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- Publisher
- Oxford University Press
- Copyright
- © The Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com
- ISSN
- 2050-0688
- eISSN
- 2050-0696
- DOI
- 10.1093/jaenfo/jnz033
- Publisher site
- See Article on Publisher Site
Abstract
Abstract Most states have a national anti-trust or competition law to regulate anti-competitive activities. There is no doubt that, in purely domestic cases, where an anti-competitive activity and its anti-competitive effects have occurred within a state, that state’s national competition authority can regulate the activity by applying its competition law. For cross-border cases such as where anti-competitive activities are carried out abroad but have anti-competitive effects on the domestic or internal market of that state or region, it has been gradually accepted that a state can apply its competition law to the activities on the basis of the effects within its territory. However, it should be noted that states have approached such cases differently. In 2017, the Supreme Court of Japan first decided the international scope of the Japanese Anti-Monopoly Act (JAMA) in cross-border cartel cases and clarified that the JAMA could apply to anti-competitive activities conducted outside of Japan if the activities in question disturbed the free competition economic order of Japan. The court did not mention the effects doctrine or the territorial principle. This article examines on what grounds and how far the JAMA can and should apply to cross-border cartel cases by analysing the Supreme Court judgement. I. INTRODUCTION Most states, including Japan, have a national anti-trust or competition law1 to regulate anti-competitive activities. There is no doubt that, in purely domestic cases, where an anti-competitive activity and its anti-competitive effects have occurred within a state, that state’s national competition authority can regulate the activity by applying its competition law. For cross-border cases such as where anti-competitive activities are carried out abroad but have anti-competitive effects on the domestic or internal market of that state or region (for example, a cross-border price-fixing cartel), it has been gradually accepted that a state can apply its competition law to the activities on the basis of the effects within its territory.2 It is said that ‘virtually all jurisdictions apply some form on an “effects” test’.3 However, it should be noted that states have approached such cases differently, and there are some notable differences in the international or geographical scope of competition law of jurisdictions. For instance, one of the leading jurisdictions in this field, the United States, applies federal antitrust laws when activities have a ‘direct, substantial and reasonably foreseeable effect’ on US commerce, thereby adopting the (qualified) effects doctrine first formulated in the 1945 Alcoa case.4 ‘The European Court of Justice (ECJ)’ (currently, ‘the Court of Justice of the European Union (CJEU)’) similarly applies the EU competition law in cross-border cartel cases in which activities are found to have had adverse effects within the EU. The ECJ has, however, also held that a prohibited agreement, decision or concerted practice consists of two elements, formation and implementation, and implementation is the crucial factor when assessing the applicability of EU competition law (the implementation theory).5 On the other hand, in the recent Intel case concerning the abuse of a dominant position, the CJEU adopted a qualified effects test. According to this test, Article 102 of ‘the Treaty on the Functioning of the European Union (TFEU)’ applies when it is foreseeable that an act carried out elsewhere will have an ‘immediate and substantial’ effect in the EU.6 Thus, the grounds for the application of competition law differ from one state or region to another. On what grounds and how far can and should ‘the Japanese Anti-Monopoly Act (JAMA)’ be applied to cross-border cartel cases? This article will examine on what grounds and how far the JAMA can and should apply to cross-border cartel cases by analysing a Japanese Supreme Court judgement from 20177 dealing with its applicability to anti-competitive activities conducted outside of Japan. This article will start with an overview of the developments in the ‘extraterritorial application’ of the JAMA prior to the 2017 Supreme Court judgement in Section II. Section III presents the Supreme Court approach. Section IV analyses the court’s judgement and considers the international or geographical scope of the JAMA in cross-border cartel cases (in particular, hard-core cartels such as price-fixing cartels). Section V touches on one related issue (the base amount for calculating administrative surcharges in cross-border cartel cases). Section VI briefly mentions possible impacts and implications of the Supreme Court judgement. II. International or geographical scope of the Japanese Anti-monopoly Act in cross-border cartel cases With regard to the applicability of the JAMA to cross-border cartel cases (its international or geographical scope), there are two questions to be considered. The first is how far the JAMA ‘can’ reach, which involves the consideration of the limits on extraterritorial application imposed by public international law (A). The second question is how far the JAMA ‘should’ reach given that, in principle, a state is generally free to decide whether and how it should regulate particular activities (B). This article focuses on the latter question. Moreover, when the JAMA is applied to the case, a third question arises regarding whether specific conduct violates provisions of the JAMA (a substantive law question). Limitations under public international law Public international law imposes limits on how far a state can apply its law internationally or geographically. It has been widely accepted that, as a premise for applying domestic law to a cross-border case, a state has to have a sufficient or reasonable relationship, that is, a genuine link or legitimate interest with that case.8 Such a link or interest is often materialized through two traditional connecting factors: the (subjective or objective) territorial principle and the (active or passive) personality (nationality) principle. In the context of competition law, the objective territorial principle formulated by the Permanent Court of International Justice in Lotus9 in 1927 has traditionally been referred to justify the application of competition law to cross-border anti-competitive activities. According to this principle, a state may exercise jurisdiction when only part of the activities have physically occurred within its territory. Today, it has also been widely accepted that the application of competition law based on effects in a state’s territory does not contravene public international