1. November 17, 2015 ICN Cartel Working Group SG1 call series
The Interplay between Private Enforcement and Leniency Program in Japan
November 17, 2015
ICN Cartel Working Group
SG1 call series
Ryohei Takai
Chief of the Leniency Program Unit
Japan Fair Trade Commission
The views expressed in this presentation are not purported to represent those of Japan Fair Trade Commission.

2. Overview
In Japan, the risk of private damage action is not an important issue in terms of the attractiveness of leniency program, because such risk is very limited (except for damage action brought by procurement agencies in public bid-rigging cases.).
In practice, JFTC does not provide the leniency documents in private case, unless otherwise ordered by the court.
Successful leniency applicant is still fully liable for private damages.
On the other hand, most of the public agencies allow to shorten the period of disbarment from future procurement opportunities to half for successful leniency applicants in bid-rigging cases.

3. Private Enforcement in Cartels in Japan
Anyone who has suffered from damages of cartel may bring private damage action under Article 25 of the Antimonopoly Law (AML) and/or Article 709 of the Civil Code.
However, such actions are rarely taken.
There have been less than 100 damage actions brought under Article 25 of the AML since (enactment of AML)
Exact number of actions brought under Article 709 of Civil Code is unknown, but small as well.
Number of the actions brought by public procurement bodies in bid-rigging cases (national/local government) is recently increasing.
⇒　The risk of private lawsuits does not prevent companies from applying for leniency, because such risk is very limited. So, the protection of leniency material in private lawsuits is not a big issue.

4. Leniency Documents in Private Lawsuits (1)
　In general, parties to a private lawsuit may file a petition for an order to the opposite party or any other third parties including JFTC to submit documents to the court.
　There is no provision in the relevant laws and regulations regarding how the leniency documents would be treated in private lawsuits.
　No petition for an order to submit leniency documents has been filed by a plaintiff in a private damage action for cartel since the introduction of leniency program in 2006.
　There was a derivative lawsuit brought by a shareholder of a cartel member company, in which the plaintiff shareholder filed a petition for an order to JFTC to submit leniency documents of other cartel member company. See the next slide…

5. Leniency Documents in Private Lawsuits (2) Derivative Lawsuit of Sumitomo Electric Industries, Ltd.
Background
　On May 21, 2010, JFTC issued the surcharge payment order to Sumitomo Electric Industries, Ltd. (Sumitomo) and others in a cartel case.
　Then, a shareholder of Sumitomo brought a derivative action against Sumitomo’s directors, claiming in part that the directors, due to the failure to apply for leniency, were liable for the surcharge, which would have otherwise been exempted or deducted by the leniency program.
　The plaintiff of the above derivative action filed a petition for an order to JFTC to submit leniency materials, all of which were filed by other companies.

6. Leniency Documents in Private Lawsuits (3) Derivative Lawsuit of Sumitomo (cont.)
JFTC’s argument:
Leniency documents should not be subject to the order to submit documents.
If the leniency documents were submitted to the court, JFTC’s enforcement of the AML should be materially and adversely affected, as the risk of such submission would decrease the incentive of possible leniency applicants.
Summary of judgment (June 15, 2012, Osaka District Court)
　The court did not decide on whether the leniency documents should be subject to the order to submit documents.
Instead, the court found that the leniency documents filed by other companies are irrelevant to the plaintiff’s arguments, and dismissed the petition.
※　The parties reached an amicable settlement, subject to the payment of JPY 520 million (approx. USD 4.3 million) by the directors to Sumitomo.
⇒　JFTC will continue to argue that leniency material not be disclosed in such private lawsuits.
The outcome of the derivative action (520 million settlement) provides management of companies an incentive to apply for leniency.

7. Mitigation of Private Liability of Leniency Applicants in Public Procurement Procedures
　Successful leniency applicant is still fully liable for damages.
　Mitigation of liability of leniency applicant in public procurement procedures
Public procurement agencies (national/local government, etc.) usually prohibit bid- rigging members to offer in the subsequent public bids for a certain period of time.
On the other hand, most of the public procurement agencies offer a program in which the above period is shorten to half for the successful leniency applicants.
No differentiation in the shortened period (50% cut uniformly regardless of the order of application).  May decrease the incentive to rush to apply for leniency.

8. Conclusion
JFTC will maintain its practice not to submit leniency documents in a private lawsuit, as such submission would decrease the incentive to apply for leniency and therefore deteriorate the whole leniency program, which is a powerful tool for JFTC to detect and investigate cartels.
If damages action is much more active in the future, protection of leniency materials in the procedures of private lawsuits would be a hot issue.
The measure to mitigate liability of leniency applicants in public procurement procedures has, to some extent, worked to increase the incentive to file a leniency application. JFTC will try to persuade relevant authorities to put differentiation into the program in order to further enhance the attractiveness of leniency program.

9. Thank you for your attention.
ICN Cartel Working Group
SG1 call series
November 17, 2015