A Japanese View of Competition Law Enforcement
Are there lessons you have learnt in Japan that can be applied to current problems in competition law enforcement of other jurisdictions including EU? If so, what are they?
First of all, I would like readers to understand the opinions expressed in this written interview are those of the writer and are not necessarily those of the Japan Fair Trade Commission (JFTC).
As for the first question, because the business environment and market situation differ by country or by economic area, I am not confident that our experience of the competition enforcement can be helpful to other jurisdictions. However, surely, under recent globalization and big wave of free trade agreement including TTIP, TTP or Japan-EU FTA, people in agricultural sector of all over the world has lately been exposed to bigger pressure of competition with other foreign farm products than never. So, the people in Japan or other areas have got to make all their efforts to raise their productivity and the quality they can offer to consumers, to survive in the current more and more globalized and competitive market.
Along with this trend, it has increasingly become more important for competition authorities to break down anti-competitive conducts raising costs of farmers, like price cartels of farming equipment or foreclosure of sales channel of farming products or procurement routes of seeds or fertilizers.
In Japan, the JFTC has aggressively tried to get rid of such harmful offences for over these years. For example, it has recently conducted a series of investigations against bid-rigging for procurement of agricultural facilities like grain elevators or rice milling facilities. As a result of its aggressive activities, the JFTC has successfully issued cease and desist orders and surcharge payment orders against a number of bid-riggers. On top of that, in these cases, we have found that the violating companies or the related companies had conspired with some of the officials of umbrella group presiding local agricultural cooperatives until our investigations started. These facts have seemed to show that these bid-riggings have been deep-rooted in this sector and derived from cozy relationship between umbrella organization and agricultural equipment companies. So, it requires comprehensive approach to stamp out such malpractices from this sector which have faced a number of global challenging issues.
Against this backdrop, the JFTC has carried out the following actions since last April;
- Establishing complaint handling section from farmers and wholesalers, and
- Setting up task force team to exclusively investigate agricultural related cases.
We expect these efforts to make us ready for tackling any violations every single day. And, I hope such experience will be useful to other competition enforcement authorities.
What is the most interesting enforcement policy you’ve worked on?
The JFTC has tried to aggressively make criminal accusations against very serious cartels or bid-riggings since it issued “the Fair Trade Commission’s Policy on Criminal Accusation Regarding Antimonopoly Violations” in June 1990, although it has handled most of the anti-competitive cases including local bid-riggings or vertical agreements in administrative procedure and imposed administrative measures on the violating companies. The Policy said that “The FTC will actively accuse to seek criminal penalties on the following cases:
- Vicious and serious cases which are considered to have wide spread influence on people’s livings, out of those violations which substantially restrain competition in certain areas of trade such as price-fixing cartels, supply restraint cartels, market allocations, bid-rigging, group boycotts, private monopolization and other violation
- Among violation cases involving those firms or industries who are repeat offenders or those who do not abide by the elimination measures, those cases for which the administrative measures of the FTC are not considered to fulfill the purpose of the Act.”
Although this policy strongly warned bidders or providers against rig-bids or cartels, it was a little unclear whether the investigated companies or persons would be accused criminally or not because the JFTC investigated all of the cases in an administrative procedure.
When I was a chief of drafting team of Amendment Bill of the Antimonopoly Act in 2007, our team thought that from due process point of view, it was desirable to allow the suspected persons or companies predict their destiny from the start of its investigation.
So, we decided to create new procedure and establish the Criminal Investigation Bureau to exclusively handle criminal accusations and totally detached from administrative procedures. In the new procedure, the JFTC finds a new clue of serious violation worthwhile making a criminal accusation, it allocates the case to the Bureau from scratch. And, the Bureau’s official shall go to the court to get search warrant to start on-site inspections. Then, the investigated companies or persons can fully prepare to defend themselves from criminal litigations.
Since the Criminal Investigation Bureau was established in 2008, the JFTC has made criminal accusations aggressively, as a result, the number of the accused cases have reached to seven during 10 years, of which pace is higher than ever. Why is that?
I also have had experienced this criminal procedure as a director of one of the divisions of the Bureau. In my understanding, this procedure is not just more desirable in the viewpoint of procedure fairness than the previous procedure, but also creates much more comfortable environment for our investigators regarding closer communication with Public Prosecutor’s Office which has to cautiously handle evidence obtained through administrative procedure or interview documents made by administrative investigators of JFTC, but not has to worry about such due process issues during joint investigation with the Criminal Investigation Bureau of JFTC.
In this sense, I think that this amendment of Antimonopoly Act has successfully opened new field to combat serious violations harming consumers’ benefit and national economy, and has brought us successful results.
Are there any new issues coming to the forefront in cartels and regulation? If so, how is the JFTC dealing with these?
Although in my presentation in “Cartels: Risk and Compliance 2016”, I would like to fully explain the new challenging issue the JFTC has faced recently, and try to avoid duplication with it, I will make a brief explanation of it in order to get the readers easily understand the background of the issue. As you all know, the JFTC has successfully collected a number of clues to start investigation through leniency program. The number of applications has reached to more than 900 during just ten years, which is the highest record in the world competition authorities as far as I know.
In my understanding, one of the reasons is the predictability or certainty of our program because our reduction rate for leniency applicants is a set rate like 100% for the first, 50% for the second, 30% for the third, the forth and the fifth. And also, our surcharge payment rates are set and no room for discretionary for JFTC. So, the applicants don’t have to worry about more expensive amount of surcharge payment order than their expectations. On the other hand, as some practitioners have pointed out, there might be possibility that the applicants do not have any incentives to be cooperative to JFTC’s investigation once they are guaranteed their status of leniency applicants by submitting application form accompanied by some evidence.
So, it may be appropriate to allow the JFTC to have a certain degree of discretionary power to change reduction rate of leniency or rate of surcharge payment along with degree of the applicant company’s cooperation to JFTC’s investigation. Now, the JFTC has set up Study Group to review our system to address this issue taking consideration of recent rapid changing business environments.
What is your number one tip for a strong compliance program?
The JFTC has regularly issued compliance research reports which has advocated key words, “3D” for effective compliance program.
The first D means Deterrence: Prevention acts in violation of the AMA through making compliance manual, setting up training program based on the manual and making rule that prohibits contact with competitors and so on.
The second D means Detection: Verification and early discovery of acts in violation of the AMA thorough audits, setting consultation desk for whistle blowers and in-house leniency program.
The third D means Damage Control: Appropriate response to an act in violation of the AMA including rapid in-house research, rapid preparation of leniency application to the related competition authorities and the appropriate decision making of executive members.
I think that such a comprehensive package of three actions are indispensable for ensuring the effectiveness of AMA compliance program as a “tool for controlling and avoiding risks.”
You spoke on the Regulations Panel Session at our Cartels: Risk & Compliance earlier this year. What was your favourite topic to discuss?
As I have written earlier in this interview, one of our challenging issues is to review our sanction system to give a thought to the system allowing the JFTC to have discretionary power. EU and EU member countries have a system where they have a certain discretionary power to set reduction rate of leniency applicants or amount of fine. I enjoyed hearing from other speakers about their experiences regarding how their systems have worked, how they can manage their system to balance between inducing application of leniency and eliciting cooperation from applicant companies, and how they might review their systems to be more effective for competition law enforcement.
