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Monday, Feb. 11, 2002

FTC moves raise doubts over Antimonopoly Law

For more than 120 years during the Meiji, Taisho and Showa eras, the government was the primary driving force of the Japanese economy. That changed as the nation entered the Heisei era, as the private sector began to play a public role previously monopolized by the government. This is why the nation needs to structurally reform the economy.

Issues on the agenda for changing the corporate legal system include promotion of information disclosure by private-sector firms and of their autonomous moves to tighten self-discipline, the establishment of rules on market-based competition and possible bailouts for the losers, and the creation of a dispute-settlement mechanism. Companies will be required to actively provide information to the market and follow the set rules as they compete.

In this sense, the beef-mislabeling scandal, the latest problem at Snow Brand Foods Co., should be denounced as a suicidal act, as should the case brewing around defunct U.S. energy giant Enron Corp.

It is the Fair Trade Commission's job to create and implement rules for competition, and the watchdog body is expected to play an ever greater role. However, I must say that the FTC's recent moves raise not a few questions.

Legal changes implemented on April 1, 2001, paved the way for individuals to file injunctions and lawsuits to halt unfair business practices. While some charge that the move could put FTC's very existence in doubt, others supported the change because it is consistent with the nation's shift toward a society where business activities are monitored on an ex-post facto basis.

However, a recent review of antimonopoly regulations to be discussed during the current Diet session only covers the elimination of Clause 2 of Article 9 of the Antimonopoly Law, which restricts the aggregate volume of stocks that can be held by large firms, and does not touch on Article 9 itself, which deals with regulations on holding companies.

Although the proposed elimination of Clause 2 is to be appreciated, the FTC still appears determined to keep preventive regulations on business activities.

Also tabled for the current Diet session is a hike in maximum criminal penalties under the Antimonopoly Law. It is not clear how the hike was suddenly put on the agenda at this stage, because when the FTC held a panel meeting on procedural issues last fall, there was no in-depth debate on the matter. The FTC has failed to correct a fundamental problem in Japan's antimonopoly law -- the coexistence of criminal penalties and surcharges.

Under such circumstances, we cannot accept the FTC's argument that antimonopoly penalties should be raised because they are the lowest when compared against those levied in other economic laws, like the Securities and Exchange Law. Why not let the Financial Services Agency determine the levels of all criminal penalties?

Also in connection with criminal punishment, procedural problems in investigations led by the FTC, which does not have criminal investigation powers, have not been addressed. There is speculation that the FTC has tried to couple the elimination of Clause 2 in Article 9 with the hike in penalties to strike a balance. If this is true, what the FTC is doing amounts to a "tie-in sale" of bills.

We do not plan to strongly resist the proposed hike in criminal penalties, but unless promises are made to correct the above-mentioned problems, the business community may seek an injunction to stop the FTC from submitting relevant bills to the Diet.

Yoshio Nakamura is a senior managing director of the Japan Federation of Economic Organizations (Keidanren).

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The Japan Times

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