11

Evidence Gathering in Cartel Evidence Gathering in Cartel InvestigationsInvestigations

IGE on Competition Law and PolicyIGE on Competition Law and Policy 66th Sessionth Session

88--1010 November November 20042004 at Geneva at Geneva TetsujiTetsuji YOKOTE YOKOTE

International Affairs DivisionInternational Affairs Division Fair Trade Commission of JapanFair Trade Commission of Japan

22

The nature of Hard Core CartelsThe nature of Hard Core Cartels

Hard Core Cartels Hard Core Cartels -- •• are difficult to detect because it is are difficult to detect because it is

conducted behind closed doors, andconducted behind closed doors, and

•• impose significant harm upon consumersimpose significant harm upon consumers..

==> Strong sanctions are imposed and > Strong sanctions are imposed and should be for the purpose of deterrenceshould be for the purpose of deterrence..

33

Recent Trends in EnforcementRecent Trends in Enforcement ((legal actions onlylegal actions only))

145145 2525 3737 3838 1818 2727 TotalTotal

44 00 11 00 00 33 OthersOthers

2121 77 33 22 66 33 Unfair Trade Unfair Trade PracticesPractices

33 00 11 00 11 11 OthersOthers

105105 1414 3030 3333 1010 1818 BidBid--riggingrigging

1010 33 22 33 11 11 Price CartelPrice Cartel

118118 1717 3333 3636 1212 2020 CartelCartel

22 11 00 00 00 11 Private Private MonopolizationMonopolization

TotalTotal 20032003 20022002 20012001 20002000 19991999

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Leniency ProgramLeniency Program: : Useful tool Useful tool for detecting cartelsfor detecting cartels

•• A leniency program has been introduced A leniency program has been introduced in many jurisdictions, which uncovers hard in many jurisdictions, which uncovers hard core cartels that would otherwise go core cartels that would otherwise go undetectedundetected..

•• A leniency program has been successful A leniency program has been successful

and is one of the most useful tools to and is one of the most useful tools to detect hard core cartelsdetect hard core cartels..

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For jurisdictions without leniency For jurisdictions without leniency programsprograms……

•• For jurisdictions without leniency programs For jurisdictions without leniency programs ((including Japan currentlyincluding Japan currently)), how to obtain , how to obtain evidence that indicates conspiracy between evidence that indicates conspiracy between participants of cartels is quite important, participants of cartels is quite important, especially at the early stage of investigationsespecially at the early stage of investigations. .

==> Dawn raid is one of the very useful tools for > Dawn raid is one of the very useful tools for gathering evidence of cartelsgathering evidence of cartels..

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Dawn Raids Dawn Raids ((OnOn--thethe--Spot InspectionsSpot Inspections): ): Japanese ExperienceJapanese Experience

•• The JFTC can enter any place of businesses The JFTC can enter any place of businesses concerned with the case and other necessary concerned with the case and other necessary places, with a prior consent of a senior executive places, with a prior consent of a senior executive of the business or the person concernedof the business or the person concerned. .

•• In In 20022002 FY, the JFTC undertook about FY, the JFTC undertook about 2020 dawn dawn

raids by mobilizing approxraids by mobilizing approx. . 8080 staff per case staff per case ((Maximum approxMaximum approx. . 200200 staff staff.)..).

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Important Tips for Dawn RaidsImportant Tips for Dawn Raids

•• Unexpectedly and SurprisinglyUnexpectedly and Surprisingly

•• Simultaneously and ExtensivelySimultaneously and Extensively

•• Elaborate Preparation for Maximizing the Elaborate Preparation for Maximizing the Effectiveness of Dawn RaidsEffectiveness of Dawn Raids

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Dawn Raids Dawn Raids ((11):): Unexpectedly and SurprisinglyUnexpectedly and Surprisingly

•• Unexpected inspection of the offices of Unexpected inspection of the offices of businesses concerned with the case will deprive businesses concerned with the case will deprive them of the time to hide or destroy evidencethem of the time to hide or destroy evidence..

•• In Japan, the inspectors have to obtain consent In Japan, the inspectors have to obtain consent of a senior executive of business in advance to of a senior executive of business in advance to initiate inspectioninitiate inspection..

==> It is important to initiate inspections when > It is important to initiate inspections when

such a senior executive is in hissuch a senior executive is in his//her office her office –– right after the opening hour is idealright after the opening hour is ideal..

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Dawn Raids Dawn Raids ((22):): Simultaneously and ExtensivelySimultaneously and Extensively

•• Especially in cartel cases, there are many Especially in cartel cases, there are many businesses concernedbusinesses concerned..

•• Information that the JFTC initiated Information that the JFTC initiated investigation tends to spread throughout investigation tends to spread throughout the participants of cartel conduct in no the participants of cartel conduct in no timetime..

==> Dawn raids have to be initiated > Dawn raids have to be initiated

simultaneously against all participantssimultaneously against all participants..

1010

Dawn Raids Dawn Raids ((33--11):): Elaborate Preparation for Maximizing Elaborate Preparation for Maximizing the Effectiveness of Dawn Raidsthe Effectiveness of Dawn Raids •• Identify the followingsIdentify the followings:: ØØThe number of offices of businesses to be inspectedThe number of offices of businesses to be inspected ØØLocation, size and entrance of related offices of Location, size and entrance of related offices of

businessesbusinesses ØØName and title of a leading personName and title of a leading person ØØName and title of a senior executiveName and title of a senior executive

==> Compose inspection teams based on these > Compose inspection teams based on these informationinformation

1111

Dawn Raids Dawn Raids ((33--22):): Elaborate Preparation for Maximizing Elaborate Preparation for Maximizing the Effectiveness of Dawn Raidsthe Effectiveness of Dawn Raids •• Whenever dawn raids are undertaken, the Whenever dawn raids are undertaken, the

headquarter is set up and chief inspectors have headquarter is set up and chief inspectors have a close contact with the headquarter a close contact with the headquarter ((Additional Additional inspectors may be sent to the inspection team if inspectors may be sent to the inspection team if necessarynecessary.)..).

•• When a key evidence is found through the When a key evidence is found through the

inspection, the headquarter may instruct inspection, the headquarter may instruct inspectors to have testimony on the spotinspectors to have testimony on the spot..

1212

Improvement of Enforcement Improvement of Enforcement System in JapanSystem in Japan

•• In addition to introducing compulsory In addition to introducing compulsory measures for criminal investigationsmeasures for criminal investigations……

ØØIncreasing the surcharge rateIncreasing the surcharge rate

ØØIntroducing a leniency programIntroducing a leniency program

==> The JFTC will have> The JFTC will have stronger power to crack stronger power to crack down on cartelsdown on cartels..