RULING PARTY IN JAPAN OKS PROPOSAL TO HIKE ANTI-MONOPOLY LAW PENALTY

RULING PARTY IN JAPAN OKS PROPOSAL TO HIKE ANTI-MONOPOLY LAW PENALTY

Japan's ruling Liberal Democratic Party (LDP) Thursday approved a Fair Trade

Commission proposal to raise the maximum penalty for violators of the country's anti-monopoly law to $769,000 from the current $38,000.

The approval clears the way for the bill to be submitted to Parliament this month. If passed as expected, the new penalty will take effect April 1.The proposed penalty is well below the $2.3 million to $3.8 million recommended last December by a study group and only one-thirteenth of the maximum fine in the United States.

"But 100 million yen (US$769,000) is still extremely high; some sort of compromise was necessary to win LDP approval," Akira Shoda, a professor at Sophia University, who headed the study group, told The Journal of Commerce.

Only hours after the LDP approved the proposal, it was criticized by Japan's powerful Federation of Economic Organizations. Reiichi Yumikura, chairman of the federation's Competitive Policy Committee, condemned it as being drawn up "in a haphazard manner" under pressure from Washington.

The proposed penalty increase follows the Japanese government's pledge during the U.S.-Japan Structural Impediment Initiative (SII) talks to strengthen enforcement of the country's antitrust law. U.S. trade officials long have complained that Japanese industries' exclusionary business practices block foreign access to Japanese markets and give Japanese companies unfair advantage in international trade.

"The revision is a step in the right direction, but it does not go far enough," said a U.S. official in Tokyo, speaking on condition of anonymity.

"There is no reason why contracts which have one foreign party should be given a closer scrutiny than those between Japanese interests," he said, referring to Article 6 of the antitrust law, which stipulates the Fair Trade

Commission must be notified of contracts signed in Japan involving a foreign party.

Roughly 6,000 of these contracts were submitted to the FTC last year.

"This is a simple notification procedure. I don't see why that should block foreign companies' entry to the Japanese market," an FTC official said.

Article 6 remains unchanged under the new bill.

The current antitrust law, enacted in 1947, was drafted by the U.S. Occupation Forces after Japan's defeat in World War II. Since then, criminal charges against violators have been brought only twice - once during the oil shock of the early 1970s when Japan's 12 oil companies formed an illegal cartel to keep prices high, then last year against wrapping companies suspected of forming an unauthorized cartel.

The 12 oil companies were fined only $19,000 (the maximum penalty at the time), and a 1.5 percent surcharge was imposed on profits accrued as a result of the cartel. The second case still is pending.

''The concept of antitrust is comparatively new in Japan, less than 50 years old," Mr. Shoda said. "We have a different background from Americans, who have been waving the antitrust banner since 1889; over there, antitrust immediately means a crime, infringement of liberty, but in Japan, most people do not react that way."

In Japan, a surcharge levied as a penalty - which was raised to 6 percent last year - and the FTC's power to order a breakup of suspected cartel practices have been the preferred measures, he said.

However, Japanese consumer groups are solidly behind the proposed penalty increase. "With the elections coming up in July, the LDP probably didn't have the nerve to quash the proposal. They want the votes of consumer groups," Mr. Shoda said.