law.10 In other words, such effects prove a genuine link or legitimate interest. A state can consequently apply its competition law as long as any part of the activities occurred in or their effects are felt in its territory. In summary, whichever principle the application of competition law is based on, it is justifiable as long as such a link can be found between the case and the state. Therefore, it can be said that the present-critical question lies in whether there is a genuine link, not which principle grounds the application. International or geographical scope of the Japanese Anti-Monopoly Act: prior to the Supreme Court judgement in 2017 Given the limitation under public international law, it has to be determined, as a matter of domestic law, whether and how far the JAMA should reach anti-competitive activities carried out abroad. The JAMA is basically silent on its international or geographical scope.11 In other words, the JAMA itself does not set any limitation on its scope.12 In addition, the JAMA or even Japanese law does not have a general ‘presumption against extraterritoriality’ as applies in US law, according to which ‘the legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.’13 Thus, it is possible to apply the JAMA to cross-border cases as long as such an application is not against public international law.14 It is ultimately for the courts and the competition authority, ‘the Japan Fair Trade Commission (JFTC)’, to determine on what ground and how far the JAMA applies. In this regard, there have been some cases (for instance, the Marin horse cartel case,15 a series of Cathode Ray Rube cases,16 the Rio Tinto/BHP Billiton case17) in which the application by the JFTC of relevant provisions could be justified based on the effects doctrine.18 However, the JFTC and the Supreme Court had never proclaimed their position prior to the 2017 Supreme Court judgement.19 It was unclear on what ground and how far the JAMA could apply. Before the 1980s, it was generally understood by scholars that the JAMA could be applied based on the objective territorial principle.20 In its 1990 report, however, the JFTC suggested the ‘extraterritorial application’ of the JAMA, stating that, even if allegedly anti-competitive conduct was carried out outside of Japan, the JAMA should regulate such conduct as long as it violates relevant provisions of the JAMA.21 The report also stated that it was not necessary to explain whether the application of the JAMA was based on either the effects doctrine or the territorial doctrine.22 Since the JFTC published the report, there has been a growing trend in academic literature towards the adoption of an effects test.23 One commentator has argued that the expressions ‘a market of our jurisdiction’ and ‘effect’ in the 1990 JFTC report are obscure. This commentator has suggested that the former be defined as ‘a market that has customers located in our jurisdiction’ and the latter as ‘the effect on customers located in the particular jurisdiction’.24 By rewording these phrases, this commentator has advocated that if allegedly anti-competitive conduct has an adverse effect on such a market, the jurisdiction can apply its competition law.25 Under this approach, whether customers located in Japan are affected would be decisive in defining the international or geographical scope of the JAMA. Additionally, following a similar path as the 1990 JFTC report, some scholars have advocated that the international or geographical scope of the JAMA be determined through a consideration of whether it should reach and regulate conduct abroad in light of its purpose and objective.26 According to this view, the JAMA will be applied if an act constitutes an infringement of the JAMA so that it becomes necessary to take regulatory action. Behind these views lies the argument that as the application of competition law based on an act or effect in the territory is not contrary to public international law, it is of no practical use to discuss which doctrine you should adopt; a state should simply define the scope of the law in view of its purpose and objective given that such a connecting factor proves a genuine link between the case and the state. Overall, there seems no doubt that the JAMA may be applied to regulate anti-competitive activity abroad if its effects occur in Japan, apart from the question as to whether the application is grounded on the effects doctrine or any other doctrine. However, there has been no consensus on what effects should be required to define the international or geographical scope of the JAMA. The majority view seems to separate ‘effects’ into those at the jurisdictional level (being examined to decide whether conduct should be covered by the JAMA) and those at the substantive law level (being examined to decide whether it violates relevant provisions of the JAMA). As the jurisdictional test, the commentators argue that the effects have to be direct, substantial and/or reasonably foreseeable (abstractly worded effects). On the other hand, others take as the starting point the statutory text of relevant provisions, arguing that the effects have to be concrete market effects at the substantive law level. According to this view, jurisdictional effects are not examined separately, and they will be affirmed as long as conduct violates relevant provisions of the JAMA. III. 2017 Supreme Court judgement: application based on the effects doctrine? Facts This case concerned an international price-fixing cartel agreement (‘the Agreement’) for ‘Cathode Ray Tubes (CRT)’ that CRT manufacturers marketed in Southeast Asia, including Malaysia and Indonesia.27 Japanese companies manufacturing and selling CRT TVs (‘Japanese TV manufacturers’) chose some suppliers among the cartel members and negotiated and decided important trade conditions, such as purchase price and purchase volume. The Japanese TV manufacturers also ordered their local manufacturing subsidiaries and others (‘local manufacturers’) in Southeast Asia to purchase CRTs from those designated suppliers. The local manufacturers purchased CRTs and produced CRT TVs in accordance with the orders from the Japanese TV manufacturers and then sold most of the CRT TVs to the Japanese TV manufacturers. The Japanese TV manufacturers re-sold the CRT TVs both inside and outside of Japan (mostly outside of Japan). The JFTC found that the Agreement constituted an unreasonable restraint on trade within the meaning of Article 2(6) of the JAMA and violated Article 3 of the JAMA. The JFTC issued cease-and-desist orders and surcharge payment orders against the cartel members who were parties to the Agreement, including Samsung SDI Malaysia Berhad (Appellant).28 Some cartel members appealed to the Appeals Division of the JFTC.29 The Appeals Division dismissed the appeal, upholding the application of the JAMA with regard to activities carried out outside of