Competition Policy -The Japanese experience-

Transcription

1 Competition Policy -The Japanese experience- 24 March 2015 Hiroyuki ODAGIRI Commissioner Japan Fair Trade Commission 1

2 Dissolution of Zaibatsu Liquidation of holding companies, e.g., Mitsui, Mitsubishi, and Sumitomo 1947 De-concentration Law Splitting 11 companies, e.g., Nippon Steel, Mitsubishi Heavy Industries (both later re-merged), and Dainippon Beer (today s Asahi & Sapporo) 1947 History Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (so-called Anti- Monopoly Act or AMA) Most recent revision to come in force in April 2015 July 1947: Start of Fair Trade Commission (JFTC) with the Chairman and 4 Commissioners JFTC General Secretariat with about 800 staff 2

3 The Number of Staff and Budget of the JFTC The Number of Staff and Budget of JFTC The Number of staff 1000 Transferred the Act against Unjustifiable Premiums and Misleading Representations to Consumer Affairs Agency Budget [million yen] 9, ,686 7,853 7, , , , , , ,962 8,915 8, , ,000 8,500 8,000 7,500 Number of staff Budget , , FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 6,000 Including 12 lawyers and 3 economists as fixed-term members 3

4 Enforcement Surcharge Amount 5years-average (million yen) Surcharge Amount 5yearsaverage (million yen) ~1983 ~1988 ~1993 ~1998 ~2003 ~2008 ~2013 4

5 Objectives of the Antimonopoly Act (as stated in Article 1) Promotion of fair and free competition Prohibition of behavior that falls under violations Prevention of excessive concentration of corporate power Private monopolization Unreasonable restraint of trade Unfair trade practices Merger regulation Stimulation of initiatives of enterprises Encouragement of Business activities Heightening the level of employment and people s actual income Assuring interests for general consumers Development of a democratic and wholesome national economy 5

6 1 Japan Fair Trade Commission Structure of the Antimonopoly Act Three Pillars Private monopolization Unreasonable restraint of trade Any behavior that substantially restraints competition in any particular field of trade is prohibited. Private monopolization (e.g. exclusion of competitors), Unreasonable restraint of trade = Hard-core cartel (e.g. price fixing, output restriction, market division, bid rigging) 2 Unfair trade practices Any behavior that tends to impede fair competition is prohibited. Group boycotts, resale price restriction, unjust low price sales, trading on exclusive terms, interference with competitors transactions, abuse of superior bargaining position, etc. 3 Merger regulation Preventive regulation (prior notification is required) Any merger that substantially restraints competition in any particular field of trade is prohibited. 6

7 Legal measures against violations of AMA Conducts Private Monopolization Unreasonable Restraint of Trade (Price fixing cartel /Bid-rigging, etc.) Unfair Trade Practices Anticompetitive Merger Legal Measures Cease and Desist Order Surcharge Payment Order Criminal Accusation Cease and Desist Order Surcharge Payment Order Criminal Accusation Cease and Desist Order Surcharge Payment Order* Cease and Desist Order *Only certain types of Unfair Trade Practices 7

8 The JFTC s Priorities Strict and expeditious enforcement against price-fixing cartels and bid riggings that have significant impacts on peoples' lives Enhancement of advocacy activities to improve competitive environment Promotion of international cooperation to cope with globalized business activities 8

9 Recent cases Bid rigging, price-fixing cartels Bid rigging (public projects) - Engineering works and paving works ordered by the Chiba Prefecture (February 2014) - Snow-Melting equipment engineering works for Hokuriku Shinkansen ordered by the Japan Railway Construction, Transport and Technology Agency (Filing criminal accusation: March 2014) Bid rigging (private business projects) - Electricity transmission line works ordered by TEPCO (Tokyo Electric Power Co., Inc.) and KEPCO (Kansai Electric Power Co., Inc.) (TEPCO: December 2013, KEPCO: January 2014) - Low temperature air conditioning system work (January 2015) Price cartels - Manufacturers of high-fructose corn syrup and manufactures of starch syrup and glucose (June 2013) - Steel ball manufacturers (September 2014) International cartels - Automotive parts (November 2012) - EU, US, Canada - Industrial machinery bearings and automotive bearings (March 2013) - EU, US - International ocean shipping services for automobiles (March 2014) - EU,US 9

10 Unfair trade practices : Abuse of superior bargaining position Recent cases of the abuse of superior bargaining position, causing undue losses to smaller companies (e.g., suppliers) - A supermarket in Hokkaido (July 2013) Forced purchase Request for dispatch of employees Request for payment of monetary contribution - A discount store in Kyusyu (June 2014) Request for dispatch of employees Request for payment of monetary contribution - Investigation is also made by the Task Force on Abuse of Superior Bargaining Position to effect fast remedies (warnings issued in 58 cases in FY2013 ) 10

