ICN Cartel Working Group SG 1 call series Cover – option 4 Interplay of public and private enforcement – cartel sanctioning and deterrence ICN Cartel Working Group SG 1 call series Freshfields Bruckhaus Deringer, Tokyo Kaori Yamada 15 September 2015

Overview Strong focus on bid-rigging cases Standard slide Template tip To start using numbers or bullets, use the INCREASE INDENT button Strong focus on bid-rigging cases Public bodies (e.g. local governments) almost always file damage claims However, companies rarely file damage claims (consumer claims almost non-existence)

Current system Available instruments for private enforcement Standard slide Current system Template tip To start using numbers or bullets, use the INCREASE INDENT button Available instruments for private enforcement AML Article 25 Civil Code Article 709 Derivative actions under the Companies Act Actions to request a confirmation of annulment Class action is not established Residents’ actions in the 1990’s The system was abolished in 2002 Created a basis for damage claims by public bodies Interim injunction by AML Article 24 (AML amendment in 2001) Only unfair trade practice (strong opposition from the business community to introduce an injunction system for other areas of infringement) Probability of “significant damage” is required Residents’ action system was introduced in the Local Autonomy Act, modelled from the US taxpayer suits. If the local government itself fails to sue the cartelists for damages, the residents can bring an action on behalf of the local government. A number of suits were led by “Citizen Ombudsman”. In 2002 however, the relevant law was amended and residents can no longer sue on behalf of their local governments.

History At the time of initial AML in 1947 Standard slide History Template tip To start using numbers or bullets, use the INCREASE INDENT button At the time of initial AML in 1947 Right to damages for victims of antitrust violations was clearly protected from the beginning art. 25-26 of the AML However, the mechanism of “multiples” was not adopted (although initially in the proposal) High economic growth until early 1990’s JFTC enforcement was relatively quiet, and so was private enforcement The only major case was US government’s winning significant damages from Japanese construction companies in relation to the big-rigging case for works at the US Navy base in Yokosuka Slow but steady change since the 1990’s Rise of residents’ actions during the 1990’s against bid-rigging cases After the abolition of residents’ action mechanism in 2002, direct actions by public bodies replaced the trend However, actions by private parties (including consumers) are still very rare

Damage claims (AML art. 25/ Civil Code art. 709) Standard slide Damage claims (AML art. 25/ Civil Code art. 709) Template tip To start using numbers or bullets, use the INCREASE INDENT button Meaning of AML art.25 Negligence is deemed Claim can be filed only after the JFTC decision is finalised Time limitation (3 years after the decision is finalised) JFTC’s opinion submitted to the court Damage calculation 8% is regarded as a reasonable yardstick? Agreed rate of “deemed” damage amount is inserted in public procurement contracts – e.g. 10% No multiples

High concentration in bid rigging cases Standard slide High concentration in bid rigging cases Template tip To start using numbers or bullets, use the INCREASE INDENT button High ratio of bid-rigging cases among JFTC investigation cases In many of them, the ‘victim’ (ie. customer) is a government body or other public bodies Very limited number of private actions other than bid-rigging (e.g. price cartel) Stand-alone cases are limited Normally antitrust private litigations (even after Civil Code art. 709) were filed after preceding investigations by the JFTC or the public prosecutor office Truly stand-alone cases were limited to unilateral conducts (private monopolisation and unfair trade practices) – in these areas, the details of infringement are much easier to detect and prove

Why so quiet? Less aggressive discovery system? Standard slide Why so quiet? Template tip To start using numbers or bullets, use the INCREASE INDENT button Less aggressive discovery system? Without an extensive discovery mechanism available in the court, plaintiffs will face challenges to prove the infringement – cartel is particularly hard to detect and prove JFTC’s notice on the provision of evidence for the purpose of damage litigations (since 1991, last amendment was in March 2015) Before the claim is made: only copy of the JFTC decision After the claim is successfully made: various evidence (e.g. link between the alleged conduct and damage, damage amount, etc.) Less litigious culture? Historical mindset among the business community in Japan that infringements should be removed by government investigations Closely-knit business communities – litigating suppliers may damage the long-standing relationship?

Recent development in derivative actions Standard slide Recent development in derivative actions Template tip To start using numbers or bullets, use the INCREASE INDENT button Based on the Companies Act Shareholders seeking to recover damages on behalf of the company from the management for: Failure to prevent antitrust violations Failure to file a leniency application Fiber-optic cable case (JFTC decision in May 2010) Shareholders of one of the defendants filed a damage claim against the management The court case was settled

Conclusion – current status of interplay Standard slide Conclusion – current status of interplay Template tip To start using numbers or bullets, use the INCREASE INDENT button Interplay – current status Generally “quiet” in the area of private enforcement More seen as means to recover compensation (particularly damage claims by public bodies) However, JFTC’s policy does not exclude the deterrence aspect

Conclusion – Future landscape? Standard slide Conclusion – Future landscape? Template tip To start using numbers or bullets, use the INCREASE INDENT button Follow the example of some European jurisdictions? Like many other jurisdictions, often settlement is encouraged by judges (currently, no safe guard for prevent abusive claims) Less litigious culture? Not litigating could be regarded as ‘negligence’ of the management? Lawyers’ number is limited in Japan US: 900,000/ UK: 80,000/ Germany 85,000/ France: 30,000/ Japan: 16,000 Still no mechanism for “class action” lawsuits which are as extensive as the US system

Disclaimer Template tip A disclaimer should always be included at the end of the presentation TOK641111 This material is for general information only and is not intended to provide legal advice. © Freshfields Bruckhaus Deringer LLP 2015