Japan. In 2016, the cartel members filed three suits in the Tokyo High Court challenging the decisions of the JFTC’s Appeals Division. The Tokyo High Court dismissed these suits, although the court’s reasoning in each case was different (Judgments, Tokyo High Court, 29 January 2017,30 13 April 201731 and 22 April 201732). The cartel members filed three petitions for the acceptance of the final appeal, but the Supreme Court of Japan accepted only one petition and rejected the other two. Opinion of the Supreme Court With regard to the international or geographical scope of the JAMA, the original court held that it was evident that the JAMA could reach the activities because the action restricting free competition occurred in the course of negotiations with the Japanese TV manufacturers situated in Japan. This decision has led some to argue that the Tokyo High court adopted the objective territorial principle.33 However, to the contrary, the Supreme Court held the following: [i]n light of the purposes of the JAMA including promotion of the democratic and wholesome development of the national economy as well as securing the interests of general consumers by promoting fair and free competition (Article 1), it is appropriate to understand that the provisions of the JAMA relating to cease-and-desist orders and surcharge payment orders apply to cartel agreements that have been concluded outside Japan if they disturb the free competition economic order of Japan. Therefore, the JFTC may issue such orders against enterprises engaged in a cartel as long as all the requirements in the JAMA are met. The expression ‘causing substantial restraint of competition in any particular field of trade’ in Article 2(6) of the JAMA, which defines unreasonable restraint of trade, means to impair the competitive function of the market of the trade in question [….] Accordingly, even if a price-fixing cartel as in this case (i.e., unreasonable restraint of trade) is concluded outside Japan, the cartel disturbs Japan’s free competition economic order if the Japanese market is one of the markets whose competitive function the price-fixing cartel may impair - for instance, if the price-fixing cartel impairs competition in which a counterparty to a transaction is situated in Japan. The Supreme Court did not mention or make any findings on the implementation or the effects of the Agreement in Japan. Instead, the court simply referred to the purpose of the JAMA (Article 1) and held that the JAMA may apply as long as all the substantive law requirements (in this case, Article 2(6) of the JAMA: ‘causing substantial restraint of competition in any particular field of trade’) are satisfied. After formulating the general criteria for the international or geographical scope of the JAMA, the Supreme Court applied it to the case and made the following holding: On the facts, Japanese TV manufacturers were in capital ties or close business alliance with their group companies, including local manufacturers, and controlled the entire business unit producing and selling CRT TVs. They also decided production schedules and specifications of CRT TVs and ordered their local manufacturers to produce CRT TVs. Japanese TV manufacturers or others including their subsidiaries purchased and sold the whole quantity or a substantial quantity of the CRT TVs into which the CRTs produced by local manufacturers had been incorporated. Although the Japanese TV manufacturers transferred or consigned the manufacture of CRT TVs to local manufacturers, they still mainly controlled and operated the CRT TV business. Consequently, the local manufacturers received orders from the Japanese TV manufacturers. In their exercise of control over and operation of the business of manufacturing and selling CRT TVs, the Japanese TV manufacturers determined key trade conditions, including suppliers, purchase prices, and purchase volumes. They also ordered the local manufacturers to purchase CRTs, and the local manufacturers bought CRTs accordingly. Moreover, given that the Japanese TV manufacturers by themselves directly negotiated trade conditions for purchasing CRTs with Samsung SDI and four other companies, the Agreement tied up the prices for CRTs being offered by Samsung SDI and those other four companies in such negotiations. We therefore find on the facts that the Japanese TV manufacturers and their local manufacturers together carried out the transactions for the purchase of the CRTs in question as part of their economic activity. We thus hold that the Agreement impaired the competitive function of the market for the transactions to which the Japanese TV manufacturers situated in Japan appeared as counterparties. In summary, the Supreme Court reasoned that the Japanese TV manufacturers and local manufacturers together constituted an economic unit, concluding that the Japanese TV manufacturers were also parties to the Agreement and were affected by it, with the result that the Agreement impaired competition in the Japanese market. IV. Analysis and opinion Adoption of the effects doctrine The Supreme Court did not mention the effects doctrine or the territorial principle. At first glance, the Supreme Court seems to be silent as to the applicability of the JAMA and its international or geographical scope. However, its judgement, in fact, has a number of implications. The holding shows that, for the application of relevant provisions, it is not required that any of the activities be conducted or implemented in Japan; the JAMA can apply to anti-competitive conduct carried out outside of Japan if the free competition economic order of Japan is disturbed. In this case, as mentioned earlier, the Supreme Court seems to regard the price for inputs indirectly overpaid by the Japanese TV manufacturers as the effects in Japan, namely the ‘disturbance of free competition order in Japan’.34 Given that conduct in Japan is not required and that anti-competitive effects give rise to a distortion of Japan’s free economic competition, it can be inferred that the court finds that anti-competitive effects in Japan trigger the application of the JAMA. In this sense, the Supreme Court has adopted an effects test.35 In view of the purpose of the JAMA, namely, the protection of market order and securing consumers interest by preventing anti-competitive activities as well as promoting development, the application of the law based on the effects within the Japanese market is appropriate and even necessary to achieve effective regulation, particularly when all the relevant activities are carried out abroad but have anti-competitive effects on the Japanese market. What kinds of ‘effects’ should be required? An additional and critical question arises as to what kinds of ‘effects’ should be required to define the international or geographical scope of the JAMA. In this regard, the court did not clarify its position. As