Competition Law and Policy of Japan
| Author | Toshiaki Takigawa |
| Published date | 01 September 2009 |
| Date | 01 September 2009 |
| DOI | http://doi.org/10.1177/0003603X0905400301 |
| Subject Matter | Article |
Competition law and policy of Japan
BY TOSHIAKI TAKIGAWA*
I.
INTRODUCTION
A. Overview
Competition law in Japan (the Antimonopoly Act or AMA)1 already
has a history of sixty-two years. It was originally initiated under the
heavy influence of U.S. antitrust laws, but at the same time, it was
equipped with fairness-oriented regulations, that is, unfair trade prac-
tice regulations. The resulting mix of orthodox antitrust principles
and fairness-oriented regulations has complicated the application and
enforcement of the Antimonopoly Act. As to sanctions, the U.S.-influ-
enced criminal penalties were later mixed with European-influenced
surcharges. This mix contributed to the sometimes inconsistent ways
of enforcing the Antimonopoly Act.
The Fair Trade Commission of Japan (JFTC),2 an independent
competition agency, has greatly contributed to developing and
*
Professor, Kansai University School of Law, Osaka, Japan.
1
Act Concerning Prohibition of Private Monopolization and Mainte-
nance of Fair Trade, Act No. 54 (1947, revised 2005) [hereinafter Antimonopoly
Act or AMA]. An English translation is available at http://www.jftc.go.jp/
e-page/legislation/ama/amended_ama.pdf.
2
See JFTC, http://www.jftc.go.jp/e-page/aboutjftc/list200906.html
(last visited June 28, 2009).
© 2009 by Federal Legal Publications, Inc.
ATB
Fall 2009
article by:
Takigawa
10-15-2009 Rev
436 : T H E A N T I T R U S T B U L L E T I N : Vol. 54, No. 3/Fall 2009
strengthening the Antimonopoly Act and its enforcement, particu-
larly through rejection of an industrial policy (or public interest)
interpretation of the AMA. However the JFTC has, at the same time,
often stuck to an inflexible interpretation of the AMA, forsaking rule
of reason analyses. The JFTC can also be criticized for making too
much use of unfair trade practice regulations, sacrificing economics-
based competition principles. However, in recent years, courts have
increasingly come to play a role as important as that of the JFTC by
introducing new ideas for the application of the AMA, including pri-
vate action suits as well as those for nullification of JFTC decisions.
This article aims to systematically analyze the current status of
the AMA and its enforcement, contrasting them with the U.S. and
European Community (EC) competition laws, and then to make sug-
gestions for future improvements.
B. History of the Antimonopoly Act
The Antimonopoly Act together with its enforcement agency, the
JFTC, was inaugurated after World War II in 1947 under the strong
leadership of the U.S. Occupation Forces. The AMA, therefore, was
largely modeled along the lines of U.S. antitrust laws. However,
uniquely Japanese characteristics, especially the concept of unfair
trade practices, were added to the AMA making its clauses more
complicated than the U.S. Sherman Act. Moreover, very detailed defi-
nitions were originally set up for key AMA clauses—“unreasonable
restraint of trade” and “unfair trade practices”—making it difficult to
improve regulations through application to cases.
After the end of the U.S. occupation, the Japanese Diet amended
the AMA in 1949 and 1953. These two amendments abolished exces-
sively rigorous prohibitions—in particular, the almost complete pro-
hibition of cooperative conduct and pre-approval system of mergers;
however, the main contents of the AMA were not weakened.3
After the initial active enforcement of the AMA in the 1940s, the
JFTC greatly reduced its enforcement of the AMA, as it was over-
whelmed by the industrial policies of the Ministry of Industry and
3
For detailed early history of the Antimonopoly Act, see Hiroshi I. Iyori
& Akinori Uesugi, THE ANTIMONOPOLY LAWS AND POLICIES OF JAPAN 1–40 (1994).
ATB
Fall 2009
article by:
Takigawa
10-15-2009 Rev
J A PA N : 437
Trade (MITI). However, in the latter half of the 1970s, the Japanese
government recognized the importance of enforcement of the AMA to
control inflation. Thus in 1977 the Diet strengthened the AMA by
introducing administrative surcharges against price cartels. Then,
during the 1980s, trade conflict with United States deepened, and
through the U.S.-Japan Structural Impediment Initiative,4 the Japan-
ese government pledged to strengthen the AMA and its enforcement
with the objective of opening up Japanese markets. The result was the
strengthening of criminal penalties and heavy condemnation of bid-
rigging.
During the 1990s, the Japanese government placed greater empha-
sis on competition policy and introduced procompetitive regulatory
reforms to revitalize the Japanese economy, which had been stagnant
after the 1990 collapse of Japan’s rapid economic growth. As a result
of the most recent AMA amendment, in 2005, surcharges were aug-
mented, a leniency system was introduced, and the investigative
powers of the JFTC were strengthened.