11 Globalization and competition policy International cartels Cartel among firms based in different countries Collaboration of agencies is needed across countries International division of labor Procurement, manufacturing, and sales across borders Which jurisdiction should take action? How to prevent duplication of sanctions? International (cross-border) mergers How to coordinate reviews across different jurisdictions? How to coordinate remedies? 11

12 Case1. Marin Hose On-the-spot inspection May 7,2007 (Coordination with: DOJ, EC, etc.) Date of order February 22, 2008 Violators (location/ cease and desist order/surcharge payment order) Case Summary Feature Bridgestone Corporation (Japan/ /2,380,000yen), Dunlop Oil & Marine Limited (UK/ /-), Trelleborg Industries SAS (France/ / -), Parker ITR S.r.l. (Italy/ /-), Manuli Rubber Industries S.p.A (Italy/ /-), Yokohama Rubber Co. (Japan/-/-), Comital Brands S.p.A(Italy/-/-), Manuli Oil & Marine (USA) INC.(U.S./-/-) The violators substantially restrained competition in the field of trade of specified marine hose ordered by customers located in Japan, by jointly determining the Champion and ensuring that the Champion would receive the orders. First case that JFTC took the cease and desist order against overseas company International market allocation case 12

13 Case2. Wire Harness On-the-spot inspection February 24, 2010 (Coordination with DOJ, EC, etc.) Date of order January 19,2012 Violators (location/ cease and desist order/surcharge payment order) Illegal conducts Yazaki Corporation(Japan/ /9,607,130,000yen) Sumitomo Electric Industries Ltd.(Japan/-/2,102,220,000yen) Fujikura Ltd.(Japan/ /1,182,320,000yen) Furukawa Electric Co., Ltd.(Japan/-/-) The violators substantially restrained competition in the field of automotive wire harness and related products ordered by automobile manufacturers (Toyota, Daihatsu, Honda, Nissan and Subaru) by jointly designating winning bidders and collaborating to have them win the biddings. 13

14 Case3. Automotive Parts On-the-spot inspection July 2011(Coordination with DOJ etc.) Date of order November 22,2012 Illegal conducts The violators substantially restrained competition in the field of each of the following products ordered by the automobile company, by jointly designating successful bidders and collaborating to have them win the biddings. Products Generators Starters Windshield wiper systems Radiators and electrical fans Automobile companies Honda Suzuki Honda Suzuki Suzuki Nissan Fuji (Subaru) Honda Fuji (Subaru) Violators Mitsubishi, Denso Mitsubishi, Hitachi Automotive, Hitachi, Denso Mitsuba, Mitsubishi, Denso Mitsubishi, Hitachi Automotive, Hitachi, Denso Mitsuba, Denso Mitsuba, Denso Mitsuba, Denso T.RAD, Denso Calsonic Kansei, Denso 14

15 Wire Harness case, Automotive Parts case + Headlamps and Rear Combination Lamps case + Bearing case Headlamp Windshield Wiper system Rear Combination Lamp Generator Starter Radiator Electrical Fan Bearing Wire Harness 15

16 Case4. International Ocean Shipping On-the-spot inspection September 6, 2012 (Coordination with DOJ etc.) Date of order March 18, 2014 Violators (location/ cease and desist order/surcharge payment order) Illegal conducts Nippon Yusen Kabushiki Kaisha (Japan/ /13,101,070,000yen) Kawasaki Kisen Kaisha, Ltd.(Japan/ /5,698,390,000yen) Wallenius Wilhelmsen Logistics, AS(Norway/ /3,495,710,000yen) Nissan Motor Car Carrier Co. Ltd. (Japan/ /423,310,000yen) Mitsui O.S.K Lines, Ltd. (Japan/-/-) (1) The violators fixed freight rate and/or colluded freight rate quotations to submit to consignors among those who have trade with the same consignors; and (2) refrained from bidding against one another for the purpose of securing incumbent trades. Ocean Route North American Route European Route Middle and Near Eastern Route Oceanian Route Violators NYK LINE, K LINE,WWL and MOL NYK, K LINE,WWL,NMCC and MOL NYK, K LINE and MOL NYK, K LINE and MOL 16

