Cartel leniency in Japan: overview

A Q&A guide to cartel leniency law in Japan.

The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.

To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-guide.

For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/mergercontrol-guide and www.practicallaw.com/restraintsoftrade-guide.

Contents

Regulation

1. What laws provide for a leniency programme and which regulatory authority administers it? Is there any published guidance?

Applicable laws and guidance

The Anti-Monopoly Act (AMA) provides for a leniency programme. The leniency programme was introduced by the amendment of Article 7-2 of the AMA in 2005, which came into effect on 4 January 2006.

The Rules on Reporting and Submission of Materials Regarding Immunity From or Reduction of Administrative Fines (Fair Trade Commission Rule No.7, 2005) provides for the detailed procedures including the:

  • Instructions regarding forms to be used for submission of leniency applications.

  • Fax number to which leniency applications must be sent.

  • Confidentiality obligations of parties that submit leniency applications.

Regulatory authority

The Japan Fair Trade Commission (JFTC) is the sole regulatory authority that was established for the enforcement of the AMA. The JFTC can implement its power independent from other ministries. The JFTC consists of a chairman and four commissioners. A general secretariat office and its subdivisions (including local offices) support the activities of the JFTC.

 

Scope of application

2. What infringements of competition law does the leniency programme cover?

The leniency programme covers administrative surcharges that could be imposed as a result of an unreasonable restraint of trade (bid riggings and cartels). As the Japan Fair Trade Commission (JFTC) imposes an administrative surcharge which is generally 10% of the affected turnover in Japan (limited to up to three years) on a corporation that committed cartels and has no discretion to make upward or downward adjustments, leniency is the only way to avoid or reduce the amount of an administrative surcharge. It has nothing to do with administrative surcharges imposed on other types of violations.

Criminal penalties are not covered by the leniency programme. However, the Anti-Monopoly Act (AMA) provides that a criminal trial cannot be initiated against a cartel offence without receiving the JFTC's accusation. The JFTC published guidelines (Guideline of the JFTC Concerning Criminal Accusation and Investigation Regarding the Breach of the AMA, 7 October 2005, as amended), in which it confirms that the JFTC's policy is not to bring a criminal accusation against the first leniency applicant and its co-operating officers or employees.

If other leniency applicants or those that did not apply for leniency are accused by the JFTC, it is still theoretically possible for a public prosecutor to bring a criminal case against the first leniency applicant and its officers or employees because the criminal accusation is non-divisible and accusations against one party covers all the parties involved in the same case as a matter of law. On this point, a Chief of Criminal Affairs Bureau of the Ministry of Justice made a statement at the National Diet (the National Diet is the legislative body, which is composed of a lower house and an upper house) that it will fully consider the fact that the JFTC did not bring a criminal accusation against the first leniency applicant.

 

Recent cases

3. What notable recent cases have applied the leniency programme?

In 2014, the Japan Fair Trade Commission (JFTC) issued cease-and-desist orders and administrative surcharge orders to shipping companies for cartels for car cargo shipping. The total administrative surcharge imposed on four companies was about JPY22.7 billion. Mitsui O.S.K. Lines, Ltd. a shipping company that was also found to have participated in cartels, was not subject to those orders because it was the first leniency applicant of the case.

According to statistics published by the JFTC, there were 61 leniency applicants in the financial year 2014, 50 leniency applications in the financial year 2013 and 102 leniency applications in the financial year 2012. As of 31 March 2015, the total number of leniency applications since implementation of the leniency programme in January 2006 is 836.

 

Availability of leniency

Administrative liability

4. Is full immunity from administrative penalties available? What conditions must be met for immunity to be granted?

Full immunity for administrative surcharges is available for the first leniency applicant that files an application before the Japan Fair Trade Commission (JFTC) begins an investigation. However, to be eligible for immunity the first leniency applicant should not engage in illegal activities after the JFTC begins an investigation. Additionally, if the leniency applicant does any of the following it is disqualified from eligibility for immunity:

  • Submits to the JFTC reports or materials that contain false information.

  • Fails to submit the requested reports or materials or submits false reports or materials in response to the JFTC's additional information request.

  • Forces other companies to engage in illegal activities or prevents other companies from ceasing illegal activities.

A joint application by companies that belong to the same corporate group is possible.

Even if the first applicant receives full immunity (in which case the applicant is also likely to avoid receiving a cease-and-desist order), it may be subject to other administrative orders, such as stopping its business under specific regulations (for example, the Construction Business Act for cartels among construction companies). It also may be disqualified from public bids if engagement in unreasonable restraint of trade (including cartels and bid-riggings) is confirmed.

