WORLD TRADE WT/DS44/R

31 March 1998

ORGANIZATION


(98-0886)

image


Original: English


Japan - Measures Affecting Consumer Photographic Film and Paper


Report of the Panel


The report of the Panel on Japan - Measures Affecting Consumer Photographic Film and Paper is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 20 March 1998 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel, and that there shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body.


Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.

WT/DS44/R

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TABLE OF CONTENTS


PAGE

  1. PROCEDURAL HISTORY 1

  2. SUMMARY OF FACTUAL ASPECTS 4

    1. THE MARKET FOR PHOTOGRAPHIC FILM AND PAPER IN JAPAN . . 4

    2. JAPANESE ENTITIES AND MEASURES RELATED TO THE US CLAIMS 5

      1. 1967 CABINET DECISION 5

      2. MITI AND RELATED ITEMS 8

        1. Industrial Structure Council Distribution Committee: Sixth and Seventh Interim Reports 8

          1. The 1968 Sixth Interim Report 9

          2. The 1969 Seventh Interim Report 10

        2. 1969 Survey on Transaction Terms 11

        3. 1970 Guidelines for Rationalizing Terms of Trade for Photographic Film 12

        4. 1971 Basic Plan of the Distribution Systemization Promotion Council 14

        5. 1975 Manual of the Distribution Systemization Development

          Centre 15

        6. Large Stores Law 16

        7. Japan Development Bank and the Small and Medium-Sized Enterprise Agency 17

      3. JFTC 17

        1. Antimonopoly Law 18

          1. JFTC Rule No. 1 under Article 6 of the Antimonopoly

            Law 18

          2. JFTC Notification 34 of 1971 (open lotteries) 18

          3. JFTC Notification 15 of 1982 19

        2. Premiums Law 19

          1. JFTC Notification of 1965 21

          2. JFTC Notification 17 of 1967 21

          3. JFTC Notification 34 of 1973 (origin) 22

          4. JFTC Notification 3 of 1977 23

          5. JFTC Notification 5 of 1977 24

        3. JFTC guidance 24

          1. 1981 JFTC guidance on dispatched employees 24

          2. 1983 JFTC guidance on advertising rules 24

      4. COUNCILS AND ASSOCIATIONS 25

        1. Fair Trade Promotion Council 25

          1. 1982 Self-Regulation Measures (dispatch of employees

            and promotional money) 25

          2. 1984 Self-Regulating Standards (developing fees) . . . 26

        2. Retailers Council and 1987 Retailers Code 27

        3. Chambers of Commerce and Industry 27

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  3. SUMMARY OF CLAIMS AND PROCEDURAL OBJECTIONS 28

    1. EVOLUTION OF THE US CLAIMS 28

    2. PROCEDURAL OBJECTIONS 30

      1. THE REQUEST FOR CONSULTATIONS AND THE CONSULTATIONS 31

      2. THE REQUEST FOR THE ESTABLISHMENT OF THE PANEL 36

        1. Adequate notice 38

        2. Related measures 39

        3. Nature of the measures 41

  4. SUMMARY OF ARGUMENTS 42

    1. DISTRIBUTION "COUNTERMEASURES" 42

    2. LARGE STORES LAW 44

    3. PROMOTION "COUNTERMEASURES" 45

    4. THE COMBINED EFFECT OF THE THREE SETS OF MEASURES 46

  5. FACTUAL ARGUMENTS OF THE PARTIES 48

    1. DISTRIBUTION "COUNTERMEASURES" 48

      1. OVERVIEW 48

      2. DEVELOPMENT OF THE JAPANESE FILM MARKET 49

      3. NEED FOR PRIMARY WHOLESALERS IN THE JAPANESE FILM MARKET 55

        1. The US allegations about the market situation in the film distribution sector 55

        2. No government obstacles to use or creation of primary wholesalers 56

        3. The role of Nagase and Kodak Japan 59

        4. Single brand distribution does not impede access of imports 60

        5. The market for paper 62

        6. Other film markets 64

      4. THE RESTRUCTURING OF THE JAPANESE FILM DISTRIBUTION SECTOR 64

        1. The origin of MITI' s distribution policies in the early

          1960s 64

        2. The 1967 Cabinet Decision 67

        3. The 1968 Sixth Interim Report 68

        4. The 1969 Seventh Interim Report and the Distribution Systemization Promotion Council 69

        5. The 1971 Basic Plan 72

        6. Vertical integration 72

        7. Single-brand distribution 73

      5. THE STANDARDIZATION OF TRANSACTION TERMS 75

        1. Introduction 75

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        2. 1970 Guidelines 78

