Japan Fair Trade Commission Commences Consultation with Possible Candidates for Leniency

12/27/2005
Client Alert

This update is also available on our Japanese language site

Japan’s new Anti-Monopoly Act (the "AMA"), which will become effective on January 4, 2006, prominently features a leniency program for administrative fines related to cartel activity.  In connection with the leniency program, the Japan Fair Trade Commission ("JFTC") began consultations with potential candidates for leniency on Tuesday, December 6, 2005, almost a month prior to the effective date of the AMA.  These consultations are intended to provide guidance to companies considering applying for leniency under the program, as well as instructions concerning what information should be presented to the JFTC in a leniency application.

The JFTC did not disclose plans to conduct such consultations prior to the effective date in the draft rules for the JFTC’s leniency program published in June, 2005 (the "Rules").  In late November, however, the JFTC announced that it would commence consultations one month before the effective date of the AMA.  The agency indicated it decided to commence consultations early because companies may want advice prior to the AMA’s effective date on procedures related to the leniency program or guidance for completing the form.  The JFTC added that, in conducting consultations, it would not discuss with potential applicants the order in which it receives leniency applications because the AMA has not yet become effective.  The JFTC may have commenced consultations to assess how seriously companies are considering applying for leniency at the very beginning of the new system.

Because these consultations are not provided for by statute, the JFTC commented on them as follows:[1]

  • Because the consultations do not have any legal effect, there is no provision for them in the Rules.
  • While the JFTC will not use information provided in the course of a consultation, the JFTC may open an investigation on the same case based on information received from another source.

The implications of the latter comment are somewhat vague.  Consider, for instance, a situation in which the JFTC is aware of the existence of a cartel and its major members, but it does not know that the applicant seeking consultation is also a participant in the cartel.  Even though the JFTC first learned that the applicant was a member of the cartel in the course of a consultation, the JFTC might try to use the prior existence of an investigation of the cartel to justify including the applicant as a target of the investigation.

The JFTC has made clear that companies will not be able to use the leniency program prior to the effective date of the AMA.  Hence a company that wants to contact the JFTC for a consultation should carefully consider how much information it will provide.  Also, the final Rules did not resolve several issues related to the draft Rules, such as an apparent inconsistency between the forms to be used for the first report and second report.  Companies should be cautious, therefore, in seeking guidance, lest they inadvertently disclose information ultimately determined to be beyond the scope of the leniency program.

Despite these questions, the initiation of consultations marks the beginning of the implementation of the AMA.  We anticipate companies will welcome both the leniency program and the opportunity for consultation, making the AMA a major event in the evolution of Japanese competition law. 


Footnotes:

[1] Please see "Japan Fair Trade Commission Publishes Draft Rules under Anti Monopoly Act" for a discussion of issues related to the Rules.

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