WORLD TRADE WT/DS44/R
31March 1998
ORGANIZATION(98-0886)
Original: English
Japan -Measures Affecting
Consumer Photographic Film andPaper
Report ofthePanel
Thereport ofthePanel onJapan -Measures Affecting Consumer Photographic FilmandPaper isbeing
circulated toallMembers, pursuant totheDSU. Thereport isbeing circulated asanunrestricted
document from 20March 1998 pursuant totheProcedures fortheCirculation andDerestriction of
WTO Documents (WT/L/160/Rev.1). Members arereminded thatinaccordance withtheDSU only
parties tothedispute mayappeal apanel report, anappeal shallbelimited toissues oflawcovered
inthepanel report andlegalinterpretations developed bythepanel, andthatthereshallbenoexparte
communications withthepanel orAppellate Body concerning matters under consideration bythepanel
orAppellate Body.
NotebytheSecretariat: ThisPanel Report shallbeadopted bytheDispute Settlement Body (DSB) within 60daysafterthedateofitscirculation
unless aparty tothedispute decides toappeal ortheDSBdecides byconsensus nottoadopt thereport. IfthePanel Report isappealed
totheAppellate Body, itshallnotbeconsidered foradoption bytheDSBuntilafterthecompletion oftheappeal. Information onthecurrent
status ofthePanel Report isavailable from theWTO Secretariat.WT/DS44/R
Pagei
TABLE OFCONTENTS
PAGE
I. PROCEDURAL HISTORY ....................................1
II. SUMMARY OFFACTUAL ASPECTS ............................4
A. THE MARKET FOR PHOTOGRAPHIC FILM AND PAPER INJAPAN ..4
B. JAPANESE ENTITIES AND MEASURES RELATED TOTHE US
CLAIMS ...........................................5
1. 1967 CABINET DECISION ...........................5
2. MITI AND RELATED ITEMS ..........................8
(a) IndustrialStructureCouncilDistributionCommittee:Sixthand
Seventh Interim Reports ........................8
(i) The1968 Sixth Interim Report ...............9
(ii) The1969 Seventh Interim Report .............10
(b) 1969 Survey onTransaction Terms .................11
(c) 1970 Guidelines forRationalizing Terms ofTrade for
Photographic Film ...........................12
(d) 1971Basic PlanoftheDistribution Systemization Promotion
Council ..................................14
(e) 1975Manual oftheDistribution Systemization Development
Centre ...................................15
(f) Large Stores Law ............................16
(g) Japan Development Bank andtheSmall andMedium-Sized
Enterprise Agency ...........................17
3. JFTC .........................................17
(a) Antimonopoly Law ...........................18
(i) JFTC RuleNo.1under Article 6oftheAntimonopoly
Law ...............................18
(ii) JFTC Notification 34of1971 (open lotteries) .....18
(iii) JFTC Notification 15of1982 ...............19
(b) Premiums Law .............................19
(i) JFTC Notification of1965 .................21
(ii) JFTC Notification 17of1967 ...............21
(iii) JFTC Notification 34of1973 (origin) .........22
(iv) JFTC Notification 3of1977 ................23
(v) JFTC Notification 5of1977 ................24
(c) JFTC guidance .............................24
(i) 1981 JFTC guidance ondispatched employees .....24
(ii) 1983 JFTC guidance onadvertising rules ........24
4. COUNCILS AND ASSOCIATIONS ......................25
(a) FairTrade Promotion Council ....................25
(i) 1982Self-RegulationMeasures(dispatchofemployees
andpromotional money) ...................25
(ii) 1984 Self-Regulating Standards (developing fees) ...26
(b) Retailers Council and1987 Retailers Code ............27
(c) Chambers ofCommerce andIndustry ...............27WT/DS44/R
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III. SUMMARY OFCLAIMS AND PROCEDURAL OBJECTIONS ...........28
A. EVOLUTION OFTHE USCLAIMS .........................28
B. PROCEDURAL OBJECTIONS .............................30
1. THEREQUESTFORCONSULTATIONSANDTHE
CONSULTATIONS ................................31
2. THEREQUEST FORTHEESTABLISHMENT OFTHEPANEL ....36
(a) Adequate notice .............................38
(b) Related measures ............................39
(c) Nature ofthemeasures ........................41
IV. SUMMARY OFARGUMENTS .................................42
A. DISTRIBUTION "COUNTERMEASURES" .....................42
B. LARGE STORES LAW ..................................44
C. PROMOTION "COUNTERMEASURES" ......................45
D. THE COMBINED EFFECT OFTHE THREE SETS OFMEASURES ....46
V. FACTUAL ARGUMENTS OFTHE PARTIES .......................48
A. DISTRIBUTION "COUNTERMEASURES" .....................48
1. OVERVIEW ....................................48
2. DEVELOPMENT OFTHEJAPANESE FILM MARKET .........49
3. NEED FOR PRIMARY WHOLESALERS INTHEJAPANESE FILM
MARKET ......................................55
(a) TheUSallegations about themarket situation inthefilm
distribution sector ............................55
(b) Nogovernment obstacles touseorcreation ofprimary