mentioned above, a state is generally free to decide how far its competition law applies as long as the application is not contrary to public international law. It is thus for the state to decide what kinds of effects should be required. Here, it is submitted that the international or geographical scope of the JAMA should be defined through a consideration of whether conduct causes concrete anti-competitive effects and violates relevant provisions, and a separate consideration of jurisdictional effects is unnecessary.36 Comparative law perspectives Each state approaches this question differently. Notable differences can be found, particularly with regard to the following two points: (i) whether it is necessary or of practical use to consider the effects at the jurisdictional level separately from those at the substantive law level, and (ii) whether the jurisdictional effects should be subject to certain qualifications (such as immediacy, substantiality, and foreseeability), namely, whether a state should put some limits on the international or geographical scope of its competition law. In considering what kind of effects should be required under the JAMA, it may be useful to refer to approaches by other states. Two main players in the area of competition law, the United States37 and EU, have determined the international or geographical scope of their competition law through an examination of jurisdictional effects (that is, whether jurisdiction to prescribe extends to conduct). As the jurisdictional test, the United States qualifies the effects, requiring that conduct have ‘direct, substantial and reasonably foreseeable effects’ on US commerce.38 In contrast, the EU simply applies the EU competition law in the cross-border cartel case when activities are found to have had adverse effects within the EU, and implementation is the crucial factor when assessing the applicability of the EU competition law (the implementation theory).39 Such a consideration of jurisdictional effects is, to a certain extent, of practical use in these jurisdictions because the United States and EU have both adopted the per se rule or similar analysis for hardcore cartels (such as a price-fixing cartel as in the CRT case). According to these countries, it is unnecessary to prove the concrete anti-competitive effects of the cartel. In the United States, the Supreme Court has for decades held that ‘[u]nder the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.’40 In the EU, Article 101(1) of the TFEU prohibits concerted practices or agreements that have the ‘object or effect’ of restricting competition. Case law has for long periods held that ‘[f]or the purpose of applying Article 81(1) EC [currently, Article 101(1) of TFEU], there is no need to take account of the concretes effects of an agreement once it appears that it has as its object the prevention, restriction or distortion of competition’.41 In practical terms, cartels are more or less per se illegal under the TFEU (to be precise, illegal ‘by object’).42 As briefly shown above, that consideration of jurisdictional effects screens out cases that should not be regulated, thereby determining the international or geographical scope of the competition law (at least in hardcore cartel cases). The critical question in those jurisdictions is whether they exercise prescriptive jurisdiction to regulate allegedly anti-competitive activities and whether they should put limits on the scope of their competition law. On the other hand, Switzerland has defined the international or geographical scope of its competition law by examining whether substantive law requirements are satisfied.43 It is noteworthy that ‘the Swiss Cartel Act (Kartellgesetz: SCA)’ does not adopt the per se rule for cartels as the JAMA does not.44 Therefore, it may offer useful insights to look closely at developments under the Swiss law. It is necessary under SCA to examine whether a cartel brings about concrete anti-competitive effects in the Swiss market. For its international or geographical scope, Article 2(2) of the SCA provides that '[t]his Act applies to practices that have an effect in Switzerland, even if they originate in another country.’45 The SCA explicitly adopts the effects doctrine. Accordingly, the SCA can be applied to cross-border cases (including both cartel and abuse of market position cases) when conduct has anti-competitive effects in the Swiss market. Nevertheless, it is unclear from the text of Article 2(2) of the SCA what kinds of effects may trigger the application of the law. In the 2013 Gaba case, the Swiss Federal Administrative Court was asked to determine whether a license contract between a Swiss company and an Austrian company violated the SCA. In deciding the international or geographical scope of the SCA, the court held that the effects in Article 2(2) of the SCA should be read together with Article 1, which sets out the purpose of the SCA,46 concluding that ‘the effects principle is intended to be leveraged to apply the cartel law even in cases in which the infringement of competition law was committed abroad’.47 Further, the court held that since a consideration of the abstractly formulated effects such as direct (unmittelbar), substantial (wesentlich) and reasonably foreseeable (vernünftigerweise vorhersehbar) effects would lead to considerable legal uncertainty, it is more effective to determine the scope of the SCA by examining whether the requirements of the substantive law rules are satisfied.48 According to the court, the SCA will be applied when allegedly anti-competitive conduct satisfies the requirements of the statute and constitutes an infringement of the SCA. In that case, the Swiss Federal Supreme Court was also asked to determine the international or geographical scope of the SCA and held as follows49: The wording of Article 2(2) of the SCA does not indicate that the effect in Switzerland must be of a certain intensity. The systematic element is also unhelpful, unlike the teleological element: The effects principle in Article 2(2) of the SCA finds its teleological justification in the protection of the national economic and social order, which is the regulatory object of the SCA. Conduct should be preventable if it has negative effects on the national market. It, however, does not derive from an abstractly formulated effects principle, but only from the individual substantive law rules when the national economic order needs protection, in other words, when the effects on the Swiss market are such that there is a need to take action. Only these rules determine when behaviour affects the Swiss economic system or competition in Switzerland and thereby measures have to be taken (emphasis added). This also includes the in-depth clarifications necessary for the assessment of effects on the Swiss competitive market, such as the determination of the relevant market. In this