MOMENTUM GATHERS BEHIND JAPAN'S ABOLITION OF FAIR

UNCLAS SECTION 01 OF 02 TOKYO 002564 SENSITIVE SIPDIS STATE FOR E, EEB, EAP/EP, AND EAP/J NSC FOR JIM LOI USTR FOR AUSTR WENDY CUTLER AND DAUSTR MICHAEL BEEMAN STATE PASS TO DOJ STUART CHEMTOB AND FTC RANDOLPH TRITELL AND DEIRDRE SHANAHAN E.O. 12958: N/A TAGS: ECIN ECON ETRD KJUS JA SUBJECT: MOMENTUM GATHERS BEHIND JAPAN'S ABOLITION OF FAIR TRADE COMMISSION ADMINISTRATIVE HEARING SYSTEM REF: TOKYO 2412 ¶1. (SBU) SUMMARY: The Japan Business Federation's (Keidanren) recent advocacy in support of abolishing the Japan Fair Trade Commission's (JFTC) internal appeals process adds to momentum gathering behind antitrust policy reform under the new government of Prime Minister Yukio Hatoyama. This call upon the government to abolish the JFTC's administrative hearing system (shimpan) for reviewing its own orders by the business community has shifted discussion of the issue in legal and political circles to practical questions of how best to transfer appeals to the court system and how to improve JFTC's investigation process as well. END SUMMARY -------------- BUSINESS COMMUNITY ADVOCACY -------------- ¶2. (U) On October 20, Keidanren released a public statement urging abolition of the JFTC,s administrative hearing system and revision of Japan's Antimonopoly Act (AMA) to bring the antitrust investigation and appeals process in line with U.S./European standards for due process and predictability of enforcement. Keidanren recommended replacing the existing appeals system with a procedure within the judicial system in which a named corporation can appeal to the courts. In view of existing capacity constraints in the court system and the need for experts trained in antitrust matters, Keidanren called for the first trial to be the exclusive jurisdiction of the Tokyo District Court for the time being, and for subsequent appeals to be the exclusive jurisdiction of the Tokyo High Court. Keidanren also urged human resources development, particularly the training of staff with expertise in AMA cases. (For the Japanese-language original, see: http://www.keidanren.or.jp/japanese/policy/20 09/086.html.) ¶3. (U) Keidanren's basic argument is that the existing appeals system under which the JFTC reviews its own decisions (effectively serving as both prosecutor and judge) is inherently unfair and invites distrust that cannot be eliminated by partial measures. Keidanren has long favored abolition and is now engaging more visibly on the issue since the prospects for passage of the necessary legislation have improved with the advent of a Democratic Party of Japan (DPJ) government (reftel). Increases in civil and criminal penalties for AMA violations also underpin business community advocacy. ¶4. (U) The U.S.-Japan Business Council (USJBC) and Japan-U.S. Business Council (JUSBC) have similarly called for abolition of the administrative hearing system in a joint statement. The two business organizations issued a wide-ranging set of recommendations to both governments upon conclusion of their joint meeting in Washington on November 3. Their competition policy recommendations also criticized the lack sufficient safeguards under the existing system to ensure the independence of the initial hearing officers. -------------- FOCUS ON THE INVESTIGATION PROCESS -------------- ¶5. (U) Both the Keidanren and USJBC/JUSBC statements propose measures to ensure that the JFTC investigation process adheres to fundamental international standards of due process and transparency on a par with international standards. The business groups specifically called for protections such as disclosure of evidence held by the JFTC to the party under investigation; respect for the attorney-client privilege and the right to have counsel present during all stages of an investigation (to protect the defense rights of parties that are subject to investigations and interviews); holding sufficient hearings prior to issuance of an order and specification of the reason and evidence serving as the basis for the order to the party at the time of the issuance of the order; and preservation of confidentiality of information provided to the JFTC. TOKYO 00002564 002 OF 002 -------------- GOJ REVIEWING POLICY -------------- ¶6. (SBU) Despite Japanese press reports that the Government of Japan has decided to scrap the present hearing system entirely, JFTC contacts say that the GOJ is still discussing the optimal system. They also confirm the GOJ is considering a new rule to allow attorneys to be present during interviews by JFTC officials, something the U.S. business community has long requested. -------------- AMERICAN CHAMBER VIEWS -------------- ¶7. (SBU) American Chamber of Commerce in Japan (ACCJ) contacts note that by going on the record as it has, Keidanren has set the terms of the policy debate. They strongly agree that improvements in the JFTC's investigation process are as important as the appeal process. Regarding abolition of the hearing system, what is required next is close attention to practical questions regarding the rules under any new system regarding issues such as evidence, disclosure, confidentiality, and other applicable laws. For example, if the Administrative Procedure Law were to apply, it would allow enforcement of any order (including the penalty) unless the court issues a suspension order. The ACCJ Competition Policy Task Force is preparing a separate viewpoint on due process issues (to be made available soon); it is now considering whether to issue a separate comment on the hearing system. ROOS