Availability of civil claims
Scope of civil claims in Japan
Individuals and corporations can bring legal action to claim compensation for damages arising from violations of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 54 of April 14, 1947; “JAA”).
Such legal action may be based on general tort law principles, which are mainly governed by Article 709 of the Civil Code and Article 25 of the JAA. The scope of general tort law is so wide that no violation of the JAA is specifically excluded. By contrast, Article 25 of the JAA lists specific types of violations that are subject to liability, including typical violations such as monopolization, unreasonable restraint of trade and unfair trade practices.
Tort liability under Article 709 of the Civil Code requires the violation to have been negligent or intentional, whereas Article 25 of the JAA requires the prior issuance of a final and binding administrative order (i.e., a cease-and-desist order) by the Japan Fair Trade Commission (the “JFTC”) before a claim for damages may be brought. Violators of Article 25 of the JAA are liable even where a violation is neither negligent nor intentional. However, a claim based on Article 25 of the JAA can only be brought after an administrative order or a declaration of illegality has been issued by the JFTC regarding the violation which has become final and binding.
Another difference is jurisdiction. Jurisdiction for actions based on general tort law is determined by the general jurisdiction rules, under which actions can be brought in a district court with jurisdiction over the location of the defendant’s principal office or the place where the tort was committed. By contrast, the Tokyo High Court was given exclusive jurisdiction over actions based on Article 25 of the JAA as the court of first instance until 2013, when an amendment to the JAA gave the Tokyo District Court exclusive jurisdiction as the court of first instance. This amendment entered into force on April 1, 2015.
The most likely defendants in these actions are business operators who have violated the JAA. In addition, although rarely seen in practice, it is technically possible to bring civil actions based on general tort law against individuals involved in violations, such as directors or employees of violating business operators.
Applicable limitation periods
The limitation period for actions claiming compensation for damages under Article 25 of the JAA is three years. The limitation period commences on the date on which the administrative order or the declaration of illegality pertaining to the alleged violation becomes final and binding (Article 26 of the JAA).
The right to claim compensation for damages based on general tort law expires (i) when the claimant does not exercise the right within three years from the time that it becomes aware of both the occurrence of damages and of the identity of the person who caused the damages or (ii) when 20 years have elapsed from the time of the tortious act.
It should be noted that, under a court precedent (judgment of the Supreme Court rendered as of April 28, 2009, Case No. Heisei (Gyo-Hi) 97, the limitation period for claims based on general tort law may commence without regard to whether an administrative order or declaration of illegality pertaining to the alleged violation has become final and binding. Therefore, civil actions based on general tort law need to be filed within three years of the injured party learning of the occurrence of the damages and the person who caused them, without regard to the status of any administrative procedure pertaining to the alleged violation.
For claims based on both general tort law and Article 25 of JAA, appeals, first from a district court to a high court and then from the high court to the Supreme Court, are available.
When a party appeals a judgment rendered by a district court to the competent high court, such party may challenge its findings both on the facts and on issues of law. In contrast, in appeals from a high court to the Supreme Court, facts legitimately determined by the high court are binding on the Supreme Court (Article 321(1) of the Civil Procedure Code (the “CPC”)), and thus, review by the Supreme Court is limited to the application of the law and the legitimacy of the fact-finding process.
Availability of class actions for infringement of competition law and/or damages in Japan
Japanese law does not specifically provide an equivalent to the class actions permitted in the US.
Under Japanese law, the “Appointed Party” system prescribed by Article 30 of the CPC is most similar to a US class action. Pursuant to Article 30 of the CPC, a number of persons, who share common interests, may appoint from among themselves one or more persons to be the party/parties to a lawsuit (the “Appointed Party”), and the Appointed Party stands as the claimant or defendant on behalf of the appointing person(s). The judgment in such a lawsuit affects not only the Appointed Party but also the persons who appointed it. However, it does affect persons who shares common interests but did not appoint the party.
Furthermore, a new collective lawsuit system (a so-called Japanese class action), which applies only to specific types of consumer protection claims will be implemented in the very near future. The Japanese government passed a new law in December 2013 introducing the new system, under which only a “Certified Qualified Consumer Organization” (a “CQCO”) approved by the government may file a class action claim for monetary damages on behalf of consumers. The claims subject to the new system are defined as “Common Obligations,” which means obligations to make monetary payments owed by business operators to consumers under the Consumer Contract Act.
The “two-tier and opt-in” procedure is a unique feature of the new system. In a “first-tier” procedure, a CQCO will file a lawsuit requesting that the court confirm the existence of a Common Obligation among the claims if the CQCO finds that damages have been caused to a sufficiently large number of consumers. If the Common Obligation is not confirmed by the court, the procedure will end. If the Common Obligation is confirmed by the court or by an agreement by the parties during the first-tier procedure, a “second-tier” procedure will be initiated to determine the claims of consumers.
