Struggling to Teethe: Japan's Antitrust Enforcement Regime

By Fry, James D. | Law and Policy in International Business, Summer 2001 | Go to article overview

Struggling to Teethe: Japan's Antitrust Enforcement Regime


Fry, James D., Law and Policy in International Business


I. INTRODUCTION

On February 22, 2000, Commissioner Shogo Itoda of the Fair Trade Commission (JFTC), Japan's independent antitrust enforcement agency, asserted that the JFTC "barks loudly and bites violators hard." (1) The JFTC's literature and leadership openly and eagerly claim it is making tremendous strides in enforcing Japan's competition law, which is commonly referred to as the Antimonopoly Act (AMA). (2) Despite three major amendments in the past decade stiffening Japan's sanctions, AMA enforcement measures still provide little deterrence or punishment for AMA violations. Admittedly, the JFTC has become more active in the past decade. Nevertheless, feeble enforcement measures available to the JFTC and Japanese courts limit the JFTC to merely gumming violators hard.

The purpose of this Note is to rebut Commissioner Itoda's above assertion. The purpose is emphatically not to attack the efforts of the JFTC or the Government of Japan. Rather, it is to examine the current weaknesses of Japan's antitrust enforcement regime, which stem from systemic shortcomings in both the AMA and the Japanese legal system as it applies to antitrust enforcement. The arguments of this Note are based upon a rational choice theoretical framework, which assumes that Japan's corporate decision-makers evaluate and rank all possible options and choose the option that will most likely further the corporation's interests. (3) The principle of deterrence used by enforcement agencies is based upon this theory. (4) Applying this primarily criminal legal theory to a business scenario, the corporate decision-maker will be deterred when the likelihood of getting caught multiplied by the magnitude of the penalty is greater than the profits the corporation will make from the anticompetitive conduct. (5) Thus, if the risk of getting caught is low, the penalty must exceed the profit in order to deter.

This analysis is delimited in two ways. First, it focuses primarily on AMA enforcement measures as actually constituted; this discussion neither attempts to speculate how Japan's antitrust enforcement regime should be organized nor addresses in detail non-legal voluntary measures such as threats of adverse publicity and administrative guidance. Second, although comparisons to the U.S. antitrust enforcement regime are used to support the thesis, the discussion does not compare the relative strength of these two systems. The types of available generalizations are limited by the qualitative methodology adopted. Despite strong internal validity, weaker external validity of the arguments presented here prevents broader application of the conclusions to all of Japan's statutes or administrative agencies. Determining causality between specific AMA provisions and degree of deterrence will be left to future quantitative research on the topic.

The body of the Note consists of six sections: (1) exploration of the history of the AMA clarifying the past and present structural flaws of the AMA; (2) explanation of antitrust enforcement procedures and the roles of the JFTC and Japanese courts in this process; (3) detailed discussion of four types of enforcement measures provided by the AMA; (4) examination of amendments to these measures adopted in the past decade; (5) analysis of the effectiveness in deterring and punishing AMA violators; (6) conclusions that Japan's lack of contempt of court powers is the fundamental reason for the ineffectiveness of Japan's antitrust enforcement regime. This Note proposes that the AMA enforcement provisions, and Japan's legal system in general, are inadequate in deterring and punishing violations of the AMA.

II. THE HISTORY OF THE AMA AND ANTITRUST ENFORCEMENT IN JAPAN

A. The AMA's Toothless Birth

Japan lacked any type of antitrust law prior to the Second World War. (6) Cartels and other anticompetitive institutions were considered by many of Japan's scholars and government officials to be an effective way of industrialization that counteracted the harmful effects of free competition. …

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