 
5. Is there a sliding scale of available leniency from administrative penalties?

Only the first leniency applicant receives full immunity (see Question 4). However, the following decreasing levels of leniency are also available for subsequent applicants for administrative surcharges:

  • The second leniency applicant that filed the application before the Japan Fair Trade Commission (JFTC) began its investigation can receive a 50% reduction in administrative surcharges.

  • The third leniency applicant that filed the application before the JFTC began its investigation can receive a 30% reduction in administrative surcharges.

  • Other applicants (up to five applicants in total and up to three applicants that filed applications within 20 days (excluding weekends and public holidays) after the JFTC began its investigation) can receive a 30% reduction in administrative surcharges, by providing information and materials not already known to the JFTC.

To be eligible for a reduction in administrative surcharges, applicants should not engage in illegal activities after the JFTC begins its investigation. If the leniency applicants are involved in the following they are disqualified from being eligible for a reduction in administrative surcharges:

  • Submits to the JFTC reports or materials that contain false information.

  • Fails to submit the requested reports or materials or submits false reports or materials in response to the JFTC's additional information request.

  • Forces other companies to engage in illegal activities or prevents other companies from ceasing illegal activities.

 
6. Is immunity or leniency for administrative penalties available to individuals? If so, what conditions apply?

The leniency programme is available for individuals that are self-employed and running a business, but not for other individuals such as officers or employees of corporations. This is because the leniency programme under the Anti-Monopoly Act (AMA) is designed to immunise or deduct administrative surcharges, which are only imposed on business enterprises (including self-employed individuals and corporations).

 

Criminal liability

7. Is immunity or leniency available for companies and/or its employees in relation to criminal prosecution? What are the implications for employees when an undertaking has been granted immunity or leniency?

Circumstances

The leniency programme under the Anti-Monopoly Act (AMA) only applies to administrative surcharges and not to criminal liabilities.

The Japan Fair Trade Commission's (JFTC) position is that it will not bring criminal accusations against the first leniency applicant and its co-operating officers or employees and there are theoretically remaining risks associated with the non-divisibility of the criminal accusation (see Question 2).

Proceedings against employees

Criminal proceedings can be brought against officers or employees and corporations that are engaged in cartels or bid-riggings. Officers or employees that are found guilty are subject to imprisonment of up to five years or fines up to JPY5 million or both. Corporations that are found guilty are subject to fines of up to JPY500 million.

The leniency programme under the AMA does not apply to criminal liabilities. However, the JFTC has published guidelines (see Question 2) regarding non-accusation of co-operating officers or employees of the first leniency applicant. Although these guidelines do not apply to officers or employees of subsequent applicants, the JFTC can still decide not to bring criminal accusations to those parties on a case-by-case basis.

Employees' interests

The JFTC published guidelines, which state that it does not bring criminal accusations against co-operating officers or employees of a company that received full immunity to administrative surcharges (see above, Proceedings against employees). However, the JFTC can bring criminal accusations against officers or employees that make false statements or do not submit the information requested by the JFTC.

 

Application proceedings

8. When should an application for leniency be made?

To receive full immunity, the leniency application must be filed in the first position before the Japan Fair Trade Commission (JFTC) begins its investigation to a fax number designated by the JFTC.

To receive a 50% reduction in administrative surcharges, a leniency application must be filed in the second position before the JFTC begins its investigation to a fax number designated by the JFTC.

To receive a 30% reduction in administrative surcharges, a leniency application must be filed before or within 20 days (excluding weekends and public holidays) of when the JFTC begins its investigation. The number of applicants is limited to five (including the first and second applicants) and up to three after the JFTC begins its investigation.

 
9. What are the procedural rules for leniency applications?

Relevant authority

The leniency application must be filed to the Leniency Officer of the Japan Fair Trade Commission (JFTC) by fax.

Applicant

The leniency application can be made by a business enterprise (including both self-employed individuals and corporations) or jointly by corporations of the same group that was involved in cartels or bid-riggings or by its legal counsel.

Individuals that are not running their own businesses as self-employed individuals cannot be leniency applicants because they are not subject to administrative surcharges.

Informal or confidential guidance

It is possible to obtain informal guidance on a confidential basis from the Leniency Officer of the JFTC by phone or other methods. The Leniency Officer can inform the inquirer as to whether or not full leniency is still available and the order of priority at that time. However, to secure the order of priority, the leniency application must be submitted to the Leniency Officer via fax by using specific forms.

