WORLD TRADE WT/DS44/R
31 March 1998
ORGANIZATION
(98-0886)
Original: English
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.
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PAGE
PROCEDURAL HISTORY 1
SUMMARY OF FACTUAL ASPECTS 4
THE MARKET FOR PHOTOGRAPHIC FILM AND PAPER IN JAPAN . . 4
JAPANESE ENTITIES AND MEASURES RELATED TO THE US CLAIMS 5
1967 CABINET DECISION 5
MITI AND RELATED ITEMS 8
Industrial Structure Council Distribution Committee: Sixth and Seventh Interim Reports 8
The 1968 Sixth Interim Report 9
The 1969 Seventh Interim Report 10
1969 Survey on Transaction Terms 11
1970 Guidelines for Rationalizing Terms of Trade for Photographic Film 12
1971 Basic Plan of the Distribution Systemization Promotion Council 14
1975 Manual of the Distribution Systemization Development
Centre 15
Large Stores Law 16
Japan Development Bank and the Small and Medium-Sized Enterprise Agency 17
JFTC 17
Antimonopoly Law 18
JFTC Rule No. 1 under Article 6 of the Antimonopoly
Law 18
JFTC Notification 34 of 1971 (open lotteries) 18
JFTC Notification 15 of 1982 19
Premiums Law 19
JFTC Notification of 1965 21
JFTC Notification 17 of 1967 21
JFTC Notification 34 of 1973 (origin) 22
JFTC Notification 3 of 1977 23
JFTC Notification 5 of 1977 24
JFTC guidance 24
1981 JFTC guidance on dispatched employees 24
1983 JFTC guidance on advertising rules 24
COUNCILS AND ASSOCIATIONS 25
Fair Trade Promotion Council 25
1982 Self-Regulation Measures (dispatch of employees
and promotional money) 25
1984 Self-Regulating Standards (developing fees) . . . 26
Retailers Council and 1987 Retailers Code 27
Chambers of Commerce and Industry 27
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SUMMARY OF CLAIMS AND PROCEDURAL OBJECTIONS 28
EVOLUTION OF THE US CLAIMS 28
PROCEDURAL OBJECTIONS 30
THE REQUEST FOR CONSULTATIONS AND THE CONSULTATIONS 31
THE REQUEST FOR THE ESTABLISHMENT OF THE PANEL 36
Adequate notice 38
Related measures 39
Nature of the measures 41
SUMMARY OF ARGUMENTS 42
DISTRIBUTION "COUNTERMEASURES" 42
LARGE STORES LAW 44
PROMOTION "COUNTERMEASURES" 45
THE COMBINED EFFECT OF THE THREE SETS OF MEASURES 46
FACTUAL ARGUMENTS OF THE PARTIES 48
DISTRIBUTION "COUNTERMEASURES" 48
OVERVIEW 48
DEVELOPMENT OF THE JAPANESE FILM MARKET 49
NEED FOR PRIMARY WHOLESALERS IN THE JAPANESE FILM MARKET 55
The US allegations about the market situation in the film distribution sector 55
No government obstacles to use or creation of primary wholesalers 56
The role of Nagase and Kodak Japan 59
Single brand distribution does not impede access of imports 60
The market for paper 62
Other film markets 64
THE RESTRUCTURING OF THE JAPANESE FILM DISTRIBUTION SECTOR 64
The origin of MITI' s distribution policies in the early
1960s 64
The 1967 Cabinet Decision 67
The 1968 Sixth Interim Report 68
The 1969 Seventh Interim Report and the Distribution Systemization Promotion Council 69
The 1971 Basic Plan 72
Vertical integration 72
Single-brand distribution 73
THE STANDARDIZATION OF TRANSACTION TERMS 75
Introduction 75
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1970 Guidelines 78
Impact of the Guidelines 80
Timing 83
1990 Guidelines 84
OTHER DISTRIBUTION "COUNTERMEASURES" 86
JFTC Notification 17 86
International contract notification 87
SYSTEMIZATION: PHYSICAL AND INFORMATION LINKS 89
Physical links and the 1975 Manual 89
Information links 91
MITI/SMEA support for systemization 93
POST-1975 DEVELOPMENTS 95
LARGE STORES LAW 97
INTRODUCTION 97
LARGE STORES AND IMPORTS 99
Import-friendliness of large stores 99