          1. Impact of the Guidelines 80

          2. Timing 83

        3. 1990 Guidelines 84

      6. OTHER DISTRIBUTION "COUNTERMEASURES" 86

        1. JFTC Notification 17 86

        2. International contract notification 87

      7. SYSTEMIZATION: PHYSICAL AND INFORMATION LINKS 89

        1. Physical links and the 1975 Manual 89

        2. Information links 91

        3. MITI/SMEA support for systemization 93

      8. POST-1975 DEVELOPMENTS 95

    2. LARGE STORES LAW 97

      1. INTRODUCTION 97

      2. LARGE STORES AND IMPORTS 99

        1. Import-friendliness of large stores 99

        2. Large stores and direct sales from manufacturers 101

        3. Large stores and imported film 102

      3. BACKGROUND AND PURPOSE OF THE LARGE STORES LAW . . . 105

      4. PROCEDURES UNDER THE LARGE STORES LAW 109

      5. EVOLUTION OF THE REGULATION OF LARGE STORES 111

        1. Department Stores Law 111

        2. Enactment of the Large Stores Law 113

        3. 1979 Revisions to the Large Stores Law 114

        4. 1982 Administrative measures under the Large Stores Law . . 115

        5. Restrictions on acquisitions 116

        6. Changes to the law since 1990 117

      6. FORMAL AND INFORMAL ADJUSTMENTS 119

        1. Adjustments under formal procedures 119

        2. Continued effect of local measures 121

        3. Informal procedures under the Large Stores Law 123

          1. "Prior explanations " 123

          2. "Local explanations " 124

          3. Large Store Council Review 125

      7. IMPACT OF FLOOR SPACE ADJUSTMENTS AND RESTRICTIONS

        ON OPERATION ON THE GROWTH OF LARGE STORES 126

    3. PROMOTION "COUNTERMEASURES" 130

      1. INTRODUCTION 130

      2. T H E L A W S U N D E R L Y I N G T H E P R O M O T I O N "COUNTERMEASURES" 131

        1. The Antimonopoly Law 131

        2. The Premiums Law 133

          1. Background and objective 134

          2. Substantive provisions 136

          3. Enforcement 138

          4. Exemptions from the Antimonopoly Law 140

      3. INITIAL IMPLEMENTATION OF THE ANTIMONOPOLY AND PREMIUMS LAW 140

      4. GENESIS OF THE PROMOTION "COUNTERMEASURES" 142

      5. POST-KENNEDY ROUND PROMOTION "COUNTERMEASURES" . . 145

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        1. JFTC Notification 17 of 1967 (premiums to businesses) 145