Form of application

Leniency applicants must use forms designated by the JFTC when making leniency applications. Forms 1 and 2 are used for a leniency application made before the JFTC begins its investigation and Form 3 is used for applications made after the JFTC begins its investigation. These forms are in Japanese and leniency applicants must complete the forms in Japanese.

Markers

Form 1 must be submitted to the Leniency Officer by fax and functions as a marker. A leniency applicant that submits Form 1 receives a notice regarding the provisional order of priority together with the deadline to submit Form 2 (usually two weeks from submission of Form 1). The leniency applicant can secure the order of priority by submitting Form 2 together with relevant materials by the deadline.

Information/evidence

Form 1 can be submitted with the following minimum information:

  • Leniency applicant's identity.

  • Brief summary of illegal activities including:

    • goods or services for which cartel or bid-rigging was conducted;

    • how illegal activities were conducted;

    • the period of illegal activities.

When submitting Form 2, additional information such as the following must be included:

  • Names and positions of officers or employees of the applicant and other participants of cartels or bid-riggings.

  • Information that is useful in understanding the nature of activities.

Evidence and materials, such as meeting minutes and correspondence, must be submitted together with an explanation of how it is connected with information in the form.

Form 3 requires similar information to Form 2. However, information and evidence submitted to the Leniency Officer must contain new information and evidence not yet known to the JFTC. Practically, it is possible to send an incomplete Form 3 without new information as a marker, provided that a follow-up report is filed in a timely way together with evidence and materials.

Oral statements

Forms 1 and 3 must be submitted to the Leniency Officer of the JFTC by fax. However, certain items in Forms 2 and 3 can be reported orally to the Leniency Officer at the JFTC's office, if the JFTC finds that there is a special circumstance to do so. A special circumstance can exist where there is a concern about discovery in other jurisdictions. However, the items that can be reported orally are limited to names and positions of officers or employees of the applicant and other participants of cartels or bid-riggings and detailed descriptions of the illegal activities. Other items in the forms must still be reported in writing.

Short-form applications

Not applicable.

 
10. What are the applicable procedures and timetable?

Initial contact

It is possible to make informal contact with the Leniency Officer of the Japan Fair Trade Commission (JFTC) at any time (see Question 9).

Application before the Japan Fair Trade Commission (JFTC) begins an investigation

The procedure is as follows:

  • The leniency application must be submitted to the Leniency Officer by fax using Form 1.

  • Once the JFTC receives the form, it will inform the applicant, usually within a few days, of the provisional order of priority and the deadline (usually two weeks) to submit Form 2 together with relevant evidence and materials.

  • After Form 2 is submitted and other evidence or materials, the JFTC confirms receipt.

Application after the JFTC begins an investigation

The procedure is as follows:

  • The leniency application must be submitted to the Leniency Officer by fax using Form 3 within 20 days (excluding weekends and public holidays).

  • After Form 3 is submitted and other evidence or materials, the JFTC confirms receipt.

Further information request from JFTC

The JFTC can request that the applicant submits additional information and evidence or materials. If the applicant fails to submit the requested reports or materials or submits false reports or materials in response to the JFTC's additional information request, it may be disqualified from being eligible for immunity or reduction in administrative surcharges. The period for this process ranges from a few months to a year or more.

 

Withdrawal of leniency

11. In what circumstances and at what stage of the proceedings can leniency be withdrawn? What implications does the withdrawal of leniency from one company have for other applicants?

Withdrawal that affects the order of priority of a leniency application is only available before the Japan Fair Trade Commission (JFTC) notifies the applicant of receipt of Form 2 or 3. Before the notification of receipt of Form 2 or 3, the order of priority is not yet finally determined and, therefore, the order of priority under the leniency programme can be determined without the party that has withdrawn their leniency application.

 

Scope of protection

12. What is the scope of leniency protection after it has been granted?

Leniency only applies to infringing activities that are revealed in information provided by the applicant. In other words, if there are other infringing activities not revealed in the leniency application (for example, infringements for other goods or services, or infringements for different periods), separate leniency applications must be filed to receive an immunity or reduction in administrative surcharges for such activities.

 
13. Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market (leniency plus)?

There is no concept of "leniency plus" in the Japanese leniency programme. A party can submit separate leniency applications for separate markets but it does not affect the leniency application already made for a certain market.

 
14. Does the grant of leniency affect a third party's ability to bring a follow-on damages action against a leniency applicant?

A leniency applicant is not immune from a civil damages action. There is no concept of punitive (treble) damages under the law, and the leniency applicant can face an actual damages action as usual.