17 The Violators agreed to mutually refrain from contending for customers by not offering lower freight rates and to raise or maintain freight rates. 1Requests for freight rate quotations Violators 2Negotiation between violators and consignors 3Decision on freight rates Consignors (Automobile companies and trading companies located in Japan) (1) The Violators fixed freight rates and/or colluded freight rate quotations to submit to consignors among the violators who have trade with the same consignors at negotiating with the consignors. Why don t we submit the same freight rates as last year to Automobile Companies X? C お s A B (2) The Violators refrained from bidding against one another for the purpose of securing the incumbent trades. Don`t submit lower freight rates than mine to Automobile Company Y. Sure. A D C 17 O.K. 17

18 18 Japan Fair Trade Commission Case5. Cathode Ray Tubes (case of international division of labor) On-the-spot inspection November 8, 2007 (Coordination with :DOJ, EC, etc) Date of order October 7, 2009 Violators (location/ cease and desist order/surcharge payment order) Case Summary Feature MT Picture Display Co.,Ltd.(Japan/ /-),MT Picture Display (Malaysia) Sdn. Bhd. (Malaysia/-/650,830,000 yen), PT. MT Picture Display Indonesia(Indonesia/- /580,270,000 yen), MT Picture Display (Thailand) Co., Ltd. (Thailand/-/566,140,000 yen), Samsung SDI Co., Ltd.(Korea/ /-), Samsung SDI (Malaysia) BERHAD(Malaysia/-/1,373,620,000 yen), LG Philips Displays Korea Co., Ltd.(Korea/ -/151,380,000 yen), P.T. LP Displays Indonesia(Indonesia/-/932,680,000yen), Chunghwa Picture Tubes Co. Ltd.(Taipei/-/-), Chunghwa Picture Tubes (Malaysia) Sdn. Bhd.(Malaysia/-/-), Thai CRT Co. Ltd(Thailand/-/-) The violators substantially restrained competition in the field of sales of the specified CRTs, by jointly setting minimum target prices to sell to overseas manufacturing subsidiaries of the Japanese TV manufacturing and sales companies. First case that JFTC took surcharge payment order against overseas company Difficulties in enforcement process for foreign enterprises

19 Suppliers of the CRTs for Television Violators (5 Parent Companies) : companies manufacturing and selling the CRTs for television located in Japan, South Korea, Taiwan etc. Customers for the CRTs for Television Japanese manufacturing and sales companies of CRT televisions 2Negotiations for the prices for the CRTs for Television, based on the price decided by 1 3Instruct the sale price decided by 2 1Jointly set minimum target prices for CRTs for Television among the violators Instruct the purchase price decided by 2 5Sell the CRT televisions Violators (6 Subsidiaries) (manufacturing base of the CRTs for Television located in Southeast Asia ) 4Sale of the CRTs for Television at the price instructed by 3 Overseas manufacturing subsidiaries of Japanese manufacturing and sales companies of CRT televisions (manufacturing base of the CRT televisions located in Southeast Asia ) Indonesia, Singapore, Thai, Philippines, Vietnam, Malaysia In the Southeast Asia 19

20 International M&A cases Semiconductor-manufacturing equipment (May 2013; approved with remedies) ASML US Inc. - Cymer Inc. - US, Korea Hard disk drive (December 2011; approved with remedies) Western Digital Ireland, Ltd. - Viviti Technologies Ltd. Samsung Electronics Co., Ltd. - Seagate Technology International - US, Korea, EU 20

21 Policy Recommendation and Advocacy -As a pair of wheels with law enforcement- 21

22 Advocacy activities 1 Electricity market The Cabinet decision instructed the JFTC to show its view from the standpoint of competition policy in light of the current situation that i) GEUs (general electricity utilities, like TEPCO) have the market power, while PPSs (power producers and suppliers) face difficulties in increasing their market share and Policy on Regulatory and Institutional Reform in the Energy Sector The Cabinet decision (April 3, 2012) ii) there has been no competition among the GEUs beyond their respective service areas, and large-scale users cannot purchase electricity in a single contract covering the entire country. JFTC s points of view - Are the purposes of regulations reasonable? - Are the contents and methods of regulations well-designed? - Inquiry into the characteristics of the electricity market and the enterprises behavior 22

23 Proposals for the electricity market from competition policy (September 2012) The JFTC suggests; Promotion of incentives for enterprises - Independence of GEU s retail units from the generation/wholesale units - Securing accessibility to and neutrality of GEU s transmission and distribution units Securing appropriate terms and conditions for the use of facilities and services provided by the monopolistic suppliers Infrastructure improvements, bargaining power disparity in retail sectors, etc. Government reform plan is in progress Step 1: Expanding use of the nationwide grid (by 2015) Step 2: Liberalization of the retail electricity sector (by 2016) Step 3: Legal separation between electricity generators and distributors, and abolishing retail price regulations (by 2020) (under discussion) 23