Large stores and direct sales from manufacturers 101
Large stores and imported film 102
BACKGROUND AND PURPOSE OF THE LARGE STORES LAW . . . 105
PROCEDURES UNDER THE LARGE STORES LAW 109
EVOLUTION OF THE REGULATION OF LARGE STORES 111
Department Stores Law 111
Enactment of the Large Stores Law 113
1979 Revisions to the Large Stores Law 114
1982 Administrative measures under the Large Stores Law . . 115
Restrictions on acquisitions 116
Changes to the law since 1990 117
FORMAL AND INFORMAL ADJUSTMENTS 119
Adjustments under formal procedures 119
Continued effect of local measures 121
Informal procedures under the Large Stores Law 123
"Prior explanations " 123
"Local explanations " 124
Large Store Council Review 125
IMPACT OF FLOOR SPACE ADJUSTMENTS AND RESTRICTIONS
ON OPERATION ON THE GROWTH OF LARGE STORES 126
PROMOTION "COUNTERMEASURES" 130
INTRODUCTION 130
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
The Antimonopoly Law 131
The Premiums Law 133
Background and objective 134
Substantive provisions 136
Enforcement 138
Exemptions from the Antimonopoly Law 140
INITIAL IMPLEMENTATION OF THE ANTIMONOPOLY AND PREMIUMS LAW 140
GENESIS OF THE PROMOTION "COUNTERMEASURES" 142
POST-KENNEDY ROUND PROMOTION "COUNTERMEASURES" . . 145
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JFTC Notification 17 of 1967 (premiums to businesses) 145
1967 Cabinet Decision (guidance on fair competition
codes) 147
JFTC Notification 34 of 1971 (open lotteries) 150
JFTC Notification 34 of 1973 (country of origin of goods) . . 150
JFTC Notification 3 of 1977 ("closed" prizes) 152
JFTC Notification 5 of 1977 (premiums to consumers) 152
POST-TOKYO ROUND PROMOTION "COUNTERMEASURES" . . . 153
JFTC guidance on the use of dispatched employees 153
1982 Self-Regulating Measures (dispatch of employees) and
the Promotion Council 154
JFTC guidance on dumping and loss-leader advertising 157
1984 Self-Regulating Standards (developing fees) 157
JFTC approval of 1987 Retailers Code and Retailers Council 158
SUBSEQUENT ENFORCEMENT 162
LEGAL ARGUMENTS CONCERNING NON-VIOLATION CLAIMS 164
INTRODUCTION TO ARTICLE XXIII:1(b) OF GATT 164
GENERAL PRINCIPLES 164
THE LEGAL TEST UNDER ARTICLE XXIII:1(b) 165
SYSTEMIC IMPLICATIONS FOR WTO DISPUTE SETTLEMENT . . . 169
REMEDIES 174
RELEVANT TARIFF CONCESSIONS 175
GENERAL CONSIDERATIONS 175
PAST GATT PANEL REPORTS 177
THE TYPES OF TARIFF NEGOTIATIONS UNDER GATT 179
Article XXVIII 179
Article XXIV:6 180
Article XXVIIIbis 181
THE INCORPORATION CLAUSE OF GATT 1994 183
CERTIFICATION OF MODIFICATIONS AND RECTIFICATIONS . . . 185
CONCLUSIONS 186
GOVERNMENTAL MEASURES 187
THE LEGAL TEST 187
Administrative guidance 188
Past GATT panel reports 190
Governmental attributability of measures 193
Measures "applied" and measures "in effect" 195
Measures and market structure 198
DISTRIBUTION "COUNTERMEASURES" 199
Attributability to the government 200
1970 Guidelines: background, publication and follow-
up 202
1975 Manual 208
Current effectiveness 209
Reports, surveys, plans and manuals 209
JDB/SMEA funding and international contract notification 209
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1967 JFTC Notification 17 . . . . . . . . . . . . . . . (iv) 1967 Cabinet Decision . . . . . . . . . . . . . . . . . .
(v) 1970 Guidelines and 1990 Guidelines . . . . . . . . (vi) Conclusions . . . . . . . . . . . . . . . . . . . . . . . .
PROMOTION "COUNTERMEASURES" . . . . . . . . . . . . . . . . .
(a) The Councils and Codes . . . . . . . . . . . . . . . . . . . . . .
