Keidanren Review
One U.S. View of Japanese Antitrust Law
September 20, 1995
(Japanese translation of this article will appear in the October issue of Gekkan Keidanren,
the monthly publication of Keidanren in Japanese. This manuscript is carried in full under
courtesy permission of Mr. Rosenthal.)
While many in the United States contend that Japanese antitrust law is not a significant
factor in the Japanese economic regulatory system, I believe them to be in error.<*1> Though
ideas, institutions and practices resistant to competition are still present in Japanese society,
there is a greater acceptance of free market ideas than many in the West recognize. In fact, in
a number of ways, antitrust law is being implemented in Japan similarly to the way it is
applied in the West. In recent years, government bodies, especially the Japan Fair Trade
Commission (JFTC), have succeeded in strengthening antitrust law considerably and seem
intent on pursuing this end even further. Japan is presently at a historical juncture when,
due to a period of some political inertia, organizations such as the JFTC have a clear
opportunity to asset themselves in expanding antitrust enforcement to advance Japanese
interests in promoting open, more efficient, less-regulated markets. Such an initiative can
also help reduce frictions in the Japan-United States bilateral relationship.
Increasing Trend of Deregulation
Though Japan has been dramatically more protectionist than the United States and
Europe, progress has been made over the last 10 years in increasing market access, especially
for many foreign consumer goods, as opposed to durable goods, or services generally.
Substantially more progress can and should be made in all sectors. Particular attention
should be paid to financial and other basic product and (often) service markets regulated by
ministries like Health, Construction, Agriculture, Telecommunications and Post, Energy and
Housing which, even now, have little incentive to deregulate. The divisions of the Ministry
of International Trade and Industry ("MITI") dealing with basic and intermediate industries
have, so far, continued long-standing protectionist policies which cannot be reconciled with
MITI's self-professed new market orientation. There are reforms already underway, however,
which can be promoted to bring change -- if Western leaders take them seriously and make it
their policy to encourage them.
The concept of deregulation is increasingly powerful today in Japan. Though some
may oppose a deregulation policy quietly, no one seems to be doing so loudly. This reflects
a general trend of change in Japan toward (1) stronger consumer sovereignty, (2) less central
planning, (3) consensus on the need to reform the Japanese distribution system which makes
goods too costly, and (4) more transparency in government decision-making.
An example of this new trend can be found in the Administrative Procedure Act of
1993 that seeks to promote transparency and fairness in the Japanese governmental process.
In it, guidelines are set for awarding licenses to enterprises, and groundrules are laid for
administrative guidance. The Japanese government has announced a deregulatory initiative
of some 1091 items. These demonstrate a commitment to a regulatory reform and seem to
herald meaningful institutional change.
Improvement in Application of Antitrust Law
Japanese antitrust enforcement is increasing. It has even occasionally been more
stringent than in the United Sates. For example, a small independent company providing
maintenance service for Toshiba elevators challenged the efforts of the manufacturer's service
subsidiary, Toshiba Elevator, to nomopolize the aftermarket for maintenance of its own
equipment by excluding independent elevator repair companies from gaining access to
Toshiba Elevator parts. They cited the decision of the United States Ninth Circuit Court of
Appeals (in Image Technical Services v. Kodak), and this influenced the Osaka court to reject
defendant's motion to dismiss. This decision was rendered before the U.S. Supreme Court
upheld the Ninth circuit decision in Kodak. The Supreme Court established the U.S. federal
precedent that single brand equipment service aftermarkets may be separate markets open to
monopolization and tying restrictions by a single equipment manufacturer. Two days ago, a
jury in California awarded $67,000,000 in damages (plus attorney's fees) against Kodak.
Passive Application to Dango Cases
The Antimonopoly Law, however, has not been enforced aggressively against
collusion in major industries. It has rarely addressed collusion through important trade
associations or otherwise among heavy industrial firms in major product sectors, or other
major Japanese enterprises -- especially by importers of key materials or providers of
establishment financial services. Two exceptions are the Oil Cartel Cases and the Sheet
Glass Case, and there have been a few others.<*2>
This rarity was properly alluded to in a
speech last year by Anne Bingaman U.S. Assistant Attorney General for Antitrust.<*3> She
noted that at various points in modern history the Japanese government has tended to use
trade associations to further official policy. Such a practice invites at least tacit horizontal
collusion and can spill over rather easily into significant overt collusive agreements.