In the second-tier procedure, a CQCO will either: (i) notify consumers with potential claims found to be subject to the class action of the first-tier result; or (ii) provide public notice via the internet, newspapers, TV commercials, etc. Consumers with claims will then delegate the authority to recover their claims to the CQCO via the same procedure, and the CQCO will file said claims with the court. The court’s judgment in the second-tier procedure will be binding against all consumers who delegated the authority to seek recovery of their claims to the CQCO at the end of the second-tier procedure.
The new system will come into effect on October 1, 2016.
It should be noted, however, that it is still unclear whether it will be possible to utilize this new system to recover damages for competition violations. It is necessary to closely monitor the development of related guidelines and actual enforcement.
Conduct of proceedings and costs
Burden of proof
The claimant is required to prove (i) a violation of antitrust law, (ii) occurrence of damages, (iii) causality between the violation and the damages, and (iv) the amount of the damages.
Even where a final and binding administrative order or declaration of illegality has been issued by the JFTC pertaining to the violation alleged by the claimant in the civil lawsuit, Japanese courts are technically not bound by such orders or declarations and the claimant still assumes the burden of proof regarding requirements (i) through (iv) above. That said, in practice such an order or declaration can have a material impact on a civil lawsuit. Specifically, a violation of competition law may be strongly presumed to have occurred based on the existence of an administrative order or declaration by the JFTC. Therefore, for claimants, the submission of such an order or declaration is highly likely to be beneficial, if available.
Joint and several liability of cartel participants
Each member of a cartel is liable for all damages caused by the cartel. In other words, a claimant may sue one or more persons from among the participants to claim compensation for all of the damages suffered by the claimant.
The JAA has a leniency program that enables applicants under certain conditions to enjoy an exemption from an administrative penalty imposed by the JFTC. However, it does not directly apply to civil procedures. Therefore, application for the program does not exempt applicants from civil liability.
The apportionment of damages awarded to a claimant among cartel participants is based mainly on the fraction of the damages attributable to each participant. If one of the joint participants compensates the claimant in excess of the fraction for which it is liable, the participant can demand reimbursement from the other participants. Such a demand can be made not only by filing another legal action against the other participants, but also by a “Notice of Suit” under Article 53 of the CPC, which forces other members of a cartel to participate in a lawsuit between the members being sued and the claimant.
Documents and evidence that can be used by claimants (for example, evidence obtained via investigation) and legal privileges
Parties to a civil lawsuit do not have a general obligation to disclose documents, including evidence that would have an adverse impact on them.
However, upon the request of a party, the court may order the other party to submit documents to the court as evidence unless a requested document falls within any of the following classifications prescribed under Article 220 of the CPC:
i) documents stating matters subject to a right to remain silent in connection with possible criminal responsibility;
ii) documents concerning a secret that relates to a public servant’s duties;
iii) documents stating facts that lawyers, doctors, notaries, religious persons or other professionals learned in the course of their duties or other technical or professional secrets;
iv) documents prepared exclusively for use by the holder thereof (excluding a document held by the state or a local public entity which is used by a public servant for an organizational purpose); and
v) documents concerning a suit pertaining to a criminal case, a record of a juvenile case or documents seized in such cases.
Further, a party can request the court to order those in possession of documentary evidence to submit it to the court (Article 226 of the CPC). For example, a claimant can request the court to have the JFTC provide its records of a case.
The JFTC has publicized a Notice on Provision of Documents for Civil Lawsuits Claiming Compensation for Damages Caused by Violations of the JAA, as of May 15, 1991, which provides, among other things, its disclosure policy when requested to provide documents to a court under Article 226 of the CPC. In the notice, the JFTC emphasized that, depending on the circumstances, it will accede to such requests for evidentiary documents, including documents used in findings of fact by the JFTC in administrative orders or other materials relevant to its investigations to promote private enforcement of the JAA.
While it would not be directly classified as pre-action disclosure (wherein a potential party to a lawsuit can request disclosure of documents held by the counterparty before commencement of the lawsuit), potential claimants can collect information in the possession of potential opponents prior to filing a lawsuit through the “Preservation of Evidence” procedure under Article 234 of the CPC.
In this procedure, a court examines evidence upon petition by a potential party even before filing a lawsuit if the court finds such examination necessary because examination of the evidence would be difficult without prior examination (Article 234 of the CPC). The petitioner must make a prima facie case showing such necessity.
