JFTC's Competition Policy Plan in Conjunction with The Revised Three-Year Program for the Promotion of Deregulation

( tentative : unofficial translation)

 

March 30, 1999
Fair Trade Commission

 

The Cabinet adopted, today, "The Three-Year Program for the Promotion of Deregulation(revised)", which includes measures to promote fair and free competition as well as deregulation, from the viewpoint of making the Japanese market more open and competitive.

The Fair Trade Commission(FTC) will continue to strictly and vigorously deal with the violations to the Act concerning Prohibition of Private Monopoly and Maintenance of Fair Trade(the AMA) as well as work on maintenance and promotion of fair and free competition at the various stages in relation to public systems such as regulation and private business practices, in order to promote fair and free competition in the Japanese market bearing in mind of the purport of the deregulation measures taken by the Government as a whole.

Specific measures of the FTC are as follows.

Taking this occasion, the FTC announces that it solicits views from the public in general concerning the role of the FTC in promoting deregulation and competition policy.

(Note) Text of the Revise Plan in regard to competition policy are indicated with Italic letter.

1. Strict,Prompt and Vigorous Actions against the AMA Violations

 

(1) Continued efforts shall be made to strengthen the enforcement of the AMA, including such measures as to reinforce the power of the Fair Trade Commission in terms of its investigative and other resources. Strict and vigorous measures, including accusation for criminal prosecution, shall be taken against price cartels, bid rigging and other types of the AMA violations.

a. Recent Enhancement of Investigation Section of the FTC

 

FY1995

FY1996

FY1997

FY1998

FY1999

No. of Total Staffs

520

534

545

552

558

No. of Investigators

220

236

248

254

260

(Note) Each number is as of the end of fiscal year.

b. Vigorous Action against Violations (Cases concluded in FY 1998 (As of March 29, 1999))

(a) Legal measures 25 cases
(recommendations and surcharge payment orders issued without a recommendation)
  • Bid-riggings
15 cases

(Construction - 8 cases, Commodity Procurement - 4 cases)

  • Price-fixing
1 case
  • Other cartel
1 case
  • Private monopolization(exclusion of the competitor)
1 case
  • Constraint of member's activity by a trade association
1 case
  • Unfair trade practices in the distribution area
6 cases

(resale price maintenance, prevention of parallel import, etc.)

(b) Warnings 16 cases
(c) Criminal accusation 1 case
(against market share fixing collusion among three manufacturers of dactile iron pipe)

c. The FTC has strictly and vigorously addressed the AMA violations which impede market access, international cartels, as well as monopolization of the Japanese market by a foreign firm.

(examples)

  1. Monopolization case where a foreign supplier of radiopharmaceutical material (Decision; September,1998)
  2. Tying trade by a computer software provider among calculating software, word-processing software and schedule management software (Decision; December,1998)
  3. International market allocation cartels by domestic and foreign producers of graphite electrode (Warning; March,1999)

(2)In order to secure fair competition order in the deregulated markets, strict and prompt action will be taken against unfair trade practices, such as practices imposing an undue disadvantage on small and medium-sized enterprises. Similarly, strict and prompt action will be taken against misleading advertising and representations which lead consumers to misunderstand the quality or contents of goods or services offered and thereby prevent consumers from making proper choices.

a. Measures to Secure Fair Competition Order( As of end of February, 1999)

(a) Unjustifiable low price sales     Warning (1 case), Caution(506 cases)

(b) Abuse of dominant bargaining position

(example)

Recommendation (1 case), Warning (1,127 cases)

(c) Misleading advertising ;

Cease and Detest Order (6 cases, as of 29 March, 1999), Warning (291 cases)

  • FTC conducted the survey on advertising of English conversation schools and pointed out the problems. (issued in June, 1998)
  • The FTC strictly dealt with the violations such as ones concerning advertising of the performance of air-cleaning machines for home-use, price indications of meat, etc.

b. Reinforcement of Consultation System for Small and Medium-Sized Enterprises

 

2 Promotion of Deregulation and Competition Policy Advocacy

In order to create a free and fair socio-economic system which is fully opened to the world, it is essential to enhance competition policy including deregulation.

For that purport, the FTC is going to engage in survey and proposal for deregulation, adjustment of competition-restricting administrative guidance, measures to non-governmental restrictions in the private sector (so-called min-min kisei), support of voluntary activities of AMA compliance, etc., and thereby to advocate competition policy among public agencies as well as business sector.