respect, Article 2(2) of the SCA merely clarifies that circumstances with foreign elements that may have or that have an effect on Switzerland also fall under the SCA. Article 2(2) of the SCA has, according to the message of the Federal Council with regard to SCA that I described, thus a wide scope (own translation). As is evident from the holding, the Swiss Federal Supreme Court followed the Swiss Federal Administrative Court and examined whether an activity impaired the Swiss economic order or competition in Switzerland; therefore, it was necessary to take action. In other words, the decisive factor for determining the international or geographical scope of the SCA is whether requirements at the substantive law level are satisfied.50 In fact, the court concluded that the examination of the ‘intensity of the effects’ in the framework of Article 2(2) of the SCA was not necessary and even not permitted.51 From the view that jurisdictional effects should be considered, it can be said that Swiss law adopted a ‘non-qualified’ effects doctrine.52 Nevertheless, the abstract nature of effects, such as immediacy and intensity, may be examined in the framework of substantive law rules. With respect to the relationship with public international law, the court concluded that its approach based on an effects test was not contrary to the limitation of public international law.53 Through a comparative law analysis, it can be pointed out that the difference in approaches (in particular, whether the jurisdictional effects are examined separately) seems to originate from different regulatory frameworks. Needless to say, the countries all have in common that when they define the international or geographical scope of their competition law, they substantially address the question of whether conduct violates relevant legal provisions. Opinion In considering what kinds of effects would then be required under the JAMA (in particular, whether it is necessary to separately examine jurisdictional effects), it must be borne in mind that a cartel must have concrete anti-competitive effects in the market.54 Whether an alleged cartel has such effects must always be examined. Unlike in the United States and EU, a cartel is not per se illegal or illegal by object under the JAMA. In view of such a regulatory framework in the JAMA and the fact that the application of the law and thereby regulation are only necessary when conduct violates relevant provisions, the international or geographical scope should be defined through a consideration of concrete anti-competitive effects at the substantive law level, that is, whether conduct violates relevant provisions of the JAMA.55 It is unnecessary and of no practical use under the JAMA to separately examine jurisdictional effects (with an abstractly formulated qualification or not). Jurisdiction should always be found as long as the concrete effects requirement at the substantive law level is satisfied. If jurisdictional effects and effects at the substantive law level are examined, there are four scenarios. The first scenario is where (i) the effects at both levels are affirmed. In this case, a state will simply apply its competition law. The second scenario is where (ii) neither jurisdictional effects nor effects at the substantive law level are felt in the market. In such a case, a state will not apply the law. These two scenarios do not give rise to any problems. The third scenario is where (iii) the jurisdictional effects are denied, but the effects at the substantive law level are affirmed. However, the effects will never be interpreted in this way because such an interpretation of ‘effects’ does not fit with the idea of the effects doctrine, which is to protect competition or interest in domestic market competition from anti-competitive activities abroad. In principle, a state is free to decide how far its law applies, subject to limitations set by public international law. So a state is likely to regulate activities that have anti-competitive effects within its territory. Considering individual circumstances, a state may, of course, affirm its jurisdiction but refrain from exercising jurisdiction to regulate the anti-competitive activities that have adverse effects in its territory56; however, this is another issue. The fourth scenario is where (iv) the jurisdictional effects are affirmed, but the effects at the substantive law level are denied. Such a situation may arise when jurisdictional effects differ from those at the substantive law level with respect to their contents or when the jurisdictional effects are ‘milder’ than the substantive law effects. In the former situation, is there any effect required other than anti-competitive effects? This question should be answered in the negative. The JAMA (or competition law in general) aims to promote and maintain vigorous competition in a national market and protect the interests of consumers within that market. The effects doctrine widely accepted in the competition law context allows a state to apply its law to protect competition or interest in domestic market competition from anti-competitive activities abroad. In view of these facts, other kinds of effects should not be invoked. Additionally, such effects would not prove a genuine link at the public international law level. In the latter situation, a court first examines and affirms whether ‘milder’ effects are felt in the market, but it eventually finds that the conduct does not cause concrete anti-competitive effects and therefore does not violate relevant provisions. Is it necessary and of practical use to examine jurisdictional effects? It is self-evident that regulatory measures are only necessary and required if conduct violates relevant provisions. In other words, the necessity of the application of the JAMA (that is, its international or geographical scope) derives only from concrete substantive law rules prohibiting certain anti-competitive conduct. In this case, the scope of the JAMA (that is, whether the conduct is regulated by the JAMA) ends up being determined through an examination of the question as to whether substantive law requirements are met. Given that a separate consideration of jurisdictional effects is not able to define the international or geographical scope of the JAMA, it is unnecessary and not of practical use. Therefore, the other question regarding whether jurisdictional effects should be qualified is also answered. Nevertheless, the abstract nature of effects, such as their immediacy, intensity and foreseeability, may be part of the elements considered in the framework of substantive law rules.57 Viewed from the perspective of the United States and EU, this argument means that the JAMA can be applied on the basis of a ‘non-qualified’ effects test. Apparently, the JAMA has a much wider scope, though this is not the case because the actual and exact scope of the