Certain documents including copies of cease-and-desist orders or administrative surcharges orders could be disclosed by the Japan Fair Trade Commission (JFTC) to the claimant of the civil damages claim by excluding or redacting business secrets and privacy. Although leniency applications and evidence or materials submitted to the JFTC may theoretically become the subject of a disclosure order by a civil court, the JFTC takes the position that it will not submit them to the court.

 

Confidentiality and disclosure

15. What are the rules relating to confidentiality during a leniency application?

Identity disclosure

The Japan Fair Trade Commission (JFTC) will not disclose the identity of a leniency applicant unless requested to do so by the applicant in the prior-notice proceedings. An applicant may want to disclose its identity to mitigate the risk of shareholders' derivative law suit by showing that it has properly submitted the leniency applications. Disclosure of the identity can also help an applicant to reduce the extent of unfavourable treatment in future public bids. However, the applicant that received full immunity can be identifiable when cease-and-desist orders or administrative surcharge orders are issued and it becomes clear that no administrative surcharge is being imposed on one of the parties that has engaged in cartels or bid-riggings.

Information disclosure

JFTC officials, including the Leniency Officer, have a confidentiality obligation under the Anti-Monopoly Act (AMA) and will not disclose the identity of a leniency applicant and information contained in the leniency application to third parties.

Confidentiality requests

The JFTC maintains confidentiality on the identity of a leniency applicant and information contained in the leniency application. It is therefore not necessary to request confidentiality.

 
16. What are the rules concerning disclosure of statements made in support of a leniency application?

Domestic submissions and domestic discovery

The Japan Fair Trade Commission (JFTC) must keep information and evidence or materials received as part of a leniency application and the JFTC takes the position that it will not submit leniency applications and evidence or materials to the courts.

Domestic submissions and foreign discovery

The forms and materials held by the JFTC will not be disclosed as a result of discovery orders by foreign courts.

However, copies of forms and materials submitted to the JFTC held by leniency applicants may be subject to discovery orders by foreign courts. The JFTC allows certain items to be orally communicated to the Leniency Officer at the JFTC's office to allow applicants to mitigate the risk of discovery orders by foreign courts (see Question 9).

Foreign submissions and domestic discovery

The courts cannot order disclosure of documents to a third party that resides outside of Japan. However, the courts can order disclosure of documents to the counterparty of a lawsuit even if the counter party resides outside of Japan.

 

Inter-agency co-operation

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities from other jurisdictions in relation to leniency? If so, what is the legal basis for and extent of co-operation?

The Japan Fair Trade Commission (JFTC) has entered into bilateral co-operation agreements with other jurisdictions including the US, EU and Canada. These co-operation agreements stipulate notification, co-operation, arrangement, request and consideration of important interests in connection with enforcement by competition authorities. However, it is the practice of the JFTC to obtain a waiver letter from the applicant concerned before the JFTC shares information received through leniency applications.

 

Proposals for reform

18. Are there any proposals for reform?

There are no proposals to reform the existing leniency programme.

 

Online resources

Japan Fair Trade Commission (JFTC)

W www.jftc.go.jp/en/

Description.The JFTC's official website publishes the original Japanese texts of the Anti-Monopoly Act (AMA), guidelines and case law. It is frequently updated (almost daily). However, the English website does not contain as much information as the Japanese website. The English website publishes non-binding translations of the AMA and various rules and guidelines.



The regulatory authority

Japan Fair Trade Commission (JFTC)

Head. Mr Kazuyuki Sugimoto (Chairman of the JFTC)
Contact details. 1-1-1, Kasumigaseki, Chiyoda-ku, Tokyo
T +81 3 3581 5471
W www.jftc.go.jp/en/

Responsibilities. The JFTC is responsible for all competition-related matters (excluding those covered solely by the Consumer Affairs Agency, such as consumer protection type issues).

Person/department to apply to. The Leniency Officer.

Procedure for obtaining application documents. Application documents and other guidelines can be obtained from the JFTC's Japanese website. Some (but not all) of the rules and guidelines including Rules on Reporting and Submission of Materials Regarding Immunity From or Reduction of Surcharges are available on the JFTC's English website.



Contributor profiles

Yusuke Nakano

Anderson Mōri & Tomotsune

T +81 3 6888 1065
F +81 3 6888 3065
E yusuke.nakano@amt-law.com
W www.amt-law.com/en/professional/profile/YSN

Professional qualifications. Japan, 1997; New York, 2002

Areas of practice. Competition; anti-trust.

