1. 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

2. Overview Strong focus on bid-rigging cases Standard slide
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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)

3. Current system Available instruments for private enforcement
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Current system
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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.

4. History At the time of initial AML in 1947
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History
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At the time of initial AML in 1947
Right to damages for victims of antitrust violations was clearly protected from the beginning art 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

5. Damage claims (AML art. 25/ Civil Code art. 709)
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Damage claims (AML art. 25/ Civil Code art. 709)
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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

6. High concentration in bid rigging cases
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High concentration in bid rigging cases
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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

7. Why so quiet? Less aggressive discovery system?
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Why so quiet?
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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?

8. Recent development in derivative actions
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Recent development in derivative actions
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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

9. Conclusion – current status of interplay
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Conclusion – current status of interplay
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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

10. Conclusion – Future landscape?
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Conclusion – Future landscape?
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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

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