wholesalers ................................56
(c) TheroleofNagase andKodak Japan ................59
(d) Single brand distribution does notimpede access of
imports ..................................60
(e) Themarket forpaper ..........................62
(f) Other filmmarkets ...........................64
4. THERESTRUCTURING OFTHEJAPANESE FILM DISTRIBUTION
SECTOR ......................................64
(a) Theorigin ofMITI'sdistribution policies intheearly
1960s ...................................64
(b) The1967 Cabinet Decision ......................67
(c) The1968 Sixth Interim Report ....................68
(d) The1969 Seventh Interim Report andtheDistribution
Systemization Promotion Council .................69
(e) The1971 Basic Plan ..........................72
(f) Vertical integration ...........................72
(g) Single-brand distribution .......................73
5. THESTANDARDIZATION OFTRANSACTION TERMS .........75
(a) Introduction ...............................75WT/DS44/R
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(b) 1970 Guidelines .............................78
(i) Impact oftheGuidelines ...................80
(ii) Timing .............................83
(c) 1990 Guidelines .............................84
6. OTHER DISTRIBUTION "COUNTERMEASURES" ............86
(a) JFTC Notification 17..........................86
(b) International contract notification ..................87
7. SYSTEMIZATION: PHYSICAL AND INFORMATION LINKS ......89
(a) Physical links andthe1975 Manual ................89
(b) Information links ............................91
(c) MITI/SMEA support forsystemization ..............93
8. POST-1975 DEVELOPMENTS .........................95
B. LARGE STORES LAW ..................................97
1. INTRODUCTION .................................97
2. LARGE STORES AND IMPORTS .......................99
(a) Import-friendliness oflarge stores ..................99
(b) Large stores anddirect salesfrom manufacturers ........101
(c) Large stores andimported film ...................102
3. BACKGROUND AND PURPOSE OFTHELARGE STORES LAW ...105
4. PROCEDURES UNDER THELARGE STORES LAW ...........109
5. EVOLUTION OFTHEREGULATION OFLARGE STORES .......111
(a) Department Stores Law ........................111
(b) Enactment oftheLarge Stores Law.................113
(c) 1979 Revisions totheLarge Stores Law..............114
(d) 1982 Administrative measures under theLarge Stores Law ..115
(e) Restrictions onacquisitions ......................116
(f) Changes tothelawsince 1990 ....................117
6. FORMAL AND INFORMAL ADJUSTMENTS ................119
(a) Adjustments under formal procedures ...............119
(b) Continued effect oflocalmeasures .................121
(c) Informal procedures under theLarge Stores Law ........123
(i) "Prior explanations" .....................123
(ii) "Local explanations" .....................124
(iii) Large Store Council Review ................125
7. IMPACT OFFLOOR SPACE ADJUSTMENTS ANDRESTRICTIONS
ONOPERATION ONTHEGROWTH OFLARGE STORES .......126
C. PROMOTION "COUNTERMEASURES" ......................130
1. INTRODUCTION .................................130
2. THELAWSUNDERLYINGTHEPROMOTION
"COUNTERMEASURES" ............................131
(a) TheAntimonopoly Law ........................131
(b) ThePremiums Law...........................133
(i) Background andobjective ..................134
(ii) Substantive provisions ....................136
(iii) Enforcement ..........................138
(iv) Exemptions from theAntimonopoly Law ........140
3. INITIAL IMPLEMENTATION OFTHE ANTIMONOPOLY AND
PREMIUMS LAW .................................140
4. GENESIS OFTHEPROMOTION "COUNTERMEASURES" ......142
5. POST-KENNEDY ROUND PROMOTION "COUNTERMEASURES" ..145WT/DS44/R
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(a) JFTC Notification 17of1967 (premiums tobusinesses) ....145
(b) 1967 Cabinet Decision (guidance onfaircompetition
codes) ...................................147
(c) JFTC Notification 34of1971 (open lotteries) ..........150
(d) JFTC Notification 34of1973 (country oforigin ofgoods) ..150
(e) JFTC Notification 3of1977 ("closed" prizes) ..........152
(f) JFTC Notification 5of1977 (premiums toconsumers) ....152
6. POST-TOKYO ROUND PROMOTION "COUNTERMEASURES" ...153
(a) JFTC guidance ontheuseofdispatched employees .......153
(b) 1982 Self-Regulating Measures (dispatch ofemployees) and
thePromotion Council .........................154
(c) JFTC guidance ondumping andloss-leader advertising ....157
(d) 1984 Self-Regulating Standards (developing fees) ........157
(e) JFTC approval of1987 Retailers Code andRetailers
Council ..................................158
7. SUBSEQUENT ENFORCEMENT .......................162
VI. LEGAL ARGUMENTS CONCERNING NON-VIOLATION CLAIMS .......164
A. INTRODUCTION TOARTICLE XXIII:1(b) OFGATT .............164