Average length of time from submission of claim to judgment in Japan
It is very difficult to assess the average length of proceedings in the absence of any authoritative records of the time required from the filing of a claim to the rendering of a judgment.
Based on publicly available records of court precedents, reaching a final judgment in the first instance typically takes two to four years. Appeals generally take a similar amount of time for each further instance.
Average cost from submission of claim to judgment in Japan
Costs consist mainly of court fees (i.e., fees to be paid to the court) and legal fees. Average amounts for such fees are not available.
Court fees include court costs, charges for service of legal documents by the court, and expenses necessary for the examination of evidence. Court costs are provided under the Act on Costs of Civil Procedure and are calculated based on the amount of a claim. A claimant or appellant must pay the court costs with a stamp on a complaint or a written appeal. However, the court fees, including the court costs, should basically be borne by the defeated party.
Legal fees should be borne by each party, in principle. In the case of a tort claim, a reasonable amount of legal fees is considered to be part of the damages caused by the tortious act and, thus, the court may order the defendant to pay an amount of money corresponding to this reasonable amount. However, the amount ordered by the court does not usually cover the entire amount of the legal fees.
Third party or alternative funding for litigation is not explicitly prohibited in Japan.
Contingency fees are allowed under Japanese law. “No win, no fee” arrangements are not explicitly prohibited but, to our knowledge, are rarely used in practice.
According to Article 466 of the Civil Act, any claim may be generally assigned except where its nature does not permit assignment. It should be noted, however, that assignment or entrustment of rights in order to have an assignee or trustee carry out a specific procedural act (i.e., bring and prosecute a claim) is prohibited under Article 10 of the Trust Act.
Alternative methods of dispute resolution
Arbitration is a typical type of alternative dispute resolution in Japan and is governed by the Japanese Arbitration Act. It can be commenced if the parties agree to use the process, although there is some debate as to whether disputes over competition law matters can be resolved through arbitration. The Arbitration Act does not explicitly exclude such disputes from its scope as defined in its Article 13(1), so arbitration may be worth considering as an option in competition law disputes.
Conciliation under the Act for Conciliation of Civil Affairs is another option that can be used to resolve competition law-related disputes.
Availability of damages and quantification
Under Japanese law, damages are compensatory because it is considered fair and sufficient to restore a victim to its original state before the violating act occurred.
Consequently, as a general rule, a claimant has to prove the difference between its actual state after being affected by the alleged violation and the state it would have been in if the violation did not occur. For example, where a claimant purchaser argues that it was forced to buy products for an increased price determined by a cartel, it has to show not only the actual price at which it purchased the products, but also the price that would have been offered under competitive conditions.
Further, while no current precedent exists to our knowledge, the passing-on defense is likely to be available in principle because the defendant may successfully claim that no damages should be claimed by buyers who themselves resold goods at a price which included overcharging by the cartel to final purchasers thereby passing on the price increase to the final customers.
The JAA does not provide specific rules to help claimants quantify the damages caused by violations of the JAA. Therefore, it is often extremely difficult to prove the price that would have been offered in the absence of a violation of the JAA. In such a case, a court may determine the damages suffered based on oral arguments and evidence submitted, exercising its discretion regarding the calculation of damages under Article 248 of the CPC.
The amount of compensation awarded in cases to date has varied, but in many of the cartel cases in which a claimant purchaser or party to a contract prevailed, courts awarded approximately 5% to 20% of the actual amount of the contract.
Punitive and exemplary damages
Japanese law does not allow punitive or exemplary damages.
Availability of interim or final injunctions in respect of alleged competition law infringement
Both interim and final injunctions are available for the private enforcement of the JAA against unfair trade practices under Article 19 of JAA, but not with respect to cartel cases.
The requirements for an injunction are prescribed by Article 24 of the JAA. According to this provision, a person is entitled to seek the suspension or prevention of typical violations of the JAA, such as the operation of a cartel, by a business operator under the following circumstances:
i) if the person’s interests are infringed or are likely to be infringed by the business operator’s violation of the JAA; or
ii) if the person is suffering or is likely to suffer extreme damages due to the violation.
In Japan, the case law on civil claims for violations of the JAA is largely concerned with bid-rigging. Price-fixing and other types of cartels have not been main enforcement targets so far.
However, there has been a remarkable trend in the field of administrative enforcement of the JAA in cartel cases, wherein the amounts of the surcharges that the JFTC has ordered have been strikingly high. This trend in surcharge payment orders means damages suffered by injured parties from potential cartels would likely be extensive, which may motivate them accordingly to file civil lawsuits.
Therefore, it will be worth noting whether the number of civil lawsuits against cartels increases in the near future.