JFTC Public Comment Opportunity: New Rules re: Fine Calculation and Leniency in accordance with 2019 AMA Amendments
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On June 29, 2020, the Japan Fair Trade Commission ("JFTC") issued a draft of amendments to relevant cabinet orders and rules ("Drafts") in accordance with the amendments to the Anti-Monopoly Act ("AMA") previously passed in June 2019 ("2019 AMA Amendments" or "Amendments").1The JFTC is seeking comments from the public. Comments are due by July 28, 2020.
The 2019 AMA Amendments were passed on June 19, 2019 and promulgated on June 26, 2019, which will become effective on or before December 25, 2020.2The amendments include various topics including enhancement of surcharge (i.e., administrative fines)3and reformation of leniency system.4
Overview of 2019 AMA Amendments
(1) Enhancement of surcharge (i.e., administrative fines)
Under the AMA, the surcharge amount (i.e., administrative fine) is calculated as relevant turnover multiplied by a certain fixed percentage, in principle, ten percent (e.g., for a cartel case). Currently, up to three years of relevant turnover is subject to surcharge calculation, but will be up to ten years once the 2019 AMA Amendments become effective. In addition, the Amendments include increase of turnover subject to surcharge calculation (e.g., including consideration for Closely-Related Business5), JFTC’s authority for estimating turnover, and change of percentage for calculating surcharge (e.g., lower percentages for retailers and wholesalers will be abolished).
(2) Reformation of leniency system
After the Amendments become effective, the leniency system will be reformed, including that a limit for number of leniency applicants will be abolished. Now, the JFTC will have certain discretion to award an additional discount for reduction of surcharge (i.e., administrative fine) when a leniency applicant cooperates with the JFTC investigation.
The reduction of surcharge (i.e., administrative fines) under the new leniency system:
| Initiation of Investigation | Ranking | Reduction | Additional Reduction in accordance with Cooperation |
|---|---|---|---|
| Before | 1st | Immunity | N/A |
| 2nd | 20% | ＋Up to 40% | |
| 3rd – 5th | 10% | ||
| 6th | 5% | ||
| After | Up to 3 companies(*) | 10% | ＋Up to 20% |
| Others | 5% |
* This category is applicable only when the applicant’s ranking is fifth or above, including the applicants before the initiation of the investigation.
Overview of Proposed Amendments to the relevant Cabinet Orders and Rules
In accordance with the 2019 AMA Amendments, the JFTC prepared the Drafts to specify the details including the following.
(1) Surcharge calculation
The Draft provides details with respect to calculation method, including a definition of Closely-Related Business. As mentioned above, consideration for Closely-Related Business will be used as base when calculating a surcharge (i.e., administrative fine) after the Amendments become effective. The Draft of relevant cabinet order specifies that business (e.g., manufacture, sales and processing) conducted in exchange for refraining from providing goods and/or services which is subject to violation conduct is one of the Closely-Related Businesses.
In addition, as mentioned above, the JFTC will be given the authority to estimate turnover when a company fails to provide required information in order for the JFTC to calculate the turnover. The Draft of relevant rules provide that the JFTC may multiply the daily average amount of sales to estimate the turnover when calculating surcharge.
(2) Reformation of leniency system
Rules about the situation when an applicant has ceased to exist (e.g., in case of merger or business transfer) was supposed to be provided by amendments to relevant cabinet orders and/or rules. The Draft of amendments to relevant cabinet order and rule provides that companies that considered to be jointly imposed surcharge (i.e., administrative fine) should be joint applicants.
The Draft subject to public comments includes proposed (i) amendments to the Cabinet Order for implementing the AMA, (ii) amendments to the Cabinet Order on transitional measures for enforcement of the 2019 AMA Amendments, (iii) amendments to the "Rules on Investigations by the Fair Trade Commission" and (iv) amendments to the "Rules on Reporting and Submission of Materials Regarding Immunity From or Reduction of Surcharges." The comments shall be submitted in Japanese by 6pm on Tuesday, July 28 Japan Time.
1 The Press Release by the JFTC on June 29, 2020 is available in Japanese at https://www.jftc.go.jp/houdou/pressrelease/2020/jun/200629.html.
2 Part of the 2019 AMA Amendments have already become effective.
3 Please see our Client Alert "New Bill: Enhancement of Fines under the Japan Anti-Monopoly Act" (July 2019) at https://www.whitecase.com/publications/alert/new-bill-enhancement-fines-under-japan-anti-monopoly-act.
4 Please see our Client Alert "New Expansion for Leniency and Fines under the Japan Anti-Monopoly Act" (July 2019) at https://www.whitecase.com/publications/alert/new-bill-expansion-leniency-and-fines-under-japan-anti-monopoly-act.
5 According to the Amendments, consideration for (i) manufacture, sale and/or management of products subject to violating conduct, or (ii) any other business closely related to the products or services subject to violating conduct ("Closely-Related Business"), will be subject to surcharge (i.e., administrative fine), after the bill becomes effective.
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