With the development of the borderless economy and the formation of a global market, the Antimonopoly Act, which stipulates the basic rules that regulate the market economy, has become increasingly important, and the demand for international consistency in the area of competition law is more critical than ever. However, the current rules for the procedures preceding the order by the Japan Fair Trade Commission (the JFTC) or subsequent appeals process fall far short of the US/European rules, not fully ensuring the standard of due process or the predictability of enforcement, which is an essential precondition for a nation pledging full-fledged "rule of law".
Referring to this disparity between the Japanese rules and the US/European rules, there are opinions arguing that it is too early to introduce the US/European style approach into the Antimonopoly Act on the ground that such approach has not been adopted to date for any administrative investigations or criminal proceedings in Japan. However, considering the increasing presence of foreign companies in Japan and the success of Japanese companies overseas amidst the ever more internationalized world economy, the gap between the Japanese law approach and the US/European law approach to due process is something that has to be closed, and this is no less true with the proceedings under the Antimonopoly Act by which competition policies should be promoted.
The "Advisory Panel on Basic Issues Regarding the Antimonopoly Act", which has been established under the Cabinet Office bearing a mission to review fundamental issues under the Antimonopoly Act, published a report in June this year. Unfortunately, this report, despite having deliberated on the issues for as long as 2 years, failed to address its original purpose to comprehensively review and picture desirable competition legislation that fits in the 21st century, without fully undertaking international comparative analysis or addressing various comments from the industry with respect to how to ensure due process in enforcing the Antimonopoly Act. If the Antimonopoly Act is amended in accordance with this report, the existing problems of the Japanese anti-monopoly practice are likely to grow into more serious stumbling stones.
We would like to make, therefore, the following proposals for comprehensive amendment to the Antimonopoly Act in relation to the JFTC investigation process and appeals process against the JFTC's administrative order by referring to, inter alia, the systems and processes in the US and Europe.
The amendment to the Antimonopoly Act last year has significantly strengthened the level of sanctions to be imposed against violations, creating a sufficient deterrent effect in line with the international standard.
At the same time, we have to be reminded that stringent sanctions are only justified by the full observation of due process principle in the implementation of laws, whereby a system of fair enforcement must be ensured and high predictability must be available for not only undertakings but also the general public.
It is interpreted that the latest amendment of the Antimonopoly Act intends that the sanctions under the Act should function not only to compel the loss of unfairly obtained profits but also to deter illegal acts as an administrative sanction, making it clear that sanctions under the Antimonopoly Act has the character of quasi-criminal penalty. Therefore, in imposing sanctions, sufficient standard of due process must be ensured to the same extent as is necessary for criminal penalty.
Failure to ensure due process, enforcement transparency and predictability will grant the authorities a free hand to enforce the rules in an arbitrary manner, causing the danger of violating the fundamental defense right of the person subject to investigation, leading to inaccurate fact findings, hampering the free business activities of the investigated undertakings, or unjustly infringing property rights of such undertakings. Against the backdrop of increasingly close-nit international economic activities, failure to observe the due process principle may disadvantage individual undertakings, including foreign entities, in an unexpected manner, which might give rise to new international friction.
By making administrative investigations comply with due process and the collected evidence accessible for the relevant undertakings (whether such evidence is advantageous or not for administrative agencies), more efficient administrative investigation will be achieved, and, in the case of appeals, the administrative authority may provide strong evidence that their fact-finding was duly conducted. This will merit both administrative authority and the undertakings involved by allowing them to have a clearer picture of issues, which furthermore leads to more expedited appeals process and the speedy resolution of disputes.
Under the current system, appeals against the JFTC's administrative dispositions may only be brought to a court after the JFTC hearing proceedings have been completed. However, given that in many violation cases under the Antimonopoly Act (such as cartels and bid-riggings) the focal point of dispute is whether there is any fact of violation, it will be appropriate to have judges with expertise in factual decisions handle such cases. Even regarding a violation case of Antimonopoly Act having specific circumstances that are unique to economic offences, fact-finding must be sought using the same standard which judges would accept as applicable to non-economic cases too.
In light of the above principle along with the increasingly limited financial resources of the government, the JFTC should concentrate its resources on the detection of allegations and administrative dispositions to such allegations in order to make the current system simpler, more reliable and more efficient.
In view of the points above, it is our opinion that the Antimonopoly Act should be amended as follows:
Under the current system, the JFTC conducts investigations, issues a cease-and-desist order or surcharge payment order, and also reviews its own order in appeals process. However, such self-conclusive system will always face inherent distrust with respect to the fairness of hearing proceedings, and any improvement merely regarding enforcement would not provide any fundamental solution to such distrust.
The current appeals process under the Antimonopoly Act is very unique even in light of other Japanese administrative procedures. Among other foreign competition authorities, there is no equivalent to such system. The current system to allow the JFTC to undertake appeals process should be abolished, and instead, to comply with the general principles of administrative lawsuits, a new system should be established whereby undertakings may call for appeals against the JFTC's administrative dispositions in the form of a cancellation lawsuit in a district court.
Some opinions debate that the JFTC hearing proceedings are necessary on the grounds that only the JFTC has expertise in enforcing the Antimonopoly Act. However, for the purpose of patent lawsuits, there is already a system where experts may be invited and involved in the relevant lawsuit as necessary. Similar system would be able to cope with the above-mentioned demand in respect of Antimonopoly Act cases.
