Introduction

A cartel is a formal agreement among firms in an oligopolistic industry. Cartel members may agree on such matters as prices, total industry output, market shares, allocation of customers, allocation of territories, bid-rigging, establishment of common sales agencies, and the division of profits or combination of these.

Talking about business competition law in Asia, Japan can be set as an example. The country gaining the world’s 2nd economic power already executed business competition law since 1947, namely Japan Anti Monopoly Act (JAMA/AMA).  The issuance of AMA as one of ways to “recover” Japan’s economic condition after being defeated in the Second World War, still serves as important reference in Japanese economy.

Similar to Business Competition Law in other countries, the AMA also has objectives based on the prohibition of monopoly practice and unfair business competition. It is mentioned in the Article 1 of AMA;

This act by prohibiting private monopolization, unreasonable restraints of trade and unfair trade practices, by preventing excessive concentration of economic power and by eliminating unreasonable restraint of production, sale, price, technology and the like, and all other unjust restriction of  business activities through combinations, and otherwise, aims to promote fair and free competition, to stimulate the initiative of enterprises, to encourage business activities, to increase employment, as well as real income levels, and thereby, to promote the democratic and sound development of the national economy as well as to assure the interests of consumers in general.

Basically, AMA prohibits 3 main issues, namely: (1) private monopolization, (2) cartels or unreasonable restraint of trade/URT (3) unfair trade practices.
Those basic prohibitions become framework to understand AMA, thus in its implementation it will be easier for the involved parties to use it as reference.

In the URT regulation, issue which earns significant portion is cartel-related issue. In Article 2 (6), the definition of Cartel consists of 2 following points: (1) conduct, and (2) shared deed. The horizontal agreement of AMA can be categorized as URT, meanwhile the vertical agreement is classified into UTP category. It is different compared to Business Competition Laws applied in other countries. Where URT can be implemented either horizontally or vertically.

Cartel can not only be proved by using direct evidences, as the presence of direct negotiation (physical meeting) among cartel actors should also be proved. This condition hampers investigation against cartel case.

Short History of Cartel in Japan

In the seventeenth century, Japan adopted isolation politic or commonly known as sakoku. This policy was intended to prevent external influences against Japan, or in the other hand to restrain the entry of foreign parties which was suspected to colonize Japan.  Japan could perform these measures, as this country was able to fulfill their own basic needs, particularly those relating to food, as Japan’s agriculture production was booming at that time. One of impacts of this isolation policy was the presence of feodal economy based on landlord system as well as guild system.

However, the policy changed on the occurrence of Meiji restoration in 1870. One of principles of Meiji restoration was modern industrialization in order to be able to compete with other countries, particularly America and Europe.  In this era, cartel was used by Japanese government to control negative impact of industrialization, such as confrontation among business players running their business activities. The common form of cartel in that era was the formation of trade union or industrial association.  In the other hand, through the formation of industrial association, Japanese government performed private resources mobilization in order to fulfill people interest. Furthermore, industrial association/cartel also served as government’s tool to absorb workforce. As a reward, business players will obtain special protection from the government.

The presence of government-organized cartel caused economic condition which was dominated only by certain group/people. These groups were known as zaibatsu or conglomerate. The zaibatsu then dominated Japanese economy, and caused unfair business competition. This condition occurred as the Japanese government gave special attention only to zaibatsu.

When Japan surrendered to USA and allied forces in the Second World War, three main points executed by the war winners incorporated in The Allied Occupation Forces (AOF) were implementing economic democratization in order to reconstruct Japanese economy based on democracy. The existence of Zaibatsu which aggressively developed their business was deemed by the USA as the trigger of Japan imperialism’s aggressiveness to seek for industrial raw materials. In the other hand, zaibatsu also adversely impacted Japanese economy which was marked with industrial concentration only in certain business groups. Economic democratization consists of: (1) agricultural land reform, (2) labor legislation, and (3) the decentralization program and enactment of the Antimonopoly Law.   As further measures, AOF dissolved zaibatsu, and divided it into several companies, followed by the issuance of AMA in 1947.

The presence of industrial association or business association comprising of business players is still commonly implemented in Japan today. It is not prohibited in AMA, however the definition is specifically regulated in Section I of Article 2.

Cartel Regulation in AMA

As aforementioned, cartel has been explicitly regulated in the AMA in several articles. The 1st Section of AMA, Article 2 (6) concerning the URT explains the prohibition of conspiracy to regulate price, production, volume, and so forth.

The term “unreasonable restraint of trade” as used in this act shall mean such business activities, by which any entrepreneurs, by contract, agreement or any other concerted actions, irrespective of its names, with other entrepreneurs, mutually restrict or conduct their business activities in such a manner to fix, maintain or increase prices, or to limit production, technology, products, facilities, or customers, or suppliers, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade.

The URT article can be classified into: First, agreement among business players to increase price constitutes requirement/component to determine that the action is considered as unfair transaction constraint/restriction. Second, all requirements to consider that cartel through unfair transaction is fulfilled when the members of cartel make an agreement (to collectively commit unfair transaction). In the other word, although cartel act does not adversely impact the current prevailing price or the members of cartel commit unfair transaction, thus the cartel is considered violating article 3 (violation of unfair transaction). Third, with regard to the verification of reasons conveyed by the members of cartel for “action contradicting to public benefit,”, thus the Supreme Court is of the opinion that the implementation of the abovementioned verification is limited to emergency situation where the verification is deemed necessary. The foregoing regulations are considered effective for criminal deed committed by cartel, such as price agreement, volume agreement and tender.

Although these regulations are largely influenced by American anti-trust, however when it comes to cartel, there are 3 main difference between the principles of law violation for Japanese cartel and American anti-trust act. First, American anti-trust act applies verification of reasons for “action contradicting to public benefit.” The second is that in the currently applied law precedent, there is a percentage requirement for market domination by the members of cartel, namely more than 50%. It is applied in order to secure/ ensure the effectiveness of cartel agreement. In the future, it is estimated that the standard of market domination for the members of cartel will reduce to less than 50%. Third, with regard to tender consultancy, committing separate tender consultancy constitutes violating article 3. For a specific field transaction, agreement to determine tender winner or rule implementation to determine tender winner constitutes unfair transaction. However the law enforcement for tender consultancy committed by cartel is different compared to law enforcement for other actions committed by cartel. For example, price agreement action which automatically creates market relating to the product whose price is agreed.