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Monday, April 26, 2004

JAPANESE PERSPECTIVES

Antimonopoly Law must be reformed to fit 21st century


The Fair Trade Commission is contemplating making a revision to the Antimonopoly Law in hopes of being able to submit a bill to the Diet, which is now in session. However, the contents of the revision are still up in the air.

Some of the mass media have blamed the holdup on the business community, saying it is resisting the amendment out of sheer egotism. But the truth of the matter is that the FTC's proposal is being opposed not only by business circles, but also by former FTC officials and renowned scholars in the field.

It has been explained that the FTC's primary goal in revising the law is to roughly double the surcharge it levies on profits earned through unfair means -- now at 6 percent -- to double-digit levels so that Japan can be on par with other industrialized countries. But this hike cannot possibly be justified given the surcharge's current legal characterization, so the FTC has proposed changing it to an "administrative fine," namely one that will collect an amount in excess of the unfairly obtained profits.

This will be the FTC's first significant change to the policy since the surcharge system was introduced in 1977, and we support the move.

The problem is that the FTC is not planning to change any other aspects of the surcharge system in a way that fits its current legal profile -- the collection of unfair benefits. As a result, the proposed revision merely calls for a name change while effectively keeping the old system intact.

As I have repeatedly pointed out in this column, Japan's Antimonopoly Law has a very complicated mechanism for dealing with offenders that levies both American-style fines for criminal penalties and a European-style administrative surcharge, all in one case. Therefore, if the new, higher surcharge is now to be considered an administrative fine, any additional criminal penalties will raise the prospect of inflicting dual punishment, which is banned under the Constitution.

In order to avoid this problem, the FTC came up with a compromise: if both administrative fines and criminal penalties are to be imposed on an offender, half the amount of the penalties will be deducted from the administrative fines.

However, it is questionable whether the two different types of sanctions -- the so-called administrative fines and criminal penalties -- can be imposed simultaneously just by adjusting the figures. So far, the FTC has not come up with any convincing arguments on this point, raising doubts in a wide range of fields.

If the FTC wants to introduce a system powerful enough to serve as a deterrent, as several western countries have done, it should take the extra step of rejecting this legacy from the past -- the coexistence of administrative measures and criminal penalties. More specifically, the FTC should abolish criminal penalties for corporate offenders and streamline the system until it resembles European-style administrative fines, which could then be meted out in accordance with the responsibility of the offender.

It is also imperative that the FTC beef up the capabilities of its staff to ensure this new punitive tool can be adequately managed while ensuring due process.

As Japan's economy undergoes more deregulation and becomes more accustomed to market principles, the business community is becoming keenly aware of the growing role the Antimonopoly Law plays as a "Constitution of economic activities."

The proposed revision is important because it helps set the direction for Japan's competition policy in the 21st century. Therefore, we would like the FTC to undertake a real review of the overall enforcement system.

Yoshio Nakamura is a senior managing director of the Japan Business Federation (Nippon Keidanren).


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