Answer ... Cartel investigations often commence internally at the Japan Fair Trade Commission (JFTC) in response to a leniency application made by a cartel participant. Once the JFTC believes that sufficient evidence has been collected from the leniency applicant, it will conduct simultaneous dawn raids (also called ‘on-site inspections’) at the premises of all alleged cartel participants. The dawn raid is understood to be the ‘official’ commencement of the investigation. If a cartel participant did not apply for leniency before the dawn raid, the dawn raid will be the first opportunity for such participant to learn that the JFTC has begun an investigation.
The term ‘dawn raid’ here could mean either an administrative investigation or a criminal investigation (see also question 3.2). Since criminal prosecutions of cartel activities are not so common in Japan, a dawn raid as an administrative investigation is more usually conducted (see also question 2.3).
Answer ... The JFTC will often conduct a dawn raid in the early stages of a cartel investigation. The dawn raid can be conducted as either an administrative investigation or a criminal investigation.
Pre-conditions for conducting a dawn raid: Pursuant to Article 47(1) of the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (AMA), the JFTC may conduct a dawn raid as an administrative investigation “in order to conduct the necessary investigation with regard to a case”. Although the JFTC has discretion as to which powers to exercise in an investigation, it is understood that a certain specific suspicion of a violation is required to conduct a dawn raid; the general possibility of a violation is not sufficient.
For the JFTC to conduct a dawn raid as a criminal investigation, there must be a suspicion of the commission of a crime set forth in Articles 89 to 91 of the AMA. Further, a warrant issued by a judge is required.
Timing: As described in question 4.1, dawn raids are generally conducted in the early stages of an investigation. However, the JFTC may also conduct a second or third dawn raid if the investigation is not making progress or if the alleged violation continues after the first dawn raid. With respect to the limitations on the time of the day to conduct a dawn raid, see question 4.3.
Location: When a dawn raid is conducted as part of an administrative investigation, the JFTC may “[e]nter any business office of the persons concerned with a case or other necessary sites”. Therefore, private premises may also be searched, insofar as material related to the alleged violation is suspected to be present there and the investigator reasonably considers this necessary for the investigation.
A dawn raid conducted as part of a criminal investigation may be conducted only at the site designated by the warrant issued by a judge. If the warrant designates private premises, it may also be searched.
Officers involved: A dawn raid conducted as part of an administrative investigation is usually conducted by designated staff members of the JFTC. In criminal investigations, staff members of the JFTC and the Public Prosecutor’s Office may work in cooperation. If a criminal investigation is ongoing, a firewall will be established to prevent information gathered during an administrative investigation from being used in the criminal investigation (see also question 3.2).
Answer ... See question 3.5 for the general rights and obligations of the JFTC.
Administrative investigations: In order to conduct a dawn raid as part of an administrative investigation, as the JFTC cannot exercise its power by force, consent from the person in charge of the premises is required. However, as non-compliance with the JFTC’s investigation may lead to criminal penalties (see question 3.5), that party will basically be obliged to comply with the investigation.
At the beginning of a dawn raid, the investigator of the JFTC will present a document stating the following:
- the title of the case;
- the gist of the alleged facts in violation of the AMA; and;
- the applicable provisions of the AMA.
Further, the JFTC must instruct the investigator to carry an identification card and present it to the persons concerned.
There are no specific rules which limit the time of the day at which a dawn raid may be conducted as part of an administrative investigation. In practice, dawn raids will normally be conducted simultaneously in the morning for all alleged participants in the cartel.
Criminal investigations: In a dawn raid conducted as part of a criminal investigation, the JFTC can directly or physically exercise its powers to conduct the investigation to the extent permitted by the warrant issued by a judge. The place where the dawn raid shall be conducted will be limited to the extent specified in the warrant. Further, a dawn raid conducted as part of a criminal investigation may not be conducted between sunset and sunrise, unless the warrant specifies that it may be executed at night; however, if this is considered necessary, a dawn raid initiated before sunset may be continued beyond sunset. In practice, dawn raids will generally be commenced simultaneously in the morning for all alleged participants in the cartel and may continue until the next day to avoid the destruction of evidence.
Answer ... Administrative investigations: During a dawn raid, the person in charge of the premises must be present. On the request of a company involved in an alleged violation, its attorney may also be present, as long as this does not affect the smooth implementation of the dawn raid. However, the JFTC does not regard the presence of an attorney as a right and thus will not wait for the attorney to arrive before commencing a dawn raid.
On the day of a dawn raid, the JFTC will allow the company to copy materials to be submitted to the JFTC that are deemed necessary for its daily business activities, as long as this does not affect the smooth implementation of the raid. The JFTC will provide a list of items seized during a dawn raid to the person in charge of the premises. In addition, on the day of or the day after the dawn raid, upon the request of the company concerned, it may peruse and copy submitted (retained) materials at a place designated by the JFTC with an adjusted schedule, to the extent that this does not affect the investigation.
