The Japan Fair Trade Commission (JFTC) recently published a report titled "Survey on Corporate Compliance Efforts with the Antimonopoly Act (Summary)". The report comes at a time that Japanese corporations are facing greater scrutiny at home and abroad for anticompetitive conduct. In 2012 thus far, the U.S. Department of Justice (DOJ) has already secured over $800 million in fines against Japanese defendants. This record number continues the upward trend in U.S. enforcement against Japanese companies over the past decade. At the same time, Japanese authorities have been increasing their competition enforcement activity, with the JFTC having issued over $400 million in surcharge payment orders to 290 enterprises for "unreasonable restraints of trade" in 2011.

Top 5 US Fines Imposed on Japanese Companies (millions)

2012

Yazaki Corp.

$470

2012

Furukawa Electric

$200

2001

Mitsubishi Corp.

$134

2009

Sharp Corp.

$120

2008

Japan Airlines Intl.

$110

The JFTC report contains the findings of the Commission's 2012 survey of corporate compliance practices, and it provides guidance for companies on adapting those practices to their particular industries. While the report focuses on the application of Japan's Antimonopoly Act (AMA), its recommendations are potentially useful for Japanese corporations seeking to protect themselves in foreign jurisdictions as well.

According to the report, the benefit of AMA compliance programs lies in their potential to help businesses avoid costly surcharges and fines as well as the expenses involved in responding to investigations and civil proceedings. The JFTC's survey findings reveal that Japanese corporations are increasingly adopting AMA compliance practices, and that effective programs share a number of characteristics.

The JFTC report makes the point numerous times that any competition compliance program must enjoy the full support of top management and be specifically tailored to the industry of the corporation adopting it in order to be effective. In the case of large conglomerate corporations, it mentions the possibility of organizing separate compliance groups for different operating divisions in order to address their particular risks. There is a consistent message in the JFTC report that off-the-shelf, one-size-fits-all solutions are inadequate to prevent and mitigate the legal ramifications of AMA violations. Instead, effective compliance programs address the realities of the business environment in which a corporation operates while provided three types of protective measures, referred to in the report as the "3Ds": deterrence, detection, and damage control.

The JFTC report's suggested deterrence practices involve informing employees and executives about the risks associated with anticompetitive conduct. This education can be accomplished through compliance manuals, in-house training, and internal disciplinary rules that punish employees involved in conduct violating the AMA. In addition, the JFTC strongly recommends the development and utilization of legal consultation systems to solicit expert advice about compliance issues.

Detection of potentially violative conduct is important because it allows corporations to respond quickly to mitigate the fallout of potentially unlawful activities. The JFTC report breaks down detection practices into two categories: passively accepting information and actively seeking to discover it. Examples of detection practices to accept information include internal violation reporting systems and in-house leniency policies for whistle-blowers. Active detection practices, on the other hand, include AMA audits and internal investigations. The JFTC report notes that such practices may incur greater opposition and resistance from employees, necessitating vocal and forceful support from senior management in order to be effective.

Finally, the JFTC report recognizes that no compliance program can completely eliminate the risk of AMA violations. But it notes that "the degree of loss resulting from conduct against the AMA depends significantly on whether or not such an act in an enterprise was discovery at an early stage and a countermeasure was implemented appropriately." Therefore, in addition to deterrence and detection, effective AMA compliance programs focus on damage control once violations are discovered. The JFTC report suggests promptly responding to discovered violations, conducting internal probes, and seeking refuge under the JFTC and other regulators' leniency programs in order to reduce the costs incurred from violations. It is wise to note, however, that this advice is not entirely objective, as the JFTC has self-serving reasons for counseling participation in its own leniency program.

The JFTC report provides useful advice for corporations seeking to safely navigate the waters of international competition law, but it is important to seek advice from experienced legal counsel in developing effective compliance practices.

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