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Fair Trade Commission Annual Report for FY2003

September 24/2005
Japan Fair Trade Commission

The Fair Trade Commission of Japan (hereinafter referred to as “JFTC”) is required under Subsection 1,Section 44 of the Antimonopoly Act to submit a report on the enforcement of the Antimonopoly Act, including that of the Subcontract Act and the Premiums and Representations Act to the National Diet via the Prime Minister.
The JFTC today submitted its Annual Report for FY2003 to the Diet. The summary of the annual report is as follows.

1. Movements of the Antimonopoly Legislation
(1)The JFTC had made a study on revision of the Antimonopoly Act. In October 2003, the Study Group of the Antimonopoly Act, which is composed of intellectuals, published its report and requested opinions from every related party concerning the matters addressed in the Study Group’s report. After that, the JFTC published a draft bill to amend the Antimonopoly Act in April 2004.

(2) In light of the amendment to the Subcontract Act in 2003, the implementatiton order of the Act was also amended in October 200

2. Investigations and Implementation Violations of the Antimonopoly Act
(1)The JFTC dealt strictly with violations of the Antimonopoly Act during FY2003, and took legal measures in 25 cases against a total of 405 entrepreneurs.
These 25 cases of violations include 3 cases of price cartels, 14 cases of bid rigging, 1 case of private monopolization and 7 cases of unfair trade practices (including interference with new entries, interference with a competitor’s trade, and abuse of dominant bargaining position of large scale retailers over suppliers)

<Major cases where recommendations were issued in FY 2003>
- Case of bid rigging for water meters ordered by the Tokyo Metropolitan Government
- Case of price cartel by major steel makers concerning sales of cold rolled stainless steel plates
- Case of private monopolization by a major telecommunications carrier in the FTTH service for detached houses
- Case of dealing on restrictive terms by movie distributor
- Case of a mechanical parking system maintenance operator preventing independent maintenance operators from trading
- Case of an abuse of dominant bargaining position of large-scale retailers over suppliers

(2) In FY2003, the JFTC ordered 468 entrepreneurs to pay surcharges totaling 3,869.96 million yen.

3. Hearing Procedure, etc.
In FY2003, the JFTC handled 160 cases in hearing procedure (record high number of cases), including 83 cases that were carried over from FY2002. Among these cases, the JFTC rendered decisions on 20 cases.

4. Investigations and Suggestions on Regulatory Reform
(1)The JFTC held a “Study Group Concerning Public Procurement and Competition Policy” to discuss selected issues on tenders and contracts in public procurement and measures for improvement. In November 2003,The JFTC published the results of its study.

(2) In parallel with the newly introduced competition as a result of regulatory reform, the JFTC showed its views under the Antimonopoly Act concerning the transaction of surplus electric power from general waste power generation and the express bus business in order to prevent any violation of the Antimonopoly Act.

5. Efforts and Fact- Finding Surveys for Creating Theoretical and Empirical Platforms on Competition Policies
(1)To reinforce the theoretical foundation for enforcement of the Antimonopoly Act and to facilitate the planning and evaluation of competition policies from a medium- to long-term perspective, the JFTC established the Competition Policy Research Center under the General Secretariat in June 2003. The mission of the Center is to build and improve functional and sustainable cooperative platforms between intellectual resources of outside analysts and practical men and staffs of the JFTC. The Center hosted an international symposium concerning competition policies and published research reports on multiple subjects.

(2) In FY 2003, the JFTC conducted the following surveys aimed at serving the operation of competition policies.
- A survey concerning competitive conditions on the management and maintenance of apartment houses
- A fact-finding survey on brand power and competition policy
- An economic analysis using new market structure indicators: using data on the degree of concentration of production and shipping

6. In FY 2003, the JFTC recognized one case concerning low-malt beer as a parallel price increase stipulated in Section 18-2 of the Antimonopoly Act and request a report on reasons for the price increase.

7. Operations Concerning Regulations on Mergers and Acquisitions
(1)With regard to Mergers and Acquisitions, the JFTC approved 13 applications for ownership from the voting rights of banks or insurance companies in FY 2003. In addition, the JFTC received 76 reports on holding companies, etc., 4 notifications for the establishment of holding companies, 959 reports on stock holding conditions of operating companies and 299 notifications for corporate mergers, division and business transfer and conducted the necessary assessment for each of them.

