-out, resale price control or unreasonable restriction on business trade. For example, private suits for damages on the basis of Antitrust Law have played little part as yet, even though there have been few criminal actions against violators. I think the reason is that the history of Japanese antitrust practices is too short to penetrate the business world , that is the Act was established in 1947 under American occupation and the conducting has been mainly carried out by an administrative agency, the Fair Trade Commission. WHAT IS THE RELATIVE RATE OF ENFORCEMENT BY JAPAN'S FAIR TRADE COMMISSION (JFTC)? If a cartel or restrictive conduct by a trade association is judged illegal by FTC, it charges the violating party an administrative fee based on the following standard rate: A; The total sales amount of the goods or services handled by the violating party during the term of illegal performance multiplied by the percentage rate settled by the rule. B; The percentage above is differentiated by industry, that is, in a big enterprise, it is 10% for manufacturing industry, 3% for retail business, 2% for wholesale business and in a medium and small sized enterprise, 4% for manufacturing industry, 1.2% for retail business, 1% for wholesale business. C; The percentage rate is increased, decreased or exempted in the following case; before the FTC started an investigation in the office of violating parties, if a party applies its cartel or restrictive conduct to the FTC, the first applier can get exemption, the second applier can get 50% deduction and the third applier can get 30% deduction; if the violating party ceases its violating conduct in good time, the percentage rate above is decreased 20%. If the violating party received the administrative fee within the prior 10 years, the percentage rate above is increased 50%. DO YOU SEE THIS CHANGING IN THE SHORT-TERM FUTURE? The only changes in the short -term future will be minor. HOW DOES THIS SYSTEM COMPARE WITH THE US SYSTEM? IS IT SIGNIFICANTLY LESS PROLIFIC? The present Japanese system is similar to the US system. In comparison, one problem lies in the application of the system and laws rather than system or laws themselves. Another issue is that members of the FTC are government officials rather than legal professionals. WHAT ISSUES ARE FACING YOUR COMPETITION CLIENTS CURRENTLY? Antitrust cases have special features just like criminal cases. Usually, the case begins with secret investigation by members of the FTC, who will then contact the person in violation. There are two ways this happens. One involves issuing a recommendation to the person to refrain from the violating conduct, and if the party accepts this recommendation, a decision is given without trial. The approach is for the FTC to institute formal proceedings against the party. The FTC holds a dominant position to the party at that time since it has strong evidence to support its pursuit against the party in question. Accordingly, we lawyers usually have to co-operate with clients. The next issue for a client whom the FTC is acting against involves the rule of substantial evidence. As I mentioned above, the FTC can collect strong and proper evidence to support its pursuit before contacting our clients or beginning the trial. In addition, the FTC can pursue our clients under the substantial evidence rule, when our clients appeal to Tokyo High Court requiring the cancellation of a wrong decision on the part of the FTC. For example, we often need to deny in court the oral evidence of an employee of our client's company that was made and presented by the FTC. However, our assertion is rejected by the rule of substantial evidence. Many Japanese attorneys handling antitrust case believe this rule gives unfair condition to the appealer. There has been recently one big change in antitrust judicial procedure. In the present system, a person dissatisfied with FTC decision cannot bring a suit in the Tokyo High Court without procedure in the trial in the FTC. But, the law was amended and the trial system in the FTC was abolished. The amended law will be passed in Congress. This is good news. WHICH PARTICULAR PROBLEMS ARE FACED BY YOUR INTERNATIONAL CLIENTS WHEN PURSUING ANTITRUST/COMPETITION MATTERS IN JAPAN? ARE THERE ANY PARTICULAR PITFALLS? I would like to highlight that antitrust matters differ from other legal fields. Experience is more important than knowledge or logic when arguing the case, especially in the process of contacting the FTC. I emphasize to our international clients that the Japanese system is similar to the US system but the actual procedure differs significantly. DO YOU BELIEVE THE SUPPORT STRUCTURE FOR PRIVATE LITIGATION SHOULD BE STRENGTHENED? WHAT EFFECT WILL THIS HAVE ON THE JFTC? Yes, I believe the structure should be strengthened. As a result, many enterprises involved in litigation will use the claim based on antitrust laws or other B to B strategies. Toshio Kobayashi is founding partner and chief executive of boutique firm Kobayashi & Todo, which has been specializing in contentious and noncontentious IP matters, and antitrust, since its formation in 1962. Kobayashi & Todo Tel: +81 3 3580 2036 |