Bid-rigging practices and cartel behavior hinder free economic activities. It is hoped that a new penalty system will be properly managed to root out such malpractice.
A revision of the Antimonopoly Law has led to a revamp of the Fair Trade Commission's penalty reduction and exemption system. The main pillar of the new framework is the introduction of a discretionary system under which penalty reductions and exemptions are determined in accordance with the extent to which a corporation accused of malpractice cooperates with the FTC's investigations. The system will be put into force by the end of next year.
It is difficult for the FTC to gain insight into corporate bid-rigging and cartel behavior, as the people involved in such practices conduct their activities behind closed doors. If the new system makes it easier to obtain cooperation from companies, the FTC can be expected to make progress in uncovering the truth in malpractice cases.
The penalty reduction and exemption system introduced in 2006 is designed to reduce penalties by 30 percent to 100 percent if a corporation voluntarily reports irregularities to the FTC around the time an investigation begins into its alleged violation of the antimonopoly law. An example case includes one in which major construction contractors reported their own malpractice in connection with a bid-rigging case involving the Linear Chuo Shinkansen construction project.
However, the scale of reductions and exemptions is automatically determined, based on the time frame in which each corporation reports its malpractice. Once a company has made such a declaration, no changes will be made to its penalty reductions or exemptions. Because of this, more than a few corporations become uncooperative after reporting their irregularities.
The discretionary penalty determination system increases the scale of reductions and exemptions to which a company is entitled if it greatly contributes to FTC investigations through such measures as voluntarily submitting important evidence. The former system applied penalty reductions and exemptions to a maximum of five corporations in each case, but that restriction will be abolished. The new system can be described as a more flexible and effective setup.
Ensure transparency
The problem is how to secure the transparency of the system's management. If there is room for the FTC to make arbitrary judgments, companies will hesitate to cooperate with it.
The FTC must provide guidelines outlining specific examples of the information to be evaluated, such as how decisions on a winner of a contract for each order were adjusted and when.
Concerns that corporations will bend to the wishes of the FTC and involve innocent companies with a view to gaining even more reductions and exemptions have not been dispelled. The FTC needs to properly discern whether the details of the irregularities declared are true.
It is noteworthy that the new system will incorporate a privilege by which the substance of consultations sought by companies from external lawyers can be concealed from the FTC.
This is aimed at making it easier for corporations to seek legal advice from lawyers if there is uncertainty about whether the irregularities they intend to voluntarily declare violate laws.
Needless to say, the privilege must not be used for such improper purposes as arranging for the people involved not to contradict each other. First and foremost, it must be used in a way that will heighten corporations' abilities to cleanse themselves of malpractice.
The latest legislative revision has extended the length of time in which irregularities are subject to penalties, from a maximum of three years to 10 years. The longer companies are engaged in violations, the greater the price they must pay. To prevent bid-rigging, it is indispensable to ensure awareness prevails among corporations.
(From The Yomiuri Shimbun, July 28, 2019)
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