Leniency and Obtaining Evidence Hiroshi Nakazato Investigation Bureau Fair Trade Commission of Japan April 6 th 2006 OECD-KOREA Regional Center for Competition

Introduction Investigation procedure ● Detection of Cartel ● Administrative Measures against Cartel Introduction of leniency program Amendment of the Antimonopoly Act ● Increase of Surcharge

Investigation Proceedings ● Decision of Measures ● Investigation ● Beginning of Cases ● Report of Violation by the Public ● Detection of Violation by the JFTC ● Report of Violation by the Applicants of Leniency Program ● Dawn Raids (On-the-Spot Inspection) ● Orders to Report ● Interviews of Suspects

Elimination Measures Against Cartel ● Criminal Accusation ● Surcharge Payment Order ● Cease and Desist Order

Surcharge Payment Order ● Increased Rate from 6% to 10% ● Repeated Offender: Increased by 50% (15%) ● Extension of the scope of surcharge to purchasing cartel and private monopolization through controlling the business activities of the other firms ● Amendment in 2005 ● Introduced in 1977

Leniency Program as Useful Tool ● A leniency program has been introduced in many jurisdictions, which uncovers hard core cartels that would otherwise go undetected. ● A leniency program has been successful and is one of the most useful tools to detect hard core cartels.

Basic Framework of Japanese Leniency Program (1) ● A leniency program was introduced by Amendment of the Antimonopoly Act in April 2005 (the Amended Act came into effect on Jan ). ● Immunity from or reduction in surcharge payment shall be applied to enterprises that meet statutory conditions (enterprises committing cartel provide information to the JFTC). ● For 1 st applicant, the JFTC has a policy of not to file a criminal accusation against the company to the Public Prosecutors Office ● The company acting as the leader in the cartel can be applied to the leniency program. ● Introduction of a Leniency Program

Basic Framework of Japanese Leniency Program (2) ● Continued... ● The Total number of enterprises that may be appllied to the leniency program is no more than 3. ● 1 st applicant before initiation of investigation → total immunity ● 2 nd applicant before initiation of investigation → 50% deduction ● 3 rd applicant before initiation of investigation → 30% deduction ● An applicant after initiation of investigation → 30% deduction

Point of Procedure Regarding a Leniency Program ● Anonymous Prior Consultation ● Submission of Reports by Facsimile. ● Priority of the First Party (Marker) (must be written in Japanese)

Creation of Clear Contact Point ● Transparency and Consistency for Applicants ● Easy to Track and Record the Database of the Past Applications Applicants have to contact to the Leniency Officer throughout proceedings.

Before the Start of Investigation Prior Consultation Phase Marker Phase Submission Phase The JFTCApplicant Awareness of possible offence Send Form I by the Facsimile Send Form II and Evidential Materials & Documents Must be in 15 business days A part of information could be orally Availability of marker Guaranteed marker position

After the Start of Investigation Prior Consultation Phase Form III Submission Phase Evidence Submission Phase The JFTCApplicant Awareness of possible offence Send Form III by the Facsimile Send Evidential Materials & Documents ● Must be in 20 business days since start of the investigation ● A part of information could be orally Availability of leniency Guaranteed marker position

Cooperation of the Applicants ● No General Clause for Full and Faithful Cooperation for Applicants ● Partial Cooperation ● Confidentiality to the Third Parties ● Additional Evidential Materials and Report to the JFTC

Confidentiality (1) ● Full disclosure of corporate information to the public will be great disincentive for applicants – the Vitamin Case in the U.S. (2002) ● Strict Confidentiality throughout the Investigation Proceedings ● After closing of the case; the JFTC will disclose the name of applicants and the fact if applicants agree.

Confidentiality (2) ● In the hearing procedures, the JFTC will not disclose the evidential materials and reports received from applicants throughout leniency proceedings. ● In the Japanese civil damage litigation, the JFTC will not disclose those materials to the plaintiffs. ● The JFTC introduced oral application to respond to the fear of the great risk of the discovery in the U.S..