Amendment of the Japanese Antimonopoly Act

Yukiko Konno

According to a public announcement by the Japan Fair Trade Commission (JFTC) dated May 29 2013, the aggregate amount of surcharge payment orders issued by the Commission in fiscal 2012 was approximately ¥25 billion, and was made to 113 business entities (the largest surcharge payment order to a single business entity being approximately ¥ 9.6 billion ($257 million)). It is easy to see that sanctions under the Antimonopoly Act have a great impact on companies with operations in Japan. On May 24, the Japanese Cabinet approved an amendment to the Act. The Bill was submitted to an ordinary session of the Diet in June for approval and is now under discussion. The press release announcing the Cabinet decision can be found on JFTC's website, www.jftc.go.jp/en/ pressreleases/yearly-2013/may/130524.html

The most significant amendments in the Bill are the abolition of JFTC administrative appeal procedures for certain JFTC orders, including cease and desist orders and surcharge payment orders, and the introduction of hearing procedures before one of those JFTC orders is issued.

Under the unamended Antimonopoly Act, a lawsuit seeking the revocation of a JFTC order may only be filed with the Tokyo High Court after the JFTC administrative appeal procedures have been complied with. The introduction of the Bill removes this requirement and will allow parties subject to a JFTC order to file an appeal against it directly with the Tokyo District Court, where it will be heard by a panel of three to five judges.

This amendment is considered to have two main advantages: first, the Bill ensures the appellant has all judicial appeal protections; second, the Bill abolishes the 'substantial evidence' requirement, which obligates the Tokyo High Court to accept the findings of the JFTC where certain criteria are met. It is anticipated that the Bill will facilitate and encourage entities to challenge JFTC orders. One of the main purposes of this abolition is to address the public distrust of the JFTC's hearing system, where the JFTC plays the role of both prosecutor (as issuer of the order) and judge. In fact, there have only been a handful of cases where the JFTC has reversed a JFTC order pursuant to the current administrative appeal procedures.

These amendments have raised two concerns. First, some scholars argue that the appellant will be required to demonstrate that the JFTC order should be overturned, whereas under the existing JFTC administrative appeal procedure, such responsibility lies with the JFTC. Second, the court may issue decisions inconsistent with the published JFTC guidelines, which may cause confusion in the market.

Similar to the notification and hearing procedures that are held before administrative orders under the Administrative Procedure Act, the Bill will introduce hearings before the issuance of a JFTC order. The applicable JFTC investigators will provide to an expected recipient of a JFTC order an explanation of the expected order, including a finding of facts, and summary of applicable laws and regulations. The target entity may respond to such findings and offer evidence, including questioning the JFTC investigators at the hearing. Further, a target entity may issue a request to inspect and copy certain evidence with respect to the JFTC's findings. The JFTC is required to fully consider the record and report before issuing any JFTC order (under the unamended Antimonopoly Act, orders are issued without any prior hearing).

Under the Bill, however, the scope of the evidence subject to copying is limited. Specifically, only evidence submitted by the party or its employees can be copied (in other words, the evidence and statements submitted by a third party may not be copied). In addition, the JFTC is entitled to reject such requests where the interests of a third party may be prejudiced or there are other circumstances that reasonably justify such decision of the JFTC.

Finally, it is worth noting that the Bill does not introduce the concept of attorney-client privilege or the right of attorneys to participate in JFTC interviews, contrary to the global trend towards harmonising competition laws across jurisdictions.

Yukiko Konno

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