Last week, PaRR reported that the Japan Fair Trade Commission (“JFTC”) has issued hearing decisions rejecting appeals against fines and orders it issued for a television cathode ray tube (“CRT”) cartel. The JFTC upheld its power to apply The Antimonopoly Act (“AMA”) to foreign companies engaged in offshore cartel conduct that had an impact in Japan. The CRT fines were the first fines issued by the JFTC against foreign companies involved in international cartels, although the JFTC had previously issued cease and desist orders to foreign companies in the marine hose cartel case. The JFTC’s ability and willingness to fine foreign companies for offshore cartels is particularly significant given the recent signing of a Cooperation Arrangement between the Australian Competition and Consumer Commission (“ACCC”) and the JFTC.
First JFTC fines against foreign CRT cartelists
In October 2009 and March 2010, the JFTC issued fines (known as surcharge orders) totalling JPY 4.5 billion (approx AUD 44 million) against six of the 11 CRT manufacturers that it alleged were involved in an international cartel to manipulate the prices for CRTs used in televisions. Each of the fined companies were foreign subsidiaries of manufacturers based in South East Asia. The JFTC also issued cease and desist orders to two companies. The JFTC found that, from May 2003, the 11 companies regularly met to set quarterly minimum target prices for CRTs.
The United States Department of Justice and European Commission also conducted investigations into cartels involving manufacturers of CRTs for televisions and computers, with Samsung SDI agreeing to pay USD 32 million to the DOJ and the EC fining seven manufacturing groups €1.47 billion over two CRT cartels.
JFTC rejects appeals and upholds jurisdiction
In 2010, the JFTC commenced two first instance appeal processes (known as “hearing procedures”) regarding the fines and orders issued to six of the 11 parties, who between them were fined JPY 3.1 billion (approx AUD 32 million) and received the two cease and desist orders. In March 2014, the JFTC issued its initial decisions upholding its jurisdiction. PaRR reports that the JFTC issued a final decision rejecting the appeal in June 2015, but has rescinded the cease and desist orders against Samsung SDI and MT Picture Display.
The appellants (Samsung SDI Co., Ltd and its subsidiaries, and MT Picture Display Co., Ltd and its subsidiaries) reportedly disputed the JFTC’s ability to apply the AMA to foreign companies that produce and sell products overseas. The CRTs were never sold directly into Japan, but were purchased by Japanese CRT TV manufacturers (such as Sanyo, Sharp and Orion) through their South East Asian manufacturing subsidiaries. Sources reported that some Japanese TV manufacturers negotiated prices directly with the CRT manufacturers. The JFTC found that the AMA should apply because the cartel conduct impacted prices of the Japanese CRT television manufacturers.
ACCC and JFTC agree to cooperate on enforcement activities
The JFTC’s willingness to pursue foreign cartelists is significant in the backdrop of its recent Cooperation Agreement with the ACCC. In April 2015, the ACCC Chairman Rod Sims and JFTC Chairman Kazuyuki Sugimoto signed a Cooperation Agreement at the International Competition Network (ICN) Conference. The Cooperation Agreement, made under the July 2014 Agreement between Japan and Australia for an Economic Partnership provides for increased cooperation and information exchange between the two agencies on enforcement activities. The ACCC expects to work closely with the JFTC on global merger and cartel investigations in future. The Cooperation Agreement envisages that the authorities will notify each other of activities that would affect the other; share information relevant to each other’s enforcement activities and consider coordinating their enforcement activities.
The JFTC Cooperation Agreement adds to a raft of agreements the ACCC has with competition authorities in other countries, including the United States, New Zealand, China, Canada and India, to cooperate and share information related to their respective enforcement activities.
The impact of such cooperation agreements on competition agencies’ investigation and enforcement activities is likely to increase as globalisation and the digital economy increasingly internationalise trade and commerce (including in respect of merger activity).