Further, in order to accumulate experiences in Antimonopoly Act cases, a possible option would be to designate certain district courts to develop expertise in competition law. If this is relevant, measures to facilitate the parties residing away from any of such designated court may be introduced for the benefit of smooth case-handling and user friendliness, such as sending the relevant case to a non-designated court if the case does not require any specialist decisions. In addition, the Tokyo High Court should be designated to deal with all the competition law cases from all across the country as the court of second instance to achieve consist decision-making.
Even if it is decided that only the specialized divisions of certain designated courts may undertake the hearing of surcharge or other cases under the Antimonopoly Act, the number of cases will be around several dozen per year. However, to prepare for the potential increase of the number of competition law cases in the future, measures should be taken to secure a budget for the court to train and retain experts and for law schools to enhance courses relating to competition law.
For the purpose of administrative investigations, the JFTC is allowed to collect evidence without obtaining search warrants from a court, and aggravated penalties are imposed upon any action to obstruct such document search. Evidence collected in this manner should be treated differently from evidence collected under the control of a court order. Under administrative investigations, there is a risk that evidence may be collected by the sole decision of the administrative agency without any objective deterrence of judicial review provided by the court. Further, the Antimonopoly Act should provide that evidence collected by the JFTC in the course of its investigation shall be subject to the same treatment as is available in other jurisdictions, whereby certain business secretes are not disclosed as designated by the relevant undertakings, and that the undertakings subject to investigations along with their counsels shall have access to all the relevant evidence.
Currently, an advance notification is sent to the relevant undertakings prior to a cease-and-desist order and such undertakings may present their opinions along with related evidence. However, given that the time period available for undertakings to present their views and submit evidence is in practice very short, the current system is not achieving an adequate standard of due process that is essential for an administrative disposition with such significant impact as a cease-and-desist order. The Antimonopoly Act should specify that mutual discussion between the JFTC and the relevant undertakings shall be ensured by having sufficient time after the JFTC notification before the undertakings' response to it with their opinions and related evidence.
To be in line with the US/European systems and to protect the defense right of individuals such as company employees, the Antimonopoly Act should specify that an advance notification properly limiting the scope of inspection shall be given to the subject person in the event of searches in company premises, that attorney presence shall be secured during searches or interviews, and that client-attorney privilege shall be guaranteed regarding any conversations and communications.
To be in line with the US/European systems and to protect the defense right of individuals such as company employees, the Antimonopoly Act should specify that any interviewee shall enjoy the privilege against self-incrimination and the right to remain silent, i.e. "nobody shall be forced to make a statement that is disadvantageous to himself/herself" as provided in the Japanese Constitution.
To be in line with the US/European system, the Antimonopoly Act should specify that any interviewee shall receive, upon request, the copies of records regarding his/her interviews and statements during questions.
We express our opinions with respect to, inter alia, the following matters set forth in the "Prospective Amendments to AMA" (October 16) presented by the JFTC.
For the purpose of reviewing the scope of surcharge application, sufficient consideration should be given, including consideration as to whether a review itself is necessary at all, so that surcharges do not impede the incentives for lawful competition among undertakings or the sustainable growth of the national economy. Also, in case it is decided that a review is necessary, the meaning of "substantial restriction of competition" in the context of private monopolization must be clarified in the Antimonopoly Act in order to ensure legal stability and predictability, and to observe the principle that penalties must be clearly defined by law. Likewise, as for unfair trading practice too, the specific description of conducts that newly come under the scope of surcharges must be specified in the Antimonopoly Act taking into account the relevant precedents to date, and for this purpose we suggest the current approach itself to regulate certain conducts individually be reviewed.
Under the system whereby the details of warnings are publicized with the name of undertakings concerned, such undertakings subject to a warning suffer an unfair disadvantage that their names are disclosed simply because of a mere allegation, which potentially damages their brand values, and such undertakings do not even have any means to petition objections against a warning. Such unfair practice must be removed by specifying in the Antimonopoly Act the conditions for warnings and their subsequent publication.
(i) Limiting the scope of document submission under the proposed special rules for document production order
With respect to the proposed introduction of special rules for document production order for the purpose of injunction cases relating to unfair trade practice, a clear limit must be set properly to the scope of document submission, given the potential danger that, unlike patent cases, the order could be extended to a very broad range of documents without any limitation.
(ii) Disclosure of evidence held by the JFTC for the purpose of civil lawsuits
Record of JFTC interviews is merely hearsay evidence and the contents of such interview record are by nature subject to further verification by way of direct questions to the witness in a court. Except for unavoidable circumstances such as the death of the relevant witness, JFTC evidence should not be disclosed for the purpose of civil lawsuits.
(iii) Information exchange with foreign competition authorities
The attempt among different competition authorities to seek consistent enforcement of competition law is in itself desirable. However, given the status quo of the Japanese legal system that falls short of full consistency with those in other jurisdictions including fundamental differences in legal framework, indiscriminate transfer of evidence obtained via JFTC investigation to foreign authorities would potentially lead to the effective submission of privileged documents which would have been protected under client-attorney privilege vis-à-vis such foreign authorities. Any information obtained through JFTC investigations is by definition only for the purpose of deciding whether the conducts under allegation infringe the Japanese Antimonopoly Act. On this basis, in the event of exchanging information with foreign competition authorities, due process must be ensured by for example allowing the relevant undertakings to express their opinion, before disclosure, on whether particular information may be disclosed or on what is the scope of disclosure to be allowed.
Regarding the proposed introduction of pre-notification system for share acquisitions, sufficient consideration should be given to business practice, by for example raising the filing thresholds of shareholding ratio.
Also, the obsolete regulation on general concentration should be abolished.