JAMA will be defined and limited through a consideration of substantive law rules aiming to protect Japan’s market. From a comparative law perspective, Japan seems to follow the same track as Switzerland, which does not come as a surprise because these two jurisdictions share the need to examine whether an alleged cartel has concrete anti-competitive effects in their national markets. Such conduct is not per se illegal nor illegal ‘by object’. Given this regulatory framework, the above-suggested approach is reasonable and appropriate under the JAMA. V. Related issues In addition to the international or geographical scope of the JAMA, the Supreme Court dealt with one related question: what factors were included in the base amount for calculating the administrative surcharge. As this question is, in practice, one of the most critical questions in cross-border cartel cases, this section briefly touches on it. In cases of cartels, the JFTC may issue administrative surcharge payment orders and/or cease-and-desist orders. In regard to purely domestic cartels, the base amount for calculating the surcharge is the sales amount of the product in that market. If the cartel has anti-competitive effects on various national markets, will the base amount be the total sales amounts in those markets? With regard to the CRTs, the Supreme Court addressed the question of whether the sales amount of the CRTs that were delivered outside of Japan were included in the base amount for calculating the surcharge. In this regard, the Supreme Court upheld the lower courts’ positions58 and held as follows: The Enforcement Order of the JAMA set outs, by reference to Article 7-2(1) of the JAMA, the method for calculating the sales amount as the basis of surcharge (Articles 5 and 6). However, it does not stipulate that the sales amount is limited to the sales amount of a product delivered inside Japan [.…] in light of the factual background, we can find that the Agreement impaired the competitive function of the market for transactions to which the Japanese TV manufacturers situated in Japan appeared as counterparties. Thus, in light of the purpose of the surcharge system and the relevant provisions and regulations, it is not correct that, if the CRTs were delivered outside Japan, their sales amount should not be included in the sales amount as the base amount for calculating the surcharge amount [….] Therefore, even though the CRTs covered by the Agreement were sold to local manufacturers and delivered outside Japan, it is appropriate here for the sales amount of such products to be included in the sales amount of the products within the meaning of Article 7-2(1) of the JAMA […]. In light of the wording of the Article 7-2(1) of the JAMA, which does not limit the base amount, the Supreme Court’s conclusion is reasonable.59 As was already pointed out and criticized,60 however, this system is problematic because it can lead to ‘double jeopardy’ when foreign competition authorities also impose administrative surcharges on cartel members. In this case, ‘double jeopardy’ did not occur, as the foreign competition authorities did not take that action. To avoid unnecessary conflicts, the base amount for calculating a surcharge should be reformed to enable the JFTC to be more flexible in setting the base amount.61 VI. Conclusion: impact and implications of the Supreme Court judgement The CRT case is the very first case in which the Supreme Court answers questions regarding whether, on what grounds, and how far the JAMA can reach anti-competitive conduct carried out outside of Japan in cross-border cartel cases. In this sense, this judgement is the cornerstone of the international or geographical scope of the JAMA. As seen above, the Supreme Court has, in practical terms, adopted an effects test.62 Accordingly, the JAMA will be applied when a cartel causes anti-competitive effects in the Japanese market, even if the action occurs abroad. In this regard, a critical question that arises is what kinds of ‘effects’ are required to define the international or geographical scope of the JAMA. The Supreme Court position is not necessarily clear. The scope should be determined through a consideration of concrete anti-competitive effects at the substantive law level (that is, whether a cartel satisfies the substantive law requirements), without separately examining jurisdictional effects because, in view of the regulatory framework of the JAMA, a separate consideration of jurisdictional effects cannot define the international or geographical scope of the JAMA; therefore, it is unnecessary and not of practical use. Additionally, it should be noted that the Supreme Court decided the scope of Article 2(6) of the JAMA in cartel cases, and it did not address the scope of other provisions of the JAMA in cases concerning the abuse of a dominant position and other restraints on competition (ie, private monopolization and unfair trade practice). Therefore, it remains to be seen whether the criteria established by the Supreme Court also apply in these cases. In those cases, neither the JFTC nor the Supreme Court have proclaimed their adherence to the effects doctrine. However, effects in the Japanese market (a distortion of the free competition economic order of Japan) may trigger the application of relevant provisions of the JAMA because other provisions prohibiting anti-competitive activities also have the same general purpose and object (Article 1 of the JAMA). Though each rule may pursue a specific purpose, the international or geographical scope should be determined by a rule. The author thanks Professor Andreas Heinemann, University of Zurich, for his comments on a draft of this article. The author also acknowledges support from a Swiss Government Excellence Scholarship. Footnotes 1 The designation of such legislation varies from state to state. For example, there are the following: Antitrust Law (United States), Competition Law (EU), Anti-Monopoly Law (Japan) and the Federal Act on Cartels and Other Restraints of Competition (Switzerland). Some states have competition law rules embedded in more general statutes or codes, such as in France. But the purpose and function of the legislation howsoever designated point in the same direction, namely, to promote and maintain vigorous competition in a national market and protect the interests of consumers within that market. 2 Eg Marek Martyniszyn, ‘Foreign States’ Amicus Curiae Participation in U.S. Antitrust Cases’ (2016) 61 Antitrust Bulletin 611, 630–31. 3 International Bar Association, ‘Report of the Task Force on Extraterritorial Jurisdiction’ (2009) 63 <https://www.ibanet.org/Document/Default.aspx?DocumentUid=ECF39839-A217-4B3D-8106-DAB716B34F1E> accessed 5 July 2019. 