Self-Initiated Investigation Necessary in Kodak Case
As this is written, Kodak has brought a Section 301 U.S. trade law complaint against
Fuji Film. Kodak alleges that anticompetitive practices in the Japanese film market deny
Kodak market access. This complaint provides an exceptional opportunity for the JFTC to
assert itself constructively in the interests of promoting competition and assisting in the
resolution of an international trade dispute. Even though it would be without precedent, the
JFTC, in my personal view, should itself initiate, even if Kodak fails to approach it, an
investigation under the Antimonopoly Law to determine after a full and careful investigation,
whether or not Kodak's trade claims are supported by the facts. A responsible inquiry by the
JFTC, whatever the conclusion, would go a long way to resolving the merits of the complaint.
Under the informal and highly political process of review under Section 301 of United States
trade law, it is unlikely that determination by the U.S. Trade Representative will be viewed as
balanced, or equally professional.
For Effective Operation of Japanese Antitrust Law
There is much criticism in Japan of the extraterritorial application of U.S. trade and
antitrust law. The more the JFTC, and Justice Ministry aggressively investigate and, where
appropriate, prosecute anticompetitive private conduct in Japanese markets, the less pressure
there will be in the United States for unilateral and extraterritorial U.S. law enforcement.
There are two institutional reforms which can significantly increase the effectiveness
of antitrust enforcement in Japan. First, new legislation should be implemented to make it
substantially easier for private parties to obtain preliminary injunctions in private cases
brought in Japanese courts. Preliminary Japanese anti-monopoly injunctions should be
made at least as easy to obtain as in the United States (where such suits are successful about
10-20% of the time).
In addition, the system of appointment of the five commissioners to the JFTC should
be reformed. The Chairman of the JFTC has traditionally been appointed (by the Prime
Minister, with consent from both Houses of the National Diet) from the Ministry of Finance.
The Ministry of Justice often has a "reserved" seat for one of the Commissioners, as do MITI
and the Ministry of Foreign Affairs. Securing seats for retired bureaucrats is not necessarily
conducive to an independent JFTC engaged in vigorous enforcement. The Antimonopoly
Law states that commissioners should be appointed from among those who have knowledge
of law and economies. Strong, well-qualified and independent candidates should be sought
as well from the bar, universities, journalism and commerce.
Economic relations between Japan and the United States should benefit considerably
from a stronger, more aggressive, better-funded and more independent JFTC. The United
States, however, should also make similar efforts to itself promote, more consistently, open
and competitive access to United States markets, particularly in its intellectual property and
trade laws and policies, if it wants convincingly to encourage Japanese officials to do the
same.
- < * >
- Mr. Douglas E. Rosenthal, born in 1940, is a Partner in the Washington office of the 400
lawyer international firm, Sonnenschein, Nath & Rosenthal. Mr. Rosenthal is the
immediate past Chief of the Foreign Commerce Section of the Antitrust Division of the
U.S. Department of Justice. He has appeared in a dozen U.S. Supreme Court cases and
in several domestic and international cartel, distribution and merger cases in the United
States (and Europe) over the past twenty years. In 1992 he was Visiting Adjunct
Professor of Law at Tokyo University.
- <*1>
- This viewpoint is discussed by Douglas E. Rosenthal and Mitsuo Matsushita in an article
entitled "Competition in Japan and The West: Can The Approaches Be Reconciled?" to be
published later this year in a book (from the Institute for International Economies),
entitled Global Competition Policy (Graham and Richardson (eds).
- <*2>
- There have been more than 700 enforcement actions against trade associations in smaller
industries - like barber shops.
- <*3>
- Before the Japan Society in New York City on March 3, 1994.
- For further information and professional services, please contact:
- Sonnenschein Nath & Rosenthal
1301 K Street, N.W.
Washington, D.C. 20005
U. S. A.
Tel: 1-202-408-6400
Fax: 1-202-408-6399
- Warning:
- The copyright of this article is retained by Mr. D.E. Rosenthal. Any reprints or
publication without his prior permission may result in legal action. Keidanren
reserves rights to carry this article under permission of Mr. Rosenthal for its
publications.
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