DOJ continues its aggressive antitrust deterrence efforts

The Antitrust Division of the U.S. Department of Justice (“DOJ”) has been stepping up its enforcement efforts against international corporations and their executives, including Japanese companies and nationals.  In February 2010, the DOJ, in cooperation with the Japanese Fair Trade Commission (“JFTC”) and the European Union, conducted a raid of well known Japanese auto parts makers suspecting a conspiracy to fix the price of electrical parts.  In February 2012, not unrelated to this incident, two Japanese companies reached a federal plea agreement with the DOJ regarding their price-fixing conspiracy on electrical auto parts, often described as the central nerve system of an automobile.  The combined criminal fines against these companies, which include jail sentences imposed on four Japanese executives, make one of the largest antitrust cases of all time.  

Although Japan’s 1947 Antimonopoly Act (“AMA”) was modeled on the U.S. antitrust laws (cf. Sherman Antitrust Act of 1890), the two systems have fundamentally different approaches towards enforcement.  While the United States stresses punishment and deterrence, Japan is more focused on the elimination of the economic incentives for engaging in such anti-competition activities.  The Antitrust Division seeks to maximize their deterrence through criminal prosecution of corporations, imposing heavy fines and actual jail time on individuals,  whereas, Japan’s primary mechanism for imposing criminal sanctions under the AMA is the surcharge system, introduced in 1977, which imposes a non-discretionary administrative fine (i.e., a statutorily fixed percentage [1%-6%] of the company’s sales involved in the cartel).  This surcharge system has never been intended to be punitive, but solely aimed at enforcing a simple payback of illegal overcharges. 

Given such fundamentally different approaches towards enforcement against antitrust violations, it is not surprising to see continued participation among certain Japanese companies in anti-competitive activities, and thereby contributing to the efforts by the DOJ to specifically target several high profile Japanese companies for their price fixing practices in recent years.  The DOJ’s recent enforcement efforts also include extradition of foreign nationals to the United States for antitrust crimes, despite the principle of dual criminality.  It should be noted that the Treaty on Extradition between the United States and Japan has been effective since March 1980; the Mutual Legal Assistance in Criminal Matters (“MLAT”) between Japan and the United States became effective in 2006; and the recent amendment to the JFTC in 2009 increased prison sentence of up to five years and monetary fines of up to ¥5 million ($62,500) against antitrust violators.  The Antitrust Division of the DOJ has recently signaled a more aggressive approach seeking prosecution of international companies and their executives.  Based on the recent development in international treaties in this area, it is entirely possible that the request for extradition of foreign nationals will be successful.  

Posted by: Mikio Nishizu

Categories: Japan Desk