4 15 USC s 6a. United States vAluminum Company of America, 148 F 2d 416 (2nd Cir, 1945) (‘Alcoa’); Hartford Fire Insurance CovCalifornia, 509 US 764, 796 (1993). In the framework of the ‘qualified’ effects doctrine, US courts have taken a restrictive approach to the applicability of the Sherman Act based on the ‘jurisdictional’ rule of reason (See, FHoffmann-La Roche LtdvEmpagran SA, 542 US 155 (2004)). 5 Joined Cases 89, 104, 114, 116, 117 and 125 to 129/85 AAhlström Osakeyhtiö and others v Commission [1988] ECR 5193, para 16 (Woodpulp). The Court of First Instance held, in a merger case, that the ‘extraterritorial’ application of the EU competition law is justified when ‘it is foreseeable that a proposed concentration will have an immediate and substantial effect’ in the EU (Case T-102/96 Gencor Ltd v Commission [1999] ECR II-753, para 90). 6 Case C-413/14 P Intel v Comission, EU:C:2017:632, paras 40–65. 7 Judgment of the Supreme Court (3rd Petty Bench), 12 December 2017, 71(10) Minshu 1958; An English translation is available at (2019) 61 Japanese YBIntlL 399. 8 See, eg Robert Jennings and Arthur Watts (eds), Oppenheim’s International Law (9th edn, OUP 1992) 458 (stating that a ‘tendency now to regard these various categories as parties of a single broad principle according to which the right to exercise jurisdiction depends on there being between the subject matter and the state exercising jurisdiction a sufficiently close connection.’); Bernard X Oxmen, ‘Jurisdiction of States’ in Rüdiger Wolfrum (ed) Max Planck Encyclopedia of Public International Law (online edn, OUP 2008), para 10; Restatement of The Law Fourth, The Foreign Relations Law of the United States, Section 211 (stating that ‘customary international law permits exercises of prescriptive jurisdiction if there is a genuine connection between the subject of the regulation and the state seeking to regulate’) (cited in William S Dodge, ‘Jurisdiction in Fourth Restatement of Foreign Relations Law’ (2018) 18 YB Private Intl L 143, 153). 9 France v Turkey, Ser A, No 10 (PCIJ 1927). 10 Alcoa (n 4) 443; International Bar Association (n 3) 63. 11 There are some provisions that seem extraterritorially applicable. For instance, art 9(2) stipulates ‘[n]o company (including a foreign company; the same applies hereinafter) may become a company that causes an excessive concentration of economic power in Japan by acquiring or holding shares in other companies in Japan.’ As is evident from the wording, the provision is designed to apply to the acquisition by a foreign company of a Japanese company’s shares. 12 Marek Martyniszyn, ‘Japanese Approaches to Extraterritoriality in Competition Law’ (2017) 66 ICLQ 747, 750. 13 EEOC vArabian American Oil Co, 499 US 244, 248 (1991) (‘Aramco’) (quoting Foley BrosvFilardo, 336 US 281, 285 (1949)). For recent developments in the case law of this presumption, see William S Dodge, ‘The Presumption Against Extraterritoriality in the U.S. Supreme Court Today’ in Andrea Bonomi and Krista Nadakavukaren Schefer (eds), US Litigation Today: Still a Threat For European Businesses or Just a Paper Tiger? (Schulthess 2018) 187. 14 art 98(2) of the Japanese Constitution requires that ‘the treaties concluded by Japan and established laws of nations’ be faithfully observed. 15 Orders of the JFTC, 20 February, 2008, 54 Shinketsushu 512. 16 See, Section III. 17 JFTC Press Release on Rio Tinto/BHP Billiton (3 December, 2010). <https://www.jftc.go.jp/en/pressreleases/yearly-2008/dec/individual_000067_files/2008-Dec-3.pdf> accessed 5 July 2019. As the parties had abandoned the merger, JFTC did not issue any orders. 18 Professor Takigawa argues that ‘actual cases testify to the JFTC’s adherence’ to the effect doctrine. Toshiaki Takigawa, ‘Putting Limits on Extra-Territorial Coverage of Competition Laws in the Age of Global Supply Chains: Comparison of the US and Japan’ in Mitsuo Matsushita and Thomas J Schoenbaum (eds), Emerging Issues in Sustainable Development: International Trade Law and Policy Relating to Natural Resources, Energy, and the Environment (Springer 2016) 250. 19 The 1998 Nordion case is sometimes regarded as the first case in which the JFTC adopts the effects doctrine. However, it is unclear whether the JFTC has actually grounded the application of the JAMA on effects in Japan because, although Nordion did not have any offices or even a presence in Japan, the JFTC also mentioned in the decision the fact that the underlying contract was concluded in Japan. Therefore, it is possible to understand that the JFTC grounded the application of the JAMA on this connecting factor. Academics are split as to the implications of this decision. See eg Takashi Kanai and others (eds), Dokusen Kinshi-Ho (6th edn, Kobundo 2018) 434–6. 20 Mitsuo Matsushita, Dokusen Kinshi-Ho to Kokusai Torihiki - Ikigai Tekiyo no Mondai wo Chushin ni (University of Tokyo Press 1970) 58. 21 Kosei Torihiki Iinkai Jimukyoku (ed), Dumping Kisei to Kyoso Seisaku Dokusenkinshi-ho no Ikigai Tekiyo (Okurasho Insatsukyoku 1990) 67 (1990 JFTC Report). 22 ibid. 23 For instance, Shingo Seryo, ‘Kokusai Torihiki- Kokusai Torihiki ni taisuru Dokkin-Ho no Tekiyo to Tetsuduki, in Dokusen Kinshi Tetsuduki-Ho’ in Akinobu Tanso and Daitaro Kishii (Yuhikaku 2002) 393. Professor Seryo argues that the JAMA will be applied if allegedly anti-competitive conduct has a direct and substantial effect in the Japanese market. 24 See Tadashi Shiraishi, ‘Customer Location and the International Reach of National Competition Laws’ (2016) 59 Japanese YB IntlL 202, 214–15. 25 ibid. 26 Dai Yokomizo, ‘Gaikoku Jigyousha no Shiteki Dokusen Koi ni taishi Wagakuni Dokkin-Ho wo Tekiyo shita Jirei’ (2000) 1177 Juristo 208, 209; Kazuaki Nishioka, ‘Gaikoku de Teiketsu sareta Kokusai Karteru heno Dokkin-ho no Tekiyou wo Koutei shita Jirei’ (2018) 1526 Juristo 144. 27 For details, see Martyniszyn (n 12) 758–61; Shiraishi (n 24) 213–15. 28 Orders of the JFTC, 7 October, 2009, 54 Shinketsushu 512. 29 This appeal system has since been abolished by the 2013 Amendment of the JAMA. 30 2303 Hanrei Jiho 105. 31 2016WLJPCA04136004. 32 2016WLJPCA04226008. 33 Eg Yasumi Ochi, ‘Terebiyo Buraunkan Jiken Tokyo Kosai San Hanketsu ni taisuru Hihan ni tsuite no Sogoteki Kento’ (2016) 793 Kosei Torihiki 58. 34 In addition, it should be noted that there were also effects on consumers in Japan because a certain volume of CRT TVs was sold in Japan as well. Although the Supreme Court did not touch on this aspect, this kind of effects might be taken into consideration when deciding the international scope of the JAMA. 35 Tadashi Shiraishi, ‘Buraunkan Jiken Saikosai Hanketsu no Kento’ (2018) 1117 NBL 4, 8; Arisa Wakabayashi, ‘Kokugai de okonawareta Kakaku Karuteru ni tsuki Dokusen Kinshi-Ho no Tekiyo wo mitometa Jirei – Buraunkan Karuteru Jiken Saikosai Hanketsu’ (2018) 1519 Juristo 102, 104. Kazuhiro Tsuchida, ‘Terebiyo Buraunkan Kokusai Karuteru Jiken Saikosai Hanketsu ni tsuite’ (2018) 809 Kosei Torihiki 59, 60–64 argues that the Supreme Court seems to have adopted a similar standard to the effects doctrine. Cf. Sayako Takizawa, ‘Wagakuni Shijo no Kyoso Kino ga sokonawareta to shite Dokkin-Ho Tekiyo wo mitometa Hanketsu – Buraunkan Jiken Saikosai Hanketsu’ (2018) 1516 Juristo 6, 7. 