C. Structure of the Antimonopoly Act
The AMA has four pillars that deal with four types of anticompeti-
tive conduct: (1) unreasonable restraint of trade, (2) unfair trade prac-
tices, (3) mergers and stock acquisitions, and (4) monopolization. (See
tables 1 and 2.) Among these, the first, third, and fourth pillars are
largely equivalent to the corresponding statutes in the U.S. antitrust
laws. But, the second pillar—unfair trade practices—is a uniquely
Japanese concept (now shared with some other Asian countries).
Unfair trade practices overlap with monopolization, as well as
with aspects of unreasonable restraints of trade. Moreover, the regula-
tion of unfair trade practices covers policy areas usually not consid-
ered the domain of competition laws. These are the direct protection
of consumers and of small and medium-sized enterprises. As a result
of such widespread coverage, the AMA clause against unfair trade
4
See Joint Report of U.S.-Japan Working Group on Structural Impedi-
ments Initiative 2 (June 28, 1990) [herinafter Joint Report]; [U.S. Trade Rep.,
National Trade Estimate Report of Foreign Trade Barriers 107 (1990).
ATB
Fall 2009
article by:
Takigawa
10-15-2009 Rev
438 : T H E A N T I T R U S T B U L L E T I N : Vol. 54, No. 3/Fall 2009
practices has often been criticized by businesses and academics for its
unclear standards for illegal conduct.
Table 1
Four Pillars of the AMA Clauses
AMA Articles Requirements for
Targeted Business Conduct
Identifying
Illegality
Unreasonable
• Art. 3
• Mutual
• Horizontal
Restraint of
(latter half)
restriction
agreements
Trade
• Art. 2 (6)
• Substantial
restraint
of competition
Unfair Trade
• Art. 19
• Discrimination, • Vertical agreements
Practices
• Art. 2 (9)
restriction,
(restraints)
obstruction,
• Part of horizontal
abuse, etc.
horizontal
• Unjustness
• Exclusionary conduct
• Impediment to • Other unfair conduct
fair competition
Mergers and
• Art. 10
• Market
• Mergers
Stock
• Art. 15
concentration
• Stock acquisitions
Acquisitions
causing
substantial
restraint
of competition
Monopolization • Art. 3
• Exclusion or
• Exclusionary conduct
(former
control
• Control of other
half)
• Substantial
companies
• Art. 2 (5)
restraint of
competition
ATB
Fall 2009
article by:
Takigawa
10-15-2009 Rev
J A PA N : 439
Table 2
Categories of Anticompetitive Conduct and Applicable AMA Clauses
Anticompetitive conduct
Applicable AMA clauses
Horizontal agreements
• Unreasonable restraint of trade
• “Control” part of monopolization
• Unfair trade practices
Vertical agreements
• Unfair trade practices
(restraints)
Mergers and stock acquisitions • Clauses for mergers and stock
acquisitions
Exclusionary conduct
• Monopolization
• Unfair trade practices
Other unfair conduct
• Unfair trade practices
II. OBJECTIVE OF COMPETITION LAW AND
AGENCY DESIGN
A. Objective of the Antimonopoly Act: consumer surplus
or total surplus?
An almost universally regarded objective of world competition
laws is consumer welfare. Nevertheless, what makes up “consumer
welfare” is somewhat controversial: Is it “consumer surplus” or “total
surplus” (consumer surplus plus producer surplus)? Article 1 of the
AMA is ambiguous on this point. The description lists both consumer
surplus (“attainment of general consumer interests”) and total sur-
plus (“promotion of national income” and “development of national
economy”) as objectives without setting priorities. In the enforcement
of the AMA by the JFTC and courts, the objectives of the AMA have
rarely been discussed because the JFTC and courts have usually
found business conduct illegal when the conduct effectively
restrained competition as stipulated in each of the AMA clauses:
“substantial restraint of competition” for an unreasonable restraint of
trade, monopolization, and mergers; “danger to impede fair competi-
tion” for unfair trade practices.
ATB
Fall 2009
article by:
Takigawa
10-15-2009 Rev
440 : T H E A N T I T R U S T B U L L E T I N : Vol. 54, No. 3/Fall 2009
Until very recently, defense arguments rationalizing restraints of
competition have been admitted only for safety reasons. Neverthe-
less, in recent decisions of both the JFTC and the courts, as well as in
the JFTC guidelines, a defense of efficiency has been admitted. In the
most recent example, the JFTC’s Business Combination Guidelines
allow for a defense of efficiency, at least as far as the achieved effi-
ciency benefits consumers.5 The Business Combination Guidelines
suggest that the JFTC considers consumer surplus as the prime objec-
tive of the AMA, although the JFTC usually concentrates on scrutiniz-
ing effects that restrict competition.
In cases...
To continue reading
Request your trial