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Japan: Supreme Court Affirms Extraterritoriality of Antimonopoly Act

(Dec. 19, 2017) On December 12, 2017, Japan’s Supreme Court ruled that the national Fair Trade Commission (FTC) can impose surcharges on firms that join cartels established overseas if the cartels impair the free competition of the Japanese market.  (Sup. Ct., Dec. 12, 2017, 2016 (Gyo-hi) No. 233, Courts in Japan website (in Japanese).)

Japan’s Antimonopoly Act does not state whether the Act applies to acts that were committed overseas.  (Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Antimonopoly Act), Act No. 54 of 1947, as amended by Act No. 108 of 2016 (in Japanese); Translation of the Antimonopoly Act, as amended by Act No. 100 of 2013, Japanese Law Translation website.)  The Court’s decision was based on article 1 of the Act, which states the purpose of the Act is to “promote democratic and wholesome development of the national economy as well as secure the interests of general consumers” by promoting fair and free competition.  (Sup. Ct., Dec. 12, 2017 (translation by author).)  Therefore, the location where the acts were committed does not affect the application of the Act, as long as they resulted in impairing the free competition of the Japanese market.  (Id.)

According to the ruling, 11 foreign companies, including Samsung SDI’s Malaysian subsidiary, agreed to set the lowest price on the market for cathode ray tubes (CRTs) for televisions to be sold to local subsidiaries of Japanese companies from 2003 to 2004.  In 2010, the FTC decided that these companies had formed a price cartel and ordered the Samsung subsidiary to pay a surcharge of approximately 1.37 billion yen (about US$12 million).  (Id.)  Samsung SDI’s subsidiary argued that “[t]he cartel had reached its price-fixing agreement in Southeast Asia, and affected products had been purchased by Southeast Asian units and subcontractors rather than the Japanese companies themselves.”  (Japan Can Go After Foreign Cartels, Supreme Court Rules, NIKKEI ASIAN REVIEW (Dec. 13, 2017).)

The Court found that the Japanese parent companies had examined the conditions of their respective subsidiaries’ contracts with those 11 companies and given instructions to the Japanese subsidiaries regarding the purchase of CRTs.  The Japanese parent companies then bought from their subsidiaries televisions that had been made with CRTs from those 11 companies.  Therefore, the price cartel impaired free market competition involving Japanese parent companies and harmed Japan’s economic order.  (Sup. Ct., Dec. 12, 2017.)  The Court also ruled that the sales of all CRTs sold to Japanese subsidiaries can serve as the basis for calculating surcharges.