Antitrust Alert: Japan Proposes to Reform JFTC Hearing Procedure for Antitrust Violations

The Japanese government has proposed significant changes to the procedures for challenging orders issued for antitrust violations by the Japanese Fair Trade Commission (JFTC).  The Cabinet submitted a bill of amendments to the Antimonopoly Act (AMA) to the House of Representatives (Shugiin) on March 12, 2010.  Most significantly, the bill would abolish the administrative hearings on alleged antitrust violations that currently are conducted by the JFTC and establish certain due process rights for parties being investigated prior to the issuance of a JFTC order.

Under the current AMA, the JFTC issues cease and desist orders or surcharge orders (administrative fines) to parties accused of violating the AMA, with no prior hearing.  Parties that choose to contest a JFTC order may, after the order is in place, request that the JFTC conduct a hearing.  A lawsuit to challenge a JFTC order can be filed with the Tokyo High Court only after the conclusion of the JFTC hearing.  The proposed bill would abolish the JFTC hearing procedure altogether but allow parties to challenge a JFTC order by filing a lawsuit directly with the Tokyo District Court.

In addition to abolishing JFTC hearings and revising the process for court review, the bill would provide certain due process protections for parties under investigation by the JFTC, including requiring that the JFTC (i) provide an explanation of the content of an anticipated order, (ii) allow the parties informally to present arguments and evidence to the JFTC, and (iii) allow them to review evidence obtained by the JFTC from the party and its employees, absent legitimate reason for refusing access to those materials.  The ability to review such evidence is regarded as important for parties' to prepare to challenge the order in the Tokyo District Court. 

Discussion

The JFTC's hearing procedure, known as the council system, has been in place since implementation of the AMA in 1947.  Until 2005 amendment of the AMA, JFTC hearings were conducted before the issuance of a formal decision.  The 2005 amendment initiated a procedure under which an order was first issued and parties seeking to challenge the order then had to request a hearing.  Many stakeholders, especially business groups, have challenged the fairness of this procedure, arguing that it does not allow parties under investigation to provide their arguments and evidence prior to the issuance of an order and permits the JFTC to serve as both prosecutor and judge.  On the other hand, many Japanese legal scholars have opposed abolition of the hearing procedure, concerned that a significant amendment of the AMA, like abolition of JFTC hearings, could lead to abolition of the JFTC itself.

The proposed bill would abolish the JFTC hearing procedure.  As a result, a party may file a complaint with the Tokyo District Court without first undergoing a JFTC hearing.  If passed, any challenge to JFTC cease and desist orders or surcharge orders would be subject to the exclusive jurisdiction of the Tokyo District Court.  Exclusive jurisdiction in this court is intended to ensure that such cases are handled by a court with the requisite expertise and that decisions on JFTC orders are consistent.  A party that is dissatisfied with a decision of the Tokyo District Court may appeal to the Tokyo High Court.

The due process rights for parties under investigation – requiring that the JFTC consider the parties' evidence and explanations and allow them to review certain evidence collected by the JFTC – reflects and important change, ensuring some level of due process during the investigation to enable parties to prepare for court challenges to JFTC orders.

The bill is expected to be passed by the end of June, and it would become law within one and a half years after passage, during which time the JFTC would develop implementing rules.

A brief outline of the Bill (in English) is available on the JFTC website.

For more information, please contact your principal Jones Day representative or either of the lawyers listed below.  

Shinya Watanabe
Tokyo
+81-03-6800-1820
swatanabe@jonesday.com

Akio Yamada
Tokyo
+81-03-6800-1680
ayamada@jonesday.com

Hiromitsu Miyakawa
Tokyo
+81-03-6800-1828
hmiyakawa@jonesday.com

H. Stephen Harris, Jr.
Washington, D.C.
+1-202-879-3771
sharris@jonesday.com

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