Manufacturers' Council . . . . . . . . . . . . . . . . .
Wholesalers' Council . . . . . . . . . . . . . . . . . . .
Promotion Council . . . . . . . . . . . . . . . . . . . .
(iv) Retailers' Council . . . . . . . . . . . . . . . . . . . . .
(v) Federation of Fair Trade Councils . . . . . . . . . .
Attributability to the government . . . . . . . . . . . . . . . .
Fair Competition Codes . . . . . . . . . . . . . . . . .
Fair Trade Councils . . . . . . . . . . . . . . . . . . . (iii) Conclusions . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . .
OVERVIEW OF THE IMPACT OF SPECIFIC MEASURES ON THE COMPETITIVE POSITION OF IMPORTS . . . . . . . . . . . . . . . .
DISTRIBUTION "COUNTERMEASURES" . . . . . . . . . . . . . . .
Evolutionofsystemization, rationalization and standardization of distribution policies . . . . . . . . . . . . . . . . . . . . . .
Objectives underlying the introduction of transaction terms
Competitive position of imported products . . . . . . . . . .
1970 Guidelines and transaction terms . . . . . . . .
1970 Guidelines and progressive rebates . . . . . .
1970 Guidelines and single-brand distribution . . .
Other distribution measures . . . . . . . . . . . . . . .
Black and white film and paper . . . . . . . . . . . .
Causal connection between distribution measures and competitive position of imports . . . . . . . . . . . . . . . . .
Introduction of transaction terms . . . . . . . . . .
Introduction of single-brand distribution . . . . . .
Governmental endorsement of private actions . . .
Downstream standardization . . . . . . . . . . . . . .
Uniformity and standardization . . . . . . . . . . . .
Financing for rationalization, systemization and standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JDB funding for joint distribution facilities . . . . .
SMEA loans to photoprocessing laboratories . . . .
Electronic information links . . . . . . . . . . . . . . . . . . .
Current competitive position of imports . . . . . . . . . . .
Primary and secondary wholesale channels . . . . .
Current market structure in the distribution system
Vertically integrated distribution system . . . . . . .
Alternative distribution policies . . . . . . . . . . . .
Change in distribution policies . . . . . . . . . . . . . . . . . .
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1990 Guidelines 270
Business Reform Law 270
RESTRICTIONS ON LARGE RETAIL STORES 271
General overview of the allegations 271
Effect of the Large Stores Law on imported products 274
Causal connection 277
Change in policies or continued restrictions of large stores . . 279 (e) Conclusions 282
PROMOTION "COUNTERMEASURES" 283
General overview 283
JFTC Notifications under the Premiums Law 284
Competitive position of imports 284
Objectives under lying the pr omotion "countermeasures" 286
Causal connection 288
Change in policies 289
Fair Trade Councils and Fair Competition Codes 290
Promotion Council 291
Retailers' Council 292
Coverage of photographic materials 293
Conclusions 294
REASONABLE ANTICIPATION 295
THE LEGAL TEST 295
SPECIFIC NEGOTIATING ROUNDS ON TARIFF CONCESSIONS . . 301 (a) General overview 301
Kennedy Round 302
Distribution "countermeasures" 303
Restrictions on large stores 305
Promotion "countermeasures" 305
Tokyo Round 306
Distribution "countermeasures" 306
Restrictions on large stores 307
Promotion "countermeasures" 309
Uruguay Round 311
Distribution "countermeasures" 312
Restrictions on large stores 313
Promotion "countermeasures" 315
THE COMBINED EFFECT OF THE THREE SETS OF MEASURES 317
LEGAL ARGUMENTS CONCERNING VIOLATION CLAIMS 321
ARTICLE III OF GATT 321
1. INTRODUCTION 321
ARTICLE III:1 323
ARTICLE III:4 325
"Laws, regulations or requirements" within the scope of
Article III:4 325
The legal test 325
Japan' s "administrative guidance" in the light of GATT precedents 327
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Are specific distribution measures "laws, regulations