        2. 1967 Cabinet Decision (guidance on fair competition

          codes) 147

        3. JFTC Notification 34 of 1971 (open lotteries) 150

        4. JFTC Notification 34 of 1973 (country of origin of goods) . . 150

        5. JFTC Notification 3 of 1977 ("closed" prizes) 152

        6. JFTC Notification 5 of 1977 (premiums to consumers) 152

      6. POST-TOKYO ROUND PROMOTION "COUNTERMEASURES" . . . 153

        1. JFTC guidance on the use of dispatched employees 153

        2. 1982 Self-Regulating Measures (dispatch of employees) and

          the Promotion Council 154

        3. JFTC guidance on dumping and loss-leader advertising 157

        4. 1984 Self-Regulating Standards (developing fees) 157

        5. JFTC approval of 1987 Retailers Code and Retailers Council 158

      7. SUBSEQUENT ENFORCEMENT 162

  6. LEGAL ARGUMENTS CONCERNING NON-VIOLATION CLAIMS 164

    1. INTRODUCTION TO ARTICLE XXIII:1(b) OF GATT 164

      1. GENERAL PRINCIPLES 164

      2. THE LEGAL TEST UNDER ARTICLE XXIII:1(b) 165

      3. SYSTEMIC IMPLICATIONS FOR WTO DISPUTE SETTLEMENT . . . 169

      4. REMEDIES 174

    2. RELEVANT TARIFF CONCESSIONS 175

      1. GENERAL CONSIDERATIONS 175

      2. PAST GATT PANEL REPORTS 177

      3. THE TYPES OF TARIFF NEGOTIATIONS UNDER GATT 179

        1. Article XXVIII 179

        2. Article XXIV:6 180

        3. Article XXVIIIbis 181

      4. THE INCORPORATION CLAUSE OF GATT 1994 183

      5. CERTIFICATION OF MODIFICATIONS AND RECTIFICATIONS . . . 185

      6. CONCLUSIONS 186

    3. GOVERNMENTAL MEASURES 187

      1. THE LEGAL TEST 187

        1. Administrative guidance 188

        2. Past GATT panel reports 190

        3. Governmental attributability of measures 193

        4. Measures "applied" and measures "in effect" 195

        5. Measures and market structure 198

      2. DISTRIBUTION "COUNTERMEASURES" 199

        1. Attributability to the government 200

          1. 1970 Guidelines: background, publication and follow-

            up 202

          2. 1975 Manual 208

        2. Current effectiveness 209

          1. Reports, surveys, plans and manuals 209

          2. JDB/SMEA funding and international contract notification 209

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          3. 1967 JFTC Notification 17 . . . . . . . . . . . . . . . (iv) 1967 Cabinet Decision . . . . . . . . . . . . . . . . . .

            (v) 1970 Guidelines and 1990 Guidelines . . . . . . . . (vi) Conclusions . . . . . . . . . . . . . . . . . . . . . . . .

      3. PROMOTION "COUNTERMEASURES" . . . . . . . . . . . . . . . . .

        (a) The Councils and Codes . . . . . . . . . . . . . . . . . . . . . .

        1. Manufacturers' Council . . . . . . . . . . . . . . . . .

        2. Wholesalers' Council . . . . . . . . . . . . . . . . . . .

        3. Promotion Council . . . . . . . . . . . . . . . . . . . .

        (iv) Retailers' Council . . . . . . . . . . . . . . . . . . . . .

        (v) Federation of Fair Trade Councils . . . . . . . . . .

        1. Attributability to the government . . . . . . . . . . . . . . . .

          1. Fair Competition Codes . . . . . . . . . . . . . . . . .

          2. Fair Trade Councils . . . . . . . . . . . . . . . . . . . (iii) Conclusions . . . . . . . . . . . . . . . . . . . . . . . .


    4. UPSETTING THE COMPETITIVE POSITION OF IMPORTED PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. THE LEGAL TEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

      (a) Measures, trade effects and market structure . . . . . . . . . (b) Causal connection . . . . . . . . . . . . . . . . . . . . . . . . . .

      (c) Relevance of the time of the tariff concession . . . . . . . .

      1. OVERVIEW OF THE IMPACT OF SPECIFIC MEASURES ON THE COMPETITIVE POSITION OF IMPORTS . . . . . . . . . . . . . . . .

      2. DISTRIBUTION "COUNTERMEASURES" . . . . . . . . . . . . . . .

        1. Evolutionofsystemization, rationalization and standardization of distribution policies . . . . . . . . . . . . . . . . . . . . . .

        2. Objectives underlying the introduction of transaction terms

        3. Competitive position of imported products . . . . . . . . . .

          1. 1970 Guidelines and transaction terms . . . . . . . .

          2. 1970 Guidelines and progressive rebates . . . . . .

          3. 1970 Guidelines and single-brand distribution . . .

