Anticompetitive Practices
(1) Lack of Transparency in Administrative Practices
This year's NTE alleges that a lack of transparency in Japanese administrative practices creates a trade barrier to the entry of foreign companies into Japan's markets. However, as the report does not provide an explanation based on specific examples as to exactly how the lack of transparency of administrative practices functions as a trade barrier, there would seem to be no need for Japan to make detailed comments as to the impact on trade. At the same time, Japan considers the ensuring of transparency in administrative procedures to be an important policy agenda, and has taken various measures to realize open and creditable administration, in line with the guidelines indicated in the "Administration Reform Program" which the Cabinet decided in December 1996. Because of the importance of this matter, Japan makes the following response to the points raised by the United States.
The Administration Procedure Law (APL): If U.S. concerns regarding the APL are based on concrete experiences, Japan would be interested in hearing them. However, a survey conducted by the Management and Coordination Agency on the current situations of APL implementation, such as, the enactment of review standards applicable to the request or applications for authorization, permission etc., and publication of administrative guidance criteria, suggests that the various ministries and agencies are abiding by the rules stipulated by the APL in engaging in administrative guidance.
Rule-making process: In regard to what seems to a comment on administrative legislation procedures, Japan recognizes the need to engage in mid- to long-term study of this issue.
Advisory Councils: Japan's advisory councils are set up for purposes, in terms of administrative operation, such as introducing various types of specialist knowledge, ensuring fairness, and coordinating interests. The Government of Japan does not agree with the U.S. views on advisory councils that these advisory councils are essentially expected to endorse policies developed or advocated by the ministries. (More than 1,000 advisory councils exist in the U.S. and there must be cases where the councils are asked to offer policy proposals or include among their members ex-government officials.) However, in consideration of criticism such as that which the United States has proffered, Japan is currently working steadily to ensure the more transparent operation of advisory councils in line with the Cabinet decision of 29 September 1995, The decision stipulates the measures that advisory council meetings and the minutes thereof would be made open to the public, and that former government officials would in principle not be appointed to these councils. The above-mentioned "Administrative Reform Program" promoted the process further. At the end of March 1996, a survey was conducted concerning issues such as the degree to which the meetings and minutes of advisory councils are open to the public (the results of which were announced last June), and a second survey is currently underway, with two surveys a year planned from now on. In addition, in terms of reviewing advisory councils themselves, in line with the Administration Reform Program, a zero-base review will be conducted of inactive and overly-similar councils to examine the need for existing councils, as well as the establishment of new advisory councils.
Information Disclosure Law: The legislation of an information disclosure law is an important agenda which should be discussed in each country from the viewpoints of how to construct democratic systems in line with the country's particular situation. It should not be discussed solely from the viewpoints of its impact on trade. Furthermore, Japan has currently initiated work on the formation of a bill for an information disclosure law, and is working toward the earliest possible completion of this bill in line with the above-mentioned Administration Reform Program, which urges submission of the necessary draft legislation to the Diet during FY1997.
(2) Japan Fair Trade Commission's Enforcement Record
(i) The Government of Japan believes that the active implementation of competition policy is important from the viewpoint of making Japan's markets more competitive and more open through the further promotion of fair and open competition in the national economy. Japan and the United States would therefore seem to be in agreement on this point. Measures concerning the active implementation of competition policy have also been included in the revised Deregulation Action Program which was put together last month.
(ii) The Fair Trade Commission (JFTC) has always vigorously enforced the Antimonopoly Law. In addition, in June 1990, to further strengthen the JFTC's enforcement of the Law to prevent anti-competitive practices, the JFTC announced that it would actively impose criminal sanctions seeking punishment in serious and unconscionable cases which could have a wide-ranging impact on consumers. Since announcement of this policy, the FTC has made criminal accusations in four cases. As is stated in the above-mentioned revised Deregulation Action Program, the FTC will take prompt and vigorous action, including bringing criminal accusations to public prosecutor's office, against price cartels, bid-rigging and other such acts violating the Law.