(1) Survey and Proposal for Deregulation

From the viewpoint of competition policy and, the FTC shall actively advocate competition policy by conducting surveys and making necessary proposals on business fields where entry is restricted by supply-and-demand adjustment and other regulations, and on the post regulation conditions regarding business fields where regulatory entry barriers have been relaxed, as well as by supporting voluntary compliance with the AMA on the part of businesses.

a. Action for promotion of deregulation

The FTC, by means of surveys on government regulation systems from the viewpoint of competition policy, etc., examines problems of government regulations, their feasible improvements, and appropriate directions of competition policy and issues relevant proposals as appropriate.

b. Recent Activities

(a) Issuance of a report by the Study Group on Government Regulations and Competition Policy

Airline sector (domestic air passenger transportation services)

March, 1997

Electricity sector April, 1997

Gas sector April, 1997

(b) Issuance of the survey on insurance industry November, 1998

 

(2) Responding to Local Government Regulations

The FTC shall also conduct surveys, from the viewpoint of competition policy, on the entry barriers instituted by local governments. Where necessary, the FTC shall submit its proposals, and undertake the appropriate adjustments with the administrative agencies concerned.

○Survey on local government regulations on-going

(3) Dealing with Anticompetitive Administrative Guidance

Ministries and government agencies concerned shall, bearing in mind the purport of "the Antimonopoly Act Guidelines regarding Administrative Guidance", enter into necessary consultations in advance, with the FTC to ensure that government regulations are not replaced by anticompetitive administrative guidance after deregulation.

○ Activities addressing to Anticompetitive Administrative Guidance

The FTC, when it has found the anticompetitive administrative guidance in the course of the investigation to a suspected AMA violation case, surveys, etc., it urges improvement of one upon the administrative agencies concerned.

(4) Responding to Non-governmental Restrictions in the Private Sector (so-called Min-Min Kisei)

Regarding restrictive business practices in the private sector, the FTC will strictly take measures against AMA violations in accordance with the provisions of the Act. The FTC will also conduct surveys on such restrictions and seek to correct private practices that restrict competition. In case where such business practices are employed based on or facilitated by the anticompetitive administrative guidance, the FTC and the ministries and government agencies concerned shall promptly undertake a review of such guidance. Where, despite of the appearance, the restriction in the private sector is nothing to do with the administrative activities, the ministries and government agencies concerned shall make widely known the fact of non-intervention and endeavor to clarify the source of the restriction.

a. Activities addressing to Non-governmental Restrictions in the Private Sector

The FTC has strictly dealt with the AMA violations such as prevention of new entry, discrimination, committed by incumbent firms or the trade associations thereof and will continue to do. The FTC also continues to urge upon administrative agencies concerned when it finds anticompetitive administrative guidance, if any, to take an appropriate measure to correct them. The FTC conducts the surveys and requests for relevant improvement as appropriate.

b. Strict Measures to the AMA violations

(example)

  • Restrictions of advertising imposed by the medical doctors association on its members (Decision; January, 1999)
  • Suspected adoption and implementation of the standard tariff by the trade association of firms of inspection and maintenance of the septic tank (Warning; June, 1998)

c. Surveys on the Non-governmental Restrictions in the Private Sector and Coordination with the Ministries Concerned

(example)

  • Survey on restrictions on advertising and opening of the shops in the pharmacies industry (Publicized ; June, 1998)
  • Survey on voluntary standard and certifications set out by public corporations (Publicized ; July, 1998)
  • Survey on regulations on advertising in personal professions (judicial scrivener and cerified administrative procedures specialist)(Publicized ; September, 1998)
  • Survey on tariffs prepared by the trade associations in the construction industry (Publicized ; March, 1999)

(5) Deterrence of the Violations, Transparency of the Implementation of the AMA

a. Support to the voluntary effort by entrepreneurs to comply with the AMA

(The FTC shall actively advocate competition policy by) supporting voluntary compliance with the AMA on the part of businesses.

(a) The Fair Trade Institute is planning to formulate a model AMA Compliance Program by revising and improving the current "Guide for AMA Compliance Program" and the FTC will assist the Institute with the formulation of the model as well as continue to support the entrepreneurs, upon their request, which voluntary work on preparing or improving the AMA Compliance Program.

(b) The FTC conducted survey on implementation of the AMA Compliance Program and publicized the result thereof, which showed about 70 percent of the companies listed in Tokyo, Osaka or Nagoya Security Exchange has implemented the AMA Compliance Program or has the plan to do.

b. Deterrence of Bid-Riggings

(a) Corporation with the Commissioning Entities

  • The FTC will enhance corporation with the commissioning entities through Liaison Officers Regarding Public Bids.
  • In order to facilitate officials of prefectures and municipal corporations, etc., in charge of procurement to detect and collect information on suspected bid-riggings, the FTC has will continuously support the seminar for procurement officials by means of providing lecturer and materials.
  • When the FTC found any problems with procurement method or the procedure thereof, it urges on the commissioning entity to address the problems.

c. In order to ensure legal certainty for the entrepreneurs as well as transparency of the implementation of the law, the FTC will continue to actively deal with consultations on the legality with the AMA of the planned business activities including mergers and acquisitions and other concentration operations. The FTC will ensure the transparency of the consultation in advance, by publicizing the result of major consultation cases.