          4. Other distribution measures . . . . . . . . . . . . . . .

          5. Black and white film and paper . . . . . . . . . . . .

        4. Causal connection between distribution measures and competitive position of imports . . . . . . . . . . . . . . . . .

          1. Introduction of transaction terms . . . . . . . . . .

          2. Introduction of single-brand distribution . . . . . .

          3. Governmental endorsement of private actions . . .

          4. Downstream standardization . . . . . . . . . . . . . .

          5. Uniformity and standardization . . . . . . . . . . . .

        5. Financing for rationalization, systemization and standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . .

          1. JDB funding for joint distribution facilities . . . . .

          2. SMEA loans to photoprocessing laboratories . . . .

        6. Electronic information links . . . . . . . . . . . . . . . . . . .

        7. Current competitive position of imports . . . . . . . . . . .

          1. Primary and secondary wholesale channels . . . . .

          2. Current market structure in the distribution system

          3. Vertically integrated distribution system . . . . . . .

          4. Alternative distribution policies . . . . . . . . . . . .

        8. Change in distribution policies . . . . . . . . . . . . . . . . . .

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          1. 1990 Guidelines 270

          2. Business Reform Law 270

      3. RESTRICTIONS ON LARGE RETAIL STORES 271

        1. General overview of the allegations 271

        2. Effect of the Large Stores Law on imported products 274

        3. Causal connection 277

        4. Change in policies or continued restrictions of large stores . . 279 (e) Conclusions 282

      4. PROMOTION "COUNTERMEASURES" 283

        1. General overview 283

        2. JFTC Notifications under the Premiums Law 284

          1. Competitive position of imports 284

          2. Objectives under lying the pr omotion "countermeasures" 286

          3. Causal connection 288

          4. Change in policies 289

        3. Fair Trade Councils and Fair Competition Codes 290

          1. Promotion Council 291

          2. Retailers' Council 292

          3. Coverage of photographic materials 293

        4. Conclusions 294

    5. REASONABLE ANTICIPATION 295

      1. THE LEGAL TEST 295

      2. SPECIFIC NEGOTIATING ROUNDS ON TARIFF CONCESSIONS . . 301 (a) General overview 301

        1. Kennedy Round 302

          1. Distribution "countermeasures" 303

          2. Restrictions on large stores 305

          3. Promotion "countermeasures" 305

        2. Tokyo Round 306

          1. Distribution "countermeasures" 306

          2. Restrictions on large stores 307

          3. Promotion "countermeasures" 309

        3. Uruguay Round 311

          1. Distribution "countermeasures" 312

          2. Restrictions on large stores 313

          3. Promotion "countermeasures" 315

    6. THE COMBINED EFFECT OF THE THREE SETS OF MEASURES 317

  7. LEGAL ARGUMENTS CONCERNING VIOLATION CLAIMS 321

    1. ARTICLE III OF GATT 321

      1. INTRODUCTION 321

      1. ARTICLE III:1 323

      2. ARTICLE III:4 325

        1. "Laws, regulations or requirements" within the scope of

          Article III:4 325

          1. The legal test 325

          2. Japan' s "administrative guidance" in the light of GATT precedents 327

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          3. Are specific distribution measures "laws, regulations

            and requirements"? 329

          4. Measures "no longer in effect" 330

        2. "Less favourable treatment" in the meaning of Article III:4 . . 332 (i) The legal test 332