and requirements"? 329
Measures "no longer in effect" 330
"Less favourable treatment" in the meaning of Article III:4 . . 332 (i) The legal test 332
"Less favourable treatment" based on product origin
or product characteristics 334
Impact on competitive conditions for imported film
and paper 336
Causal connection 337
Causation of market structure by governmental measures or
private practices 339
Conclusions 341
ARTICLE X OF GATT 342
INTRODUCTION 342
THE LEGAL TEST 343
"Laws, regulations, judicial decisions or administrative rulings" 343
MEASURES TAKEN IN THE CONTEXT OF THE PREMIUMS
LAW 345
Premiums Law enforcement actions 345
Actions under "Fair Competition Codes" 347
Requests for information and disclosure of confidential information 348
MEASURES TAKEN IN THE CONTEXT OF THE LARGE STORES
LAW 349
MITI' s "prior explanation" procedures 349
"Local explanation" procedures 349
Specific examples: The MCA and JFTC studies 351
Administrative rulings "made effective" 353
"Affecting the sale or distribution of imports" 353
5. CONCLUSIONS 354
ARGUMENTS OF THIRD PARTIES 355
THE EUROPEAN COMMUNITIES 355
FACTUAL ASPECTS 356
LEGAL ASPECTS 358
ARGUMENTS IN REPLY BY JAPAN 361
MEXICO 362
INTERIM REVIEW 364
FINDINGS 370
PRELIMINARY ISSUES 370
SPECIFICITY OF THE "MEASURES" IDENTIFIED IN THE PANEL REQUEST 371
Article 6.2 and the request for establishment of the Panel . . . 371
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Analysis of Article 6.2 372
The eight "measures" in light of Article 6.2 374
SUMMARY 376
CLAIMS OF THE PARTIES 377
SEQUENCE OF CLAIMS TO BE ADDRESSED 378
BURDEN OF PROOF 378
ARTICLE XXIII:1(B) - NON-VIOLATION NULLIFICATION OR IMPAIRMENT 380
OVERVIEW OF THE NON-VIOLATION REMEDY 380
THREE REQUIRED ELEMENTS 382
Application of a measure 383
General considerations 383
Governmental versus private actions 385
Measure versus continuing effect 386
Summary 387
Benefit accruing under the GATT 387
Benefits under successive Rounds 388
Legitimate expectations of a benefit 391
Nullification or impairment of benefit: causality 394
DISTRIBUTION "MEASURES" 396
General 396
1967 Cabinet Decision 397
1967 JFTC Notification 17 on premiums to businesses 400
1968 Sixth Interim Report 403
1969 Seventh Interim Report 407
1969 Survey Report on Transaction Terms 411
1970 Guidelines for Rationalizing Terms of Trade for Photographic Film 413
1971 Basic Plan for the Systemization of Distribution 418
1975 Manual for Systemization of Distribution by Industry: Camera and Film 421
Concluding observations on distribution "measures" 425
RESTRICTIONS ON LARGE RETAIL STORES 426
PROMOTION "MEASURES" 432
1967 Cabinet Decision 433
1967 JFTC Notification 17 on premiums to business 437
1977 JFTC Notification 5 on premium offers to consumers . . 440
1981 JFTC Guidance on Dispatched Employees 443
1982 Self-Regulating Measures on Fairness In Trade and Establishment of the Fair Trade Promotion Council 446
1984 Self-Regulating Standards 452
1987 The Retailers Fair Competition Code and the Retailers Council 454
Concluding observations on promotion "measures" 462
COMBINED EFFECTS 462
ARTICLE III:4 - NATIONAL TREATMENT IN RESPECT OF LAWS, REGULATIONS AND REQUIREMENTS 467
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Laws, regulations or requirements 468
No less favourable treatment 470
ARTICLE X:1 - PUBLICATION OF ADMINISTRATIVE RULINGS OF GENERAL APPLICATION 471
GENERAL CONSIDERATIONS ON THE LEGAL TEST UNDER ARTICLE X:1 472
"MEASURES" TAKEN IN THE CONTEXT OF THE PREMIUMS
LAW 473
Premiums Law enforcement actions 473
Actions under "Fair Competition Codes" 474
"MEASURES" TAKEN IN THE CONTEXT OF THE LARGE STORES
LAW 475
CONCLUSIONS 476
ANNEX ON TRANSLATION PROBLE. M. .S 477
LIST OF TRANSLATION ISSUES 477
APPENDIX TO TRANSLATION ISSUE 16 485
APPENDIX TO TRANSLATION ISSUE 19 492
RESPONSES BY THE TRANSLATION EXPERTS 492