3 Review of AMA Exemption Systems

 

(1)Review of AMA Exemption Systems of Cartels and Others

With regard to the AMA exemption systems of cartels and other activities, the result of the reviews that have been conducted concerning the overall scope of conducts and trade associations covered by the exemption systems is as follows. As for the exemption systems under the AMA, depression cartel system and rationalization cartel system will be repealed. As for the exemption systems under the AMA Exemption Act ( Act concerning Exemptions from the AMA), exemption concerning cooperatives will be integrated to the system under Section 24 of the AMA, and the other exemptions will be abolished in principle. The Exemption Act itself will be abolished as well. A bill for this purpose will be submitted to the ordinary session of the Diet in 1999.

With regard to the exemption system for the conducts characteristic of natural monopolies (Section 21 of the AMA), further consideration on abolition shall be continued aiming to reach a conclusion by the end of CY 1999.

With regard to the exemption system for the cooperatives (Section 24), further review on the proviso in the light of limiting and clarifying the scope of the exemption will be continued, aiming to reach a conclusion by the end of CY 1999.

○ The Bill concerning Restructuring AMA Exemption Systems that proposes repeal of depression cartel system and rationalization cartel system, abolition of the AMA Exemption Act, etc., was submitted to the Diet on February 16, 1999.

<Outline of the Bill>

- Repeal of the depression cartels system, Rationalization cartels system, etc.

  • Abolition of the AMA Exemption Act and accompanying measures

- Integration of the provision accommodating the exemption for the cooperatives to Section 24 of the AMA

- Abolition of the exemption provided for other trade associations and systems

- Legislative measures to continue the exemption to notification obligation for the trade associations having been exempted by the AMA Exemption Act

  • Amendment of the other laws

- Limitation of the scope of the exemptions and improvement of the procedures for FTC's interventions for the exemption systems provided by the laws such as Maritime Transportation Law, Coastal Shipping Association Law, Civil Aeronautics Law, Law concerning Coordination and Improvement of Hygienically Regulated Business.

(2) Resale Price Maintenance System for Copy-righted works

Regarding the resale price maintenance (RPM) system for copy-righted works( books, newspapers, periodicals, records, music tapes and music CDs), particular reasons are necessary to keep it, as the system accommodates RPM system which is in principle prohibited by the AMA. Necessary measures will be taken while deepening the discussion on the issues pointed out by the final opinion by the Administrative Reform Committee.

For the time being, prompt and appropriate action shall be taken against various types of problematic practices, in the light of consumers' interest, in distribution and business transaction existing under the current RPM system.

a. In March, 1998, the FTC issued " FTC's Plan to Review RPM Systems for Copy-righted Works", in conjunction with the Revised Three-Year Program for the Promotion of Deregulation and has worked on the matter accordingly.

b. The FTC has urged improvement of distribution and business practices upon the industries concerned, in the light of the interest of consumers. The FTC publicized the current situation of the activities by each of the industries for improvement of the business practices in February 1999.

The outline of the measures taken by the industries are as follows.

4 Matters related to Concentrations

 

Regarding the notification system for mergers and acquisitions of business, the reporting system for stockholdings of other companies, and the notification system for interlocking directorates, measures such as introduction or raise of a minimum threshold shall be taken from the viewpoint of achieving more efficiently the aims of the regulation on concentration operations, of leasening the burden on enterprises, and of bringing about harmonization with international regulatory practices.

As for the kind of holding companies prohibited and the kind of stocks subject to the restriction on the total value of stockholdings by a large-scale non-financial company, necessary review shall be implemented in accordance with the supplement of the provisions of the Amendment Act of the AMA(Act No. 87 of 1997).

Especially for the restriction on the total value of stockholdings by a large-scale non-financial company, enlargement of the scope of stocks not under the restriction as well as increase the minimum threshold of the large-company shall be implemented as far as is necessary, putting in mind to substantially enlargement and increase.

○ The FTC has dealing with concentration operations such as mergers and acquisitions that have increasingly occurred in domestic and international dimension responding to the recent economic situation such as globalization of the business activities.

  • Reduce the scope of notification and reporting systems of mergers, stockholdings etc., ( Implemented; January, 1999)
  • Making mergers and acquisitions in foreign countries under the AMA regulation as well as reform the notification and reporting systems
  • Issuance of the Guidelines concerning Concentration Regulations (December, 1999)
5 Private Remedy System

 

Regarding the private remedy system, study shall be conducted bearing in mind that the system be, as the basic condition of deregulation, effective and consistent with the related legislative structure, aiming to reach a conclusion by the end of FY 999 at latest.

○ The FTC has studied on feasibility and desirability of interdicting private action system for injunctive relief as well as measures to improve the present damage action system against the AMA violations, from the viewpoint of promoting reforming Japan's socio-economic system to one based on self-responsibility rule as well as market principle and of improving private remedy system for victims of the AMA violations.