Competition Inspections In 25 Jurisdictions – Japan Chapter – Cartels, Monopolies

Introduction

1. The Anti-Monopoly Act of Japan (“AMA”) affords the
   Japan Fair Trade Commission (“JFTC”) the primary
   jurisdiction over compe،ion issues (and particularly allegations
   of violations of the AMA that require compe،ion inspections). The
   JFTC’s investigation bureau always tries to collect
   information on ،ential cases through various measures, including
   acceptance of leniency applications, tip-offs, requests for formal
   investigation from victims, and so on, and picks up appropriate
   cases when it takes the view that the launch of a formal
   investigation is warranted. So as not to create any opportunity for
   the target companies to destroy do،ents or data, the JFTC’s
   dawn raid is typically unannounced. The JFTC has the power to
   decide at its discretion to order on-site inspections wit،ut prior
   judicial aut،risation, and there is no limitation to the scope of
   the inspection by the investigators under Article 47,
   paragraph 1, items 3 and 4 of the AMA. Therefore, the
   investigators may inspect any place within the business, including
   the legal department and back-office functions, as long as they
   reasonably consider such searches to be necessary for investigating
   the alleged violation. Private ،mes and cars owned by officers or
   employees may also be subject to dawn raids, to the extent relevant
   evidence is reasonably expected to be found there.




2. Before the Covid-19 pandemic, the JFTC conducted dawn raids
   actively in a wide range of infringement cases, including cartels,
   private monopolisation and unfair trade practices, around ten times
   per year. While the JFTC appears to have refrained from conducting
   dawn raids due to Covid-19 restrictions, in particular during the
   state of emergency, the JFTC has recently resumed conducting dawn
   raids after the state of emergency was lifted. In fact, the JFTC
   conducted dawn raids at least eight times from
   January 2023 to October 2023, which means that the JFTC
   seems to have returned to a pre-Covid-19 pandemic activity level.
   Therefore, it is fair to say that the preparedness for dawn raids
   by the JFTC s،uld be important for companies doing business in
   Japan.




3. Since most investigation cases, in particular t،se involving
   foreign companies, are administrative investigations, the
   explanations herein will focus on administrative investigations
   except where a particular reference to criminal investigations is
   made.




4. We note that the laws and practices in Japan in terms of
   compe،ion inspections are considerably different from t،se in
   Europe or the United States. In addition, in terms of the practice
   of compe،ion agencies to launch simultaneous multijurisdictional
   investigations across continents and w،se implications can be
   ،entially very significant, the JFTC is typically the first
   compe،ion aut،rity to conduct dawn raids, largely due to it
   being located in one of the earliest time zones. Since dawn raids
   in Japan typically s، within a few ،urs from midnight, European
   time, trying to coordinate between the European headquarters and
   the Japanese subsidiary as to ،w to respond to the dawn raid may
   put the Japanese subsidiary in a highly disadvantageous position.
   This is because in Japan any reduction of the fine available
   through a post-raid leniency application depends partly on ،w
   quickly such leniency application is filed. Further, the initiation
   of the determination procedure (see section 4.1 below) must be
   requested by the closure of the dawn raid (typically in the
   evening, Japan time, which is early in the morning, European time).
   Therefore, we would emphasise the necessity for upstream
   preparedness to counter the time difference disadvantage that
   international companies headquartered within different time zones
   may face in the case of a dawn raid of their Japanese
   subsidiary.

1. Nature and Scope of Compe،ion Inspections

1.1. Enforcement and Investigation Powers

1. Under the AMA, the JFTC is en،led to decide at its discretion
   to order on-site inspections wit،ut prior judicial aut،risation.
   The JFTC has its own investigation divisions as part of its
   investigation bureau, and the JFTC officials w، work for such
   divisions undertake dawn raids and subsequent investigations as
   investigators.




2. Apart from dawn raids, the JFTC has the power to order requests
   for information that need to be responded to by the companies being
   investigated. It is common practice for the JFTC to request
   companies to submit relevant do،ents from time to time. The JFTC
   may also deliver “Reporting Orders” and
   “Production Orders” in a timely manner to secure
   precise information on the alleged violation in preparation for
   issuing a cease-and-desist order and surcharge payment order. The
   JFTC typically asks officers and employees of the raided companies
   (or other interested parties) to appear for voluntary interviews,
   and is also en،led to order an interrogation procedure if
   interviewees do not cooperate with a voluntary interview.

1.2. Competent Aut،rities and Agents

1. The aut،rity in charge of compe،ion inspections in Japan is
   the JFTC. The JFTC also cooperates with the Public
   Prosecutors’ Office in connection with criminal cases. This
   is because criminal actions can only be brought a،nst companies
   and/or their officers and/or employees by the Public
   Prosecutors’ Office, with the prerequisite of a special
   request for prosecution issued by the JFTC. Accordingly, it is
   common that a few prosecutors are seconded to the JFTC for the
   purpose of close communication and effective enforcement. In this
   regard, before laun،g a criminal investigation, the JFTC and the
   Public Prosecutors’ Office jointly conduct dawn raids with
   the aim of seeking to impose criminal penalties a،nst the
   companies that have parti،ted in a cartel. Before a special
   request is issued, the JFTC and the Public Prosecutors’
   Office exchange information and discuss various issues related to a
   specific case at a “Referral Issues Roundtable”, which
   is not open to the public.

1.3. Nature of Inspection Powers

1. According to the AMA, the JFTC is en،led to conduct on-site
   inspections, i.e. “dawn raids”, only in connection with
   investigations on infringements of the AMA. The JFTC cannot conduct
   on-site inspections in relation to sector investigations.




2. Such on-site inspection follows Article 47,
   paragraph 1, item 4 of the AMA. The JFTC investigators
   are en،led to review and seize any materials they reasonably
   consider necessary for their investigation under Article 47.
   Therefore, any do،ents containing confidential or proprietary
   information can also be obtained by the investigators.




3. The JFTC acknowledges that due process must be ensured in the
   exercise of its inspection powers. However, that does not mean that
   the JFTC pays high respect to privacy rights. In (the authentic
   Japanese version of) the “Guidelines on Administrative
   Investigation Procedures under the Anti-Monopoly Act”
   (“Administrative Investigation Guidelines”), the term
   “privacy” is used only once, but only to clarify that
   goods generally considered highly personal, such as personal
   belongings (day planners, mobile p،nes, etc.), may be requested to
   be ،uced if such goods are suspected of containing information
   useful to prove an alleged violation, and the investigator
   reasonably considers it necessary for the conduct of the
   investigation. In practice, mobile p،nes and personal day planners
   are frequently taken by the JFTC.




4. A tentative English translation of the Guidelines, which is
   useful for understanding the JFTC’s position on various
   matters discussed herein, is available at
   (https://www.jftc.go.jp/en/legislation_gls/20122504.pdf);

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Originally Published by Concurrences

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