<Major cases of business combinations in FY 2003>
- The merger between Meiji Life Insurance Co., Ltd. and the Yasuda Mutual Life Insurance Co., Ltd.
- The establishment of a company for joint production of ethyl acetate by Showa Denko K.K. and Kyowa Hakko Kogyo Co., Ltd.
- The management integration of Yuasa Corporation and Japan Storage Battery Co., Ltd.
- The transfer of the business on glass substrate for magnetic disks from HOYA Corporation to Nippon Sheet Glass Co., Ltd.
- The management integration of Hokuriku Bank, Ltd. and the Hokkaido Bank, Ltd.

(2) In order to further ensure the transparency of the review on mergers and acquisitions and to improve predictability of it, the JFTC formulated and published the Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination. The Guidelines specify the factors for judgment in business combination review based on past experience of the review.

8. Securing transparency of law operation and prevention of violations of the Antimonopoly Act
In FY 2003, the JFTC accepted 1,126 inquiries on the activities of entrepreneurs and 457 inquiries on the activities of trade associations and responded to those inquiries.

9. Operations Related to the Subcontract Act
(1) In FY2003, the JFTC conducted document-based investigations of 18,295 parental enterprises and 108,395 subcontractors.

(2) As a result of the document-based investigations, 1,365 cases were deemed to be violations of the Subcontract Act, the JFTC issued recommendations in 8 cases and issued warning in the other cases.

(3) In light of the amendment to the Subcontract Act in 2003, the JFTC revised Rules of the JFTC that stipulate information to be included in ordering documents as well as guidelines for the Act. In addition, the JFTC held briefing sessions for entrepreneurs newly subject to the said Act and conducted a fact-finding survey to raise awareness of the revised Act.

(4) To effectively control any abuse of dominant bargaining position in transactions between shippers and distributors that are not regulated by the Subcontract Act, the JFTC designated the Specific Unfair Trade Practices When Specified Shippers Assign the Transport and Custody of Articles, pursuant to Subsection 9,Section 2 of the Antimonopoly Act.

10. Operations Related to the Premiums and Representations Act
(1)In FY 2003, the JFTC issued 27 cease and desist orders and rendered 382 warnings. This number of cease and desist orders is the highest since FY 1976.

<Major cases subject to cease and desist orders in FY 2003>
- Case of misleading representations of care services, etc. on fee charging homes for the elderly
- Case of misleading representation of hospitalization benefits by a life insurance company
- Case of misleading representation on place of origin of sporting goods
- Case of misleading representation on soft drink without juice

(2) To further ensure the transparency of the enforcement of the amended Premiums and Representations Act, the JFTC prepared and published the Guidelines to Application of Subsection 2, Section 4 of the Premiums and Representations Act in October 2003. The purpose of the Guidelines is to clarify the stance of the JFTC on the application of the provisions and judgment criteria for “reasonable grounds” of materials justifying the representations.

(3) The JFTC designated the “Misleading Representations Concerning Fee-Charging Homes for Elderly” in order to prevent misleading representations and to thestrict action against them by specifying representations that may cause consumers to misunderstand the services provided by fee charging homes for the elderly.

11. International- Affairs- Related Operations
(1)The JFTC exchanged views on the issues related to competition policies with foreign competition authorities on a bilateral basis and actively participated in meetings held by international institutions.

(2) In July 2003, the Japanese government and the European Community (EC) signed the Agreement between the Government of Japan and the European Community Concerning Cooperation on Anticompetitive Activities, which includes notification, cooperation ,coordination, requests for enforcement and considerations of important interests, etc..

(3) In developing countries and transitional economies, the establishment of competition legislation is gathering momentum. The JFTC has provided competition authorities of these countries with technical assistance, such as conducting training courses, etc..

*Every announcement is tentative translation. Please refer to the original text written in Japanese.

Japan Fair Trade Commission:

100-8987 1-1-1 Kasumigaseki, Chiyoda-ku, Tokyo,Japan
Tel: +81-3-3581-1998
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