Japan Antimonopoly Act: Precedent-Setting Criminal and Administrative Fines in Japanese Galvanized Steel Sheet Cartel Investigation

9월 25, 2009

 

On September 15, 2009, the Tokyo District Court found three galvanized steel sheet companies and six former sales executives guilty of violating Japan’s Antimonopoly Act (“AMA”) for participating in a price-fixing cartel.

According to publicly available sources, including prosecution materials submitted by the Japan Fair Trade Commission (“JFTC”), representatives of Nisshin Steel Co., Ltd. (“Nisshin”), Yodogawa Steel Works, Ltd. (“Yodogawa”), Nippon Steel & Sumikin Coated Sheet Corporation1 (“NSS”), and JFE Galvanizing & Coating Co., Ltd. (“JFE”) met repeatedly between around April 2006 and June 2006, and agreed to raise the sales price of galvanized steel sheets by 10 yen per kilogram . Such conduct, the JFTC alleged, substantially restricted competition in the market for sales of the product. The four companies jointly controlled about 90 percent of the Japanese galvanized steel sheet market.

The JFTC began its investigation in January 2008, following a leniency application by JFE, one of the companies allegedly involved in the cartel. In November 2008, the JFTC filed a criminal accusation with the Prosecutor-General against Nisshin, Yodogawa and NSS, and one month later, the JFTC filed an additional criminal accusation against six former sales executives of the three companies.

In August 2009, the JFTC ordered the three steel sheet companies to cease their illegal cartel and imposed an aggregate fine of over 15.5 billion yen for violations of Article 3 of the AMA in connection with the alleged price fixing. The aggregate fines are the highest ever imposed by the JFTC.

Last week, in connection with criminal charges filed by the Prosecutor-General, the Tokyo District Court fined Nisshin and Yodogawa 180 million yen each and NSS 160 million yen. The Court also sentenced the six former sales executives to prison terms ranging from ten months to a year (in each case with a stay of execution for three years). In connection with the sentencing, Chief Justice Yasushi Handa stated that the cartel was a large-scale, organized crime involving a great a number of representatives from each company and that the scheme was skillfully undertaken. He also remarked that the scheme of the cartel was deeply rooted and that the defendant companies paid little attention to legal compliance, pointing out that the companies had continued fixing prices even after an on-the-spot investigation by the JFTC in connection with another cartel.

Apart from the record-breaking fines imposed, this case is significant for at least two other reasons.

First, the investigation into the alleged cartel was the first JFTC investigation under its new authority to conduct “compulsory” investigations of potential criminal offenses. Pursuant to its compulsory investigations power, which was added as part of the 2005 amendments to the AMA, the JFTC has the authority to compel companies to produce evidence in the course of an investigation. The result of the JFTC’s investigation was the first criminal cartel accusation filed in over 17 years. The charges filed in this matter also marked the first criminal case against a price-fixing cartel since the introduction of the leniency program in 2005.

Second, although the JFTC initiated investigations into four companies, neither JFE, which was the first cartel participant to make an application under the JFTC's antitrust leniency program, nor any of its employees were prosecuted or sentenced. The AMA does not expressly provide that leniency applicants will escape criminal liability, but the JFTC has previously indicated that under certain circumstances, the first applicant will receive 100% immunity. By declining to file criminal accusations with the Prosecutor-General against JFE or its employees,2 the JFTC has sent a clear message that, in practice, it will not file criminal charges against the first leniency applicant or its officers or employees.

This case has attracted much attention because it was the first time in many years that the JFTC pursued criminal liability for an alleged price-fixing cartel. However, in recent years, there has been a trend in the regulations and the law toward stiffer penalties for violations of the antimonopoly law. One such example is the 2009 amendment of the Antimonopoly Act, which increased a number of criminal penalties, including the maximum prison sentence for unfair transaction restrictions from three years to five years. The fines and sentences imposed in this case should be considered a part of this trend, which is expected to continue.

1  Nittetsu Steel Sheet Corporation and Sumitomo Metal Steel Products Inc., were two separate entities at the time of the offence, merged on December 1, 2006 to become Nippon Steel & Sumikin Coated Sheet Corporation.

2  Although authority for prosecution lies with the Prosecutor-General, no cartel prosecution can be brought unless the JFTC first files a criminal accusation with the Prosecutor-General.