36 The Tokyo High Court in one of the previous three suits seems to have adopted a similar approach and held that ‘as the agreement was found to have caused substantial restraint of competition in any particular field of trade, there was no need to examine the existence and degree of the effects’ (n 32). See, also, Nishioka (n 26) 144; Masahiro Murakami, ‘Buraunkan Kokusai Karuteru Jiken Saikosai Hanketsu – Heisei 29 Nen 12 Gatsu 12 Nichi’ (2018) 46(2) Kokusai Shoji Homu 150. 37 In deciding the international or geographical scope of a federal statutory provision, the US Supreme court has considered the ‘focus’ of relevant provisions in the framework of ‘the presumption against extraterritoriality’ (Morrison vNational Australia Bank Ltd., 561 US 247 (2010) (the focus on the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States); RJR Nabisco, Inc, vEuropean Community, 136 S Ct 2090 (2016)). In this way, it can be said that, in deciding the international or geographical scope of a federal statutory provision, the United States also considers its purpose and objective. 38 15 USC s 6a. 39 See (n 5). 40 United States vSocony-Vacuum Oil Co, 310 US 150, 223 (1940); United States vSealy, Inc, 388 US 350 (1967); United States vTopco Associates, Inc, 405 US 596 (1972). 41 Eg C-389/10 P KME Germany and others v Commission [2011] ECR I-13125, para 75 (quoting Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299). 42 See ICN Anti-Cartel Enforcement Template (European Union. Updating of the template: 4/12/2015) available at <http://ec.europa.eu/competition/international/multilateral/template.pdf> accessed 5 July 2019. 43 BVGer, 19 December 2013 - Gaba, 2013/4 RPW 750, Section 3.3; BVGer, 13 November 2015 – BMW, 2015/4 RPW 801, s 2.3; BGer, 2C_18012014, 28 June 2016. On these judgments, see Andreas Heinemann, ‘Die internationale Reichweite des Kartellrechts’ in Pascal Grolimund and others (eds) Festschrift für Anton K. Schnyder: Zum 65 Geburtstag (Schulthess 2018) 1135. 44 But, a cartel is presumed to lead to the elimination of effective competition (art 5(3) and (4) of the SCA). 45 An English translation provided by the federal council is available at <https://www.admin.ch/opc/en/classified-compilation/19950278/index.html> accessed 5 July 2019. 46 art 1 of the SCA reads as follows: ‘The purpose of this Act is to prevent the harmful economic or social effects of cartels and other restraints of competition and, by doing so, to promote competition in the interests of a liberal market economy’ (quoted from the translation of the federal council). 47 BVGer, 19 December 2013 - Gaba, 2013/4 RPW 760, s 3.3.14.1. 48 ibid. For the approach by the court, see Marino Baldi and Felix Schraner, ‘Gaba Urteil des Bundesverwaltungsgerichts als wettbewerbspolitischer Markstein’ (2014) 110/2014 Schweizerische Juristen-Zeitung 501, 508. 49 BGer, 2C_18012014, 28 June 2016, s 3.2.3 (reference omitted by the author). 50 Many commentators have argued this view. For instance, Baldi/Schraner (n 48) 508; Anton K Schnyder, ‘Einleitung/Sachlicher, zeitlicher und räumlicher Geltungsbereich. Extraterritoriale Anwendung (G.)’ in Günter Hirsch and others (eds), Münchner Kommentar zum Europäischen und Deutschen Wettbewerbsrecht. Kartellrecht. Missbrauch- und Fusionskontrolle, Band 1, Europäisches Wettbewerbsrecht (C.H.Beck 2007) 232, para 927; Philipp Zurkinden, ‘Teil M-Wettbewerbsrecht, Kapital 1. Das Kartellrecht im Völker- und europarechtlichen Rahmen’ in Herbert Kronke and others (eds), Handbuch Internationales Wirtschaftsrecht (2nd edn, Ottoschmidt 2017) para 8; Rolf H Weber, ‘A. Einleitung, Geltungsbereich und Verhältnis zu anderen Rechtsvorschriften’ in Roland von Büren and Lucas David (eds), Schweizerisches Immaterialgüter- und Wettbewerbsrecht: V/2 Kartellrecht (Helbling and Lichtenhahn 2000) 42; Rolf H Weber and Priska Zeier, ‘Vertikale Wettbewerbsabreden nach schweizerischem Kartellrecht’ (2005) 2/2005 Zeitschrift für Wettbewerbsrecht 178, 179; Reto Heizmann and Michael Mayer, ‘Art 2’ in Roger Zäch and others (eds), KG. Kommentar zum Bundesgesetz über Kartelle und andere Wettbewerbsbeschränkungen (Dike 2018), para 71. 51 BGer, 2C_18012014, 28 June 2016, s 3.7. 52 Cf. Heinemann (n 43) 1157 − 1158 argues that the effects be foreseeable. 53 BGer, 2C_18012014, 28 June 2016, s 3.7. 54 art 3 of the JAMA reads as follows: ‘An enterprise must not effect private monopolization or unreasonable restraint of trade.’ art 2(6) of the JAMA reads as follows: ‘The term “unreasonable restraint of trade” as used in this Act means such business activities, by which any enterprise, by contract, agreement or any other means irrespective of its name, in concert with other enterprises, mutually restrict or conduct their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade.’ 55 Murakami (n 36) 150. 56 See, the so-called ‘jurisdictional’ rule of reason in United States. See (n 4). 57 Since such a nature would lead to legal uncertainty due to its ambiguity, its function should be carefully considered. Even in the United States, from where the qualified effects test originates, it remains debatable in the case law what ‘direct’ effects means exactly. While some cases have adopted a strict approach (for instance, United States vLSL Biotechnologies, 379 F.3d 672 (9th Cir 2004); United States vHui Hsiung, 758 F.3d 1074 (9th Cir 2014), others have adopted a moderate one (for instance, Animal Science Products IncvChina Minmetals Corp, 654 F.3d 462 (3rd Cir 2011); Minn-chem, IncvAgrium, Inc, 683 F.3d 845 (7th Cir 2012), cert dismissed, 134 S Ct 23 (7th Cir. 2013); Lotes Co, LtdvHon Hai Precision Industry Co, 753 F.3d 395 (2nd Cir 2014); Motorola Mobility LLC vAU Optronics Corp, 746 F.3d 842 (7th Cir 2014).) 58 For details on the JFTC’s decisions and the Tokyo High Court’s judgements, see Martyniszyn (n 12) 758–61; Shiraishi (n 24) 213–15. 59 Murakami (n 36) 151; Takizawa (n 35) 7. 60 The Supreme Court of Japan upheld the Tokyo High Court position which has been criticized by many legal commentators. See Takigawa (n 18) 253–4. 61 The surcharge system has recently been amended. The JFTC Press Release (19 June, 2019) in Japanese is available at <https://www.jftc.go.jp/houdou/pressrelease/2019/jun/190619_1.html> accessed 5 July 2019. 62 As above mentioned, the effects test adopted by the Supreme Court of Japan is different from the effects doctrine in the United States, in the way that the abstract nature of effects, such as their immediacy, intensity, and foreseeability is not required at the jurisdictional level. See Section IV. © The Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
Journal
Journal of Antitrust Enforcement – Oxford University Press
Published: Sep 17, 2009