Criminal investigations: JFTC staff members may prohibit anyone from entering or leaving the site without permission while questioning, inspections, retentions, on-site inspections, searches or seizures are being conducted as part of a criminal investigation. The party concerned has no right to have an attorney present during the dawn raid. In practice, however, there are cases where attorneys have been allowed to be present during a dawn raid.
After carrying out retention or seizure, a JFTC staff member must prepare an inventory of the objects retained or seized and deliver a copy to the owner or holder of the objects retained or seized, or a person who can act in lieu of the owner or holder. However, the law does not provide a right for the company to take copies of the retained or seized documents.
Answer ... Administrative investigations: The AMA does not specifically state the subject of the seizure during a dawn raid. The JFTC has stated in its Guidelines on Administrative Investigation Procedures under the Anti-monopoly Act that “[a]n order to submit materials is given to the extent that the investigator reasonably considers such materials are necessary for Case Investigations”. It is common practice that key personnel involved in the alleged conduct are interviewed during a dawn raid.
Criminal investigations: In conducting a dawn raid as part of a criminal investigation, the JFTC may seize only those items listed in a warrant issued by a judge (see question 4.3). However, comprehensive wording may be included at the end of the list, such as “any other items relevant to the case”, and the subject of a seizure may become an issue.
Answer ... When a JFTC investigator appears at company premises to conduct a dawn raid, the company should immediately contact its legal counsel and legal division to seek appropriate advice. The legal division should then immediately issue a notice within the company group to prohibit the destruction of any documents or electronic data relating to the alleged violation.
Subsequently, if the company did not file for leniency prior to the dawn raid, it should decide whether to apply for leniency within 20 business days of the date of the dawn raid. The company should:
- conduct an internal investigation and determine whether cartel activity took place; and
- contact the JFTC to confirm whether it is still possible to file a leniency application.
If the JFTC seeks to interview key personnel on a voluntary basis, the company should prioritise its own internal investigation to the extent possible and then cooperate with the JFTC promptly once the internal investigation is completed.
Answer ... After a dawn raid, the JFTC will continue its investigation by conducting interviews and requesting additional information or documents from the parties concerned.
Once the investigation is complete, if the JFTC seeks to issue a cease and desist order, it must conduct a hearing of opinions with the prospective addressee of the order. First, the JFTC will notify the prospective addressee in advance of matters such as:
- the expected contents of the cease and desist order;
- the facts found by the JFTC; and
- the application of laws and regulations thereto.
The prospective addressee may submit a request to the JFTC to inspect or copy the evidence proving the facts found by the JFTC. On the hearing date, the party may state its opinions, submit evidence and address questions to the investigators. The JFTC will decide whether to issue a cease and desist order after carefully considering the report of such hearing.
Generally speaking, it takes approximately 12 to 18 months from the initial dawn raid until a cease and desist order is issued by the JFTC; but this period can vary significantly, depending on the case.
Answer ... Cartels are restricted as an unreasonable restraint of trade under the AMA. This activity must be conducted “in concert with other enterprises” (see question 2.1). It is understood that this requires ‘liaison of intention’ (‘ishi-no-renraku’) between enterprises. In this respect, the Tokyo High Court ruled in its judgment dated 25 September 1995 that “[t]he said ‘liaison of intention’ means that an entrepreneur recognizes or predicts implementation of the same or similar kind of price-raising among entrepreneurs and, accordingly, intends to collaborate with such a price-raising. [. . .] ‘liaison of intention’ can be proved by showing mutual recognition of other entrepreneurs’ price-raising and tacit acceptance of such a price-raising of another.”
In proving this “liaison of intention”, the JFTC will likely consider the following factors:
- previous exchanges of information regarding an increase in the prices of a certain product; and
- coordinated or similar increases in prices as a result.
Answer ... There is no settlement procedure for cartel activities. In the 2016 revision to the AMA, which came into effect on 30 December 2018, a so-called ‘commitment system’ (‘kakuyaku-seido’) was introduced. In case of an alleged violation, the party concerned will propose a plan to the JFTC to cease and desist the alleged violation. If the JFTC determines that such plan is sufficient to cease the alleged violation, the JFTC will approve it and the party concerned will receive no administrative sanctions. However, the JFTC has announced in its guidelines that this commitment system will not apply to certain material violations including price cartels, supply restriction cartels and bid rigging.
In June 2018 a type of plea bargaining was introduced into the criminal procedure. This is applicable to cartel activities. If an individual or a company provides statements or other evidence of a third party’s crime in cooperation with the prosecutor’s investigation, the prosecutor may apply certain reduction or immunity measures (including non-indictment) against that individual or company, provided that consent is obtained from the defence counsel. However, there have been no cases as yet in which this plea bargaining system has been applied to cartel activity.