The Government of Japan believes that enforcement measures provided in the Law are sufficient to deter the antimonopoly activities. Measures against Antimonopoly Act violations include: criminal sanctions seeking punishment; hearing decisions, which are administrative actions ordering the violator to cease and desist the violations; and surcharge payment orders, in which profits made by a cartel are seized.
As can be seen from the above, the measures and enforcement contained in the Antimonopoly Act are in no way inferior to international standards, and the NTE allegations are therefore unfounded.
Moreover, the matter of vital importance should be the appropriate handling of individual case based on the facts, not the total number of cases or average year of imprisonment sentenced.
In addition, since 1991 the FTC has made accusations against 67 people and 46 companies in a total of four cases. In a recent bid-rigging case regarding water-meters ordered by the Tokyo Metropolitan Government, criminal accusations were made against 34 people and 25 companies. Over the last three years, the surcharge payment orders assessed totaled ¥19.6 billion (US$182 million), while in FY1996 alone, total sum of payment orders mounted to approximately ¥7.5 million (about US$69 million).
(iii) In the tight circumstances of administrative and financial reforms, JFTC's enforcement powers has been steadily strengthened and improved for the purpose of the active implementation of competition policy as well as deregulation.
In FY1997, despite the tight budget situation, 13 staff members will be added to the FTC, mostly to the investigation section. And a senior investigator will also be assigned to the Investigation Bureau, and a second investigation division will be set up in the Tohoku Office. Of the 13 new staff members, nine will be assigned to the Special Investigation Department of the Investigation Bureau, which will bring total regular staff in Department from 46 FY1996 to 55 FY1997, with total regular staff in the investigation section increasing from 236 to 248.
(iv) The purpose of Japan's Premiums Law is to protect consumer interests and ensure fair competition, which should be through prices and quality, by preventing excessive premiums and deceptive or misleading representation, both of which misguide consumers in purchasing goods. The Premiums Law therefore simply regulates excessive use of premium incentives in sales, and, representation is not subject to this regulation if it is based on facts.
In April 1996, responding to changes in the economic and social situation, and also giving thought to the views proffered by the United States, the FTC revised the general rules under regulations on premiums, which apply to all industries, and at present is reviewing rules applied to designated sectors (sector-specific notifications and fair competition codes) in line with the content of the revised general rules.
In continental Western European countries and in Northern European countries, the offering of premiums is strictly restricted. Even in the United States, the provision of premiums in the form of general prizes, which is allowed with a certain range of restrictions in Japan, is prohibited. From an international perspective therefore, the regulations concerning premiums in Japan is not unique nor restrictive.
As inappropriate soliciting of customers (excessive premiums and deceptive or misleading representations), which is restricted under the Premiums Law, has a tendency to spread and accelerate, private trade associations set voluntary standards ("fair competition codes") for themselves, which is an effective way of preventing problematic behavior. Fair competition codes are announced publicly, and entrepreneurs are free to be bound or not by these codes, so newcomers are not disadvantaged by the fair competition codes system.
(v) The independence of the FTC is stipulated in Section 28 of the Antimonopoly Law, and the chairman and commissioners exercise their authority independently, with no ties to their previous experience within a government.
(vi) The JFTC has always taken strict measures against violations of the Antimonopoly Law, such as restriction of entry into markets or discriminatory treatment of newcomers by entrepreneurs or trade associations, and, where necessary, requested the relevant government organizations to take positive measures. Recent cases of decisions by the FTC include a case concerning exclusion of other firms in the area of manufacturing and sales of medical food products (May 1996, recommendation decision) and a case concerning a doctors association restricting the establishment of medical facilities by its members (February 1997, recommendation decision).
(vii) In regard to the review of antimonopoly exemption systems, the NTE alleges that monopolistic practices by the Japan Harbor Transport Association are not being addressed. If this refers to matters such as so-called "prior negotiation system", etc, those practices have never been exempted from the Antimonopoly law and has no connection with the review of antimonopoly exemption systems.
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