Non-professional qualifications. LLB, The University of Tokyo, 1994; LLM, Harvard Law School, 2001

Recent transactions

  • Assisting six parties in auto-parts investigations.
  • Representing a Japanese company in Power Cables case.
  • Assisting a Japanese company against which a large-scale private monopolisation investigation was launched by the Japan Fair Trade Commission (JFTC) and terminated without any sanctions.
  • Lead counsel in a global leniency application project by a Japanese company.
  • Lead counsel in a global merger filing project by a Japanese company.
  • Assisting a foreign company in the first foreign-to-foreign merger case that the JFTC launched an investigation against.
  • Representing a foreign company that submitted opinions and evidence to the JFTC in opposition to a certain merger.

Languages. Japanese, English

Professional associations/memberships. Daini Tokyo Bar Association; American Bar Association, Section of Antitrust Law; Adjunct Lecturer, Hitotsubashi University (2004, 2007 to 2009) and Hitotsubashi Law School (2009 to 2013); Japan Competition Law Forum; Member, Council of Experts for Promoting Translation of Japanese Laws and Regulations into Foreign Languages, Cabinet Secretariat (2006 to 2009); International Bar Association.

Publications

  • Leniency Regimes, European Lawyer Reference, fifth edition, 2015.
  • Competition Law in Asia-Pacific: A Practitioner's Guide, Kluwer Law International, 2015.
  • Introduction to Japanese Business Law & Practice, LexisNexis Japan, second edition, 2014.
  • The Merger Control Review, Law Business Research, sixth edition, 2015.

Atsushi Yamada

Anderson Mōri & Tomotsune

T +81 3 6894 1037
F +81 3 6894 1038
E atsushi.yamada@amt-law.com
W www.amt-law.com/en/professional/profile/ATY

Professional qualifications. Japan, 2005; New York, 2013

Areas of practice. Competition; anti-trust.

Non-professional qualifications. LLB, The University of Tokyo, 1994; LLM, Cornell Law School, 2003

Recent transactions

  • Assisting parties in an auto-parts investigation conducted by multiple agencies.
  • Assisting a global mobile technology company in relation to an alleged unfair trade practices case initiated by the JFTC.
  • Assisting a Japanese construction company in relation to an alleged cartel case initiated by the JFTC.
  • Handling merger filing in Japan and in China in relation to integration of LPG business by Japanese companies.
  • Handling merger filing in Japan, China, Korea and Taiwan in relation to integration of lead frame business by Japanese companies.
  • Regularly providing advice to major companies in various industries, such as information technology, pharmaceutical, manufacturing, construction, transportation, financial institutions and trading houses.

Languages. Japanese, English

Professional associations/memberships. Tokyo Bar Association; American Bar Association, Section of Antitrust Law; Japan Competition Law Forum; International Bar Association; Inter-Pacific Bar Association, Competition Law Committee; Non-governmental adviser for the International Competition Network.

Takahiko Itoh

Anderson Mōri & Tomotsune

T +81 3 6894 1093
F +81 3 6894 1094
E takahiko.itoh@amt-law.com
W www.amt-law.com/en/professional/profile/TJI

Professional qualifications. Japan, 2003; New York, 2008

Areas of practice. Competition; anti-trust; mergers and acquisitions.

Non-professional qualifications. LLB, The University of Tokyo, 1997; LLM, Stanford Law School, 2007

Recent transactions

  • Assisting a global mobile technology company in relation to an alleged unfair trade practices case initiated by the JFTC.
  • Assisting a Japanese construction company in relation to an alleged cartel case initiated by the JFTC.
  • Handling merger filing in Japan and in China in relation to integration of LPG business by Japanese companies.
  • Assisting HSR filing by a Japanese company which acquired a US foundry for US$1.3 billion.
  • Handling merger filing in Japan, China, Korea and Taiwan in relation to integration of lead frame business by Japanese companies.

Languages. Japanese, English

Professional associations/memberships. Daini Tokyo Bar Association; American Bar Association, Section of Antitrust Law; Japan Competition Law Forum; International Young Lawyers Association, Antitrust Commission; International Bar Association; Non-governmental adviser for International Competition Network.

Publications

  • Co-author, Essential Points of Japan M&A Practice, Shoji Homu, 2015.
  • Trends of the Competition Las Policy in Russia, Fair Trade, No. 741, 2012.
  • Co-author, Practical Solutions to Avoid Breaching Antitrust Laws, Business Law Journal, 51 to 52, 2012.
  • Co-author, Theory and Practice of Merger Control Regulations under Anti-Monopoly Act – Guidance for Merger Filings, Shoji Homu, 2010.

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