          1. "Less favourable treatment" based on product origin

            or product characteristics 334

          2. Impact on competitive conditions for imported film

            and paper 336

          3. Causal connection 337

        3. Causation of market structure by governmental measures or

          private practices 339

        4. Conclusions 341


    2. ARTICLE X OF GATT 342

      1. INTRODUCTION 342

      2. THE LEGAL TEST 343

        1. "Laws, regulations, judicial decisions or administrative rulings" 343

      3. MEASURES TAKEN IN THE CONTEXT OF THE PREMIUMS

        LAW 345

        1. Premiums Law enforcement actions 345

        2. Actions under "Fair Competition Codes" 347

        3. Requests for information and disclosure of confidential information 348

      4. MEASURES TAKEN IN THE CONTEXT OF THE LARGE STORES

        LAW 349

        1. MITI' s "prior explanation" procedures 349

        2. "Local explanation" procedures 349

        3. Specific examples: The MCA and JFTC studies 351

        4. Administrative rulings "made effective" 353

        5. "Affecting the sale or distribution of imports" 353

          5. CONCLUSIONS 354


  8. ARGUMENTS OF THIRD PARTIES 355


    1. THE EUROPEAN COMMUNITIES 355

      1. FACTUAL ASPECTS 356

      2. LEGAL ASPECTS 358

      3. ARGUMENTS IN REPLY BY JAPAN 361


    2. MEXICO 362


  9. INTERIM REVIEW 364


  10. FINDINGS 370


    1. PRELIMINARY ISSUES 370

      1. SPECIFICITY OF THE "MEASURES" IDENTIFIED IN THE PANEL REQUEST 371

        1. Article 6.2 and the request for establishment of the Panel . . . 371

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        2. Analysis of Article 6.2 372

        3. The eight "measures" in light of Article 6.2 374

      2. SUMMARY 376

    2. CLAIMS OF THE PARTIES 377

    3. SEQUENCE OF CLAIMS TO BE ADDRESSED 378

    4. BURDEN OF PROOF 378

    5. ARTICLE XXIII:1(B) - NON-VIOLATION NULLIFICATION OR IMPAIRMENT 380

      1. OVERVIEW OF THE NON-VIOLATION REMEDY 380

      2. THREE REQUIRED ELEMENTS 382

        1. Application of a measure 383

          1. General considerations 383

          2. Governmental versus private actions 385

          3. Measure versus continuing effect 386

          4. Summary 387

        2. Benefit accruing under the GATT 387

          1. Benefits under successive Rounds 388

          2. Legitimate expectations of a benefit 391

        3. Nullification or impairment of benefit: causality 394

      3. DISTRIBUTION "MEASURES" 396

        1. General 396

        2. 1967 Cabinet Decision 397

        3. 1967 JFTC Notification 17 on premiums to businesses 400

        4. 1968 Sixth Interim Report 403

        5. 1969 Seventh Interim Report 407

        6. 1969 Survey Report on Transaction Terms 411

        7. 1970 Guidelines for Rationalizing Terms of Trade for Photographic Film 413

        8. 1971 Basic Plan for the Systemization of Distribution 418

        9. 1975 Manual for Systemization of Distribution by Industry: Camera and Film 421

        10. Concluding observations on distribution "measures" 425

      4. RESTRICTIONS ON LARGE RETAIL STORES 426

      5. PROMOTION "MEASURES" 432

        1. 1967 Cabinet Decision 433

        2. 1967 JFTC Notification 17 on premiums to business 437

        3. 1977 JFTC Notification 5 on premium offers to consumers . . 440

        4. 1981 JFTC Guidance on Dispatched Employees 443

        5. 1982 Self-Regulating Measures on Fairness In Trade and Establishment of the Fair Trade Promotion Council 446

        6. 1984 Self-Regulating Standards 452

        7. 1987 The Retailers Fair Competition Code and the Retailers Council 454

        8. Concluding observations on promotion "measures" 462

      6. COMBINED EFFECTS 462

    6. ARTICLE III:4 - NATIONAL TREATMENT IN RESPECT OF LAWS, REGULATIONS AND REQUIREMENTS 467

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      1. Laws, regulations or requirements 468

      2. No less favourable treatment 470

    7. ARTICLE X:1 - PUBLICATION OF ADMINISTRATIVE RULINGS OF GENERAL APPLICATION 471

      1. GENERAL CONSIDERATIONS ON THE LEGAL TEST UNDER ARTICLE X:1 472

      2. "MEASURES" TAKEN IN THE CONTEXT OF THE PREMIUMS

        LAW 473

        1. Premiums Law enforcement actions 473

        2. Actions under "Fair Competition Codes" 474

      3. "MEASURES" TAKEN IN THE CONTEXT OF THE LARGE STORES

        LAW 475

    8. CONCLUSIONS 476

  11. ANNEX ON TRANSLATION PROBLE. M. .S 477

    1. LIST OF TRANSLATION ISSUES 477

      1. APPENDIX TO TRANSLATION ISSUE 16 485

      2. APPENDIX TO TRANSLATION ISSUE 19 492

    2. RESPONSES BY THE TRANSLATION EXPERTS 492