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22 February 2007
The leniency programme for surcharge payments in case of cartel and bid rigging was introduced into the Anti-monopoly Law over a year ago. According to the Fair Trade Commission of Japan, a total of 26 applications for leniency were received between January 4 2006 (the date on which the leniency programme was first implemented) and the end of March 2006; since then, on average four to five applications per month have been accepted. In September 2006 surcharge payments were ordered in the first leniency case; as a result, one company enjoyed total immunity and two other companies received a 30% reduction in their surcharge payments.
The commission has announced that it will use all its resources to continue investigating price cartels and bid rigging. Individual enterprises should not only promote compliance in order to prevent violations of the Anti-monopoly Law, but also be prepared to apply for leniency.
This update provides an overview of the leniency programme.
Immunity from/reduction of surcharge payment
Leniency will be granted to no more than three applicants in the following manner:
The grant of leniency applies only to the surcharge payment. However, the commission has also declared that it will not file criminal accusations against (i) the first enterprise that files an application for leniency before the commencement of the investigation, and (ii) its officers and employees.
Civil damages suits
Even if a company obtains leniency, it may still be sued for civil damages by potential plaintiffs (eg, cartel victims); however, civil damages suits for violations of the Anti-monopoly Law in Japan are not as common as in the United States. Moreover, unlike in the United States, recovery of treble damages and class actions are not allowed under Japanese law.
Applying for leniency before the investigation
First, a potential applicant or its attorney may contact the commission on an anonymous basis before filing an official application for leniency. During this informal consultation process, the potential applicant will be informed of the expected order of its leniency application (assuming that the application is filed immediately).
Submission of Form 1
Applicants for leniency must file a written report with the commission by fax using the appropriate form (Form 1). The order in which the commission receives the forms of the various applicants determines the order of the leniency applications. Form 1 must include:
Response of the commission
On receipt of Form 1, the commission will inform the applicant of its priority order and the deadline for submission of the next document (Form 2) and supporting materials (eg, notes on cartel meetings).
Submission of Form 2
In Form 2, applicants must provide a more detailed description of the cartel, including the name and position of the officers and employees involved in the cartel.
Notification by the commission
On receipt of Form 2 and the supporting materials, the commission will notify the applicant that the relevant documents have been submitted. Even after receipt of the notification, the applicant must answer additional information requests - if any - by the commission.
Applying for leniency after the investigation
If the commission's investigation has already started, applications for leniency must be filed within 20 business days of the commencement of the investigation by using another form (Form 3); supporting materials must also be submitted within this period. The information to be included in Form 3 is similar to that in Form 2, but the applicant must include information of which the commission was unaware. On receipt of Form 3 and the supporting materials, the commission will provide the applicant with a notification.
When preparing an application for leniency, applicants will face many difficulties as a matter of practice. For example, potential applicants may be unclear as to how to define the relevant market or have difficulties performing the necessary internal investigation.
Moreover, in international cartel cases applicants should be aware of the potential consequences that an application for leniency may have in other jurisdictions. For example, applicants might consider submitting some materials orally to avoid having written materials disclosed during discovery procedures in other jurisdictions. Moreover, information submitted to the commission might be disclosed to the competition authorities of other jurisdictions, as Japan has entered into anti-monopoly cooperation agreements with the United States, the European Union and Canada.
When a company becomes aware that its officers or employees may be involved in a cartel, it should take the necessary steps - including an internal investigation - as soon as possible and cooperate with outside counsel with sufficient experience in this area.
For further information on this topic please contact Yusuke Kaeriyama at Nagashima Ohno & Tsunematsu by telephone (+81 3 3511 6332) or by fax (+81 3 5213 7832) or by email (email@example.com).
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