24 Advocacy activities 2 Childcare Sector Study Report on Childcare Sector (June 2014) Difficulty in balancing child-raising and working is one of the factors for the declining birth rate A large number of children are on a waiting list for childcare facilities Childcare is one of sectors which could become the driving force of growth as vast new markets (Japan Revitalization Strategy, June 2013) In the Report, JFTC proposes; Promotion of new entry of diverse businesses into the market Impartiality in subsidy systems and taxation systems Enhanced information disclosure and third-party evaluation Enhancement of additional services 24

25 Intellectual Property Rights and Competition Policy - Another challenge - 25

26 Japan Fair Trade Commission Antimonopoly Act shall not apply to such acts recognizable as the exercise of rights under the Patent Act and other IPR Acts (Article 21). However, any act that may seem to be an exercise of a right cannot be recognizable as the exercise of the rights provided for in the aforesaid Article 21, provided that it is found to deviate from or run counter to the intent and objectives of the intellectual property systems, which are, namely, to motivate entrepreneurs to actualize their creative efforts and make use of technology (JFTC, Guidelines for the Use of Intellectual Property under the Antimonopoly Act, 2007). 26

27 Japan Fair Trade Commission Patent Pool Effective in preventing royalty stacking and reducing transaction costs However, it should not be used for anti-competitive purposes, e.g., to collude on product prices or to deter entry Pachinko Machine Patent Pool Case (1997) 10 dominant incumbent firms formed a patent pool, which refused to license the patents to new entrants. Violation of AMA s prohibition of private monopolization 27

28 Standard Setting Standards are now indispensable for compatibility E.g., 250 standards are involved in laptop computer Firms form consortium or forum to agree on standards. They should not promote collusion in product markets Participating firms are supposed to offer license of their standard essential patents (SEPs) on a FRAND basis What to do with non-participating firms? How to decide an FRAND rate? Recent private litigation case in Japan: Samsung vs. Apple 28

29 Appendix: Amendments to the Antimonopoly Act 29

30 Surcharge Criminal Investigative power Hearing procedure Before 2005 amendment Base rate: 6% Exclusive right for criminal accusation Recommendation system Ex ante hearing procedure 2005 amendment 2009 amendment 2013 amendment (unenforced) Expanding target conduct Raising base rate : 10% Repeat offense : add 50% Leniency program Criminal investigative power Abolition of recommendation system Prior procedure Ex post hearing procedure Expanding target conduct Offense leader : add 50% Revising leniency program Raising maximum jail term Consideration of Reform of hearing procedure Making Prior Procedure more sufficient and transparent Procedures for hearing prior to Final Administrative Orders Abolition of ex post hearing procedure 30

31 Procedures prior to final administrative order Current procedure Investigation by JFTC Notification by JFTC (expected content of order, etc.) JFTC Explanation (expected content of order, fact-finding, evidence, etc.) Opportunity for recipients to express opinions and offer evidence Commission meeting Outline of Revision Procedures prior to issuing final orders Improving sufficiency and transparency of the procedure Inspection and copy of evidence that proves facts found by JFTC will be sanctioned Note: The recipient will be allowed to copy only its own property and the written statements of its employees. Introduction of the procedures for hearing presided over by an officer designated by JFTC Asking of questions and oral presentation of opinions will be allowed in the procedures for hearing Abolition of hearing procedure for administrative appeal Addressing the criticism that JFTC plays the role of both prosecutor and judge in the current JFTC hearing procedures procedures prior to final administrative order New procedure Investigation by JFTC Notification by JFTC (expected content of order, etc.) Procedures for hearing opinion (presided over by an officer designated by JFTC) Explanation by Investigators (expected content of order, fact finding, evidence, etc.) questions from recipient Presentation of opinions (oral/written) and offer of evidence by recipient Commission meeting Inspection of evidence and copying recipient s own property and written statements of its employees Appeal procedures Cease and desist order/ Surcharge payment order Hearing procedure for administrative appeal Tokyo High Court JFTC The court Appeal procedures Introduction of trial at the District Court Only Tokyo District Court has jurisdiction over the appeal suit pertaining to the cease and desist order/surcharge payment order as the court of first instance (ensuring expertise in the court). Panel of three judges hears the case in Tokyo District Court (a five-judge panel may be set). Appeal procedures Cease and desist order/ surcharge payment order Tokyo District Court Tokyo High Court Court Supreme Court Setting a panel of five judges will be allowed in Tokyo High Court when the court hears the case. Abolition of the substantial evidence rule and restriction on offering new evidence Supreme Court 31

32 Thank you very much for your kind attention. Opinions expressed in this presentation are those of the speaker and are not necessarily those of the JFTC. 32