1. GENERAL PRINCIPLES ............................164
2. THELEGAL TEST UNDER ARTICLE XXIII:1(b) .............165
3. SYSTEMIC IMPLICATIONS FORWTO DISPUTE SETTLEMENT ...169
4. REMEDIES .....................................174
B. RELEVANT TARIFF CONCESSIONS ........................175
1. GENERAL CONSIDERATIONS ........................175
2. PAST GATT PANEL REPORTS ........................177
3. THETYPES OFTARIFF NEGOTIATIONS UNDER GATT ........179
(a) Article XXVIII .............................179
(b) Article XXIV:6 .............................180
(c) Article XXVIII bis............................181
4. THEINCORPORATION CLAUSE OFGATT 1994 ............183
5. CERTIFICATION OFMODIFICATIONS AND RECTIFICATIONS ...185
6. CONCLUSIONS ..................................186
C. GOVERNMENTAL MEASURES ...........................187
1. THELEGAL TEST ................................187
(a) Administrative guidance ........................188
(b) PastGATT panel reports .......................190
(c) Governmental attributability ofmeasures .............193
(d) Measures "applied" andmeasures "ineffect" ...........195
(e) Measures andmarket structure ....................198
2. DISTRIBUTION "COUNTERMEASURES" .................199
(a) Attributability tothegovernment ..................200
(i) 1970Guidelines: background, publication andfollow-
up................................202
(ii) 1975 Manual ..........................208
(b) Current effectiveness ..........................209
(i) Reports, surveys, plans andmanuals ...........209
(ii) JDB/SMEA funding and international contract
notification ...........................209WT/DS44/R
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(iii) 1967 JFTC Notification 17.................209
(iv) 1967 Cabinet Decision ....................210
(v) 1970 Guidelines and1990 Guidelines ..........210
(vi) Conclusions ..........................213
3. PROMOTION "COUNTERMEASURES" ...................215
(a) TheCouncils andCodes ........................215
(i) Manufacturers 'Council ...................216
(ii) Wholesalers 'Council .....................216
(iii) Promotion Council ......................217
(iv) Retailers 'Council .......................218
(v) Federation ofFairTrade Councils ............219
(b) Attributability tothegovernment ..................220
(i) FairCompetition Codes ...................220
(ii) FairTrade Councils .....................221
(iii) Conclusions ..........................223
D. UPSETTING THE COMPETITIVE POSITION OF IMPORTED
PRODUCTS .........................................226
1. THELEGAL TEST ................................226
(a) Measures, trade effects andmarket structure ...........228
(b) Causal connection ............................232
(c) Relevance ofthetimeofthetariff concession ..........234
2. OVERVIEW OFTHEIMPACT OFSPECIFIC MEASURES ONTHE
COMPETITIVE POSITION OFIMPORTS ..................235
3. DISTRIBUTION "COUNTERMEASURES" .................238
(a) Evolution ofsystemization, rationalization andstandardization
ofdistribution policies ........................239
(b) Objectives underlying theintroduction oftransaction terms .241
(c) Competitive position ofimported products ............244
(i) 1970 Guidelines andtransaction terms ..........244
(ii) 1970 Guidelines andprogressive rebates ........246
(iii) 1970 Guidelines andsingle-brand distribution .....248
(iv) Other distribution measures .................250
(v) Black andwhite filmandpaper ..............250
(d) Causal connection between distribution measures and
competitive position ofimports ...................251
(i) Introduction oftransaction terms ............252
(ii) Introduction ofsingle-brand distribution ........253
(iii) Governmental endorsement ofprivate actions .....255
(iv) Downstream standardization ................255
(v) Uniformity andstandardization ..............256
(e) Financingforrationalization,systemizationand
standardization ..............................257
(i) JDBfunding forjointdistribution facilities .......257
(ii) SMEA loans tophotoprocessing laboratories ......258
(f) Electronic information links .....................260
(g) Current competitive position ofimports .............263
(i) Primary andsecondary wholesale channels .......264
(ii) Current market structure inthedistribution system .265
(iii) Vertically integrated distribution system .........267
(iv) Alternative distribution policies ..............268
(h) Change indistribution policies ....................269WT/DS44/R
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(i) 1990 Guidelines ........................270
(ii) Business Reform Law ....................270
4. RESTRICTIONS ONLARGE RETAIL STORES ...............271
(a) General overview oftheallegations .................271
(b) Effect oftheLarge Stores Lawonimported products .....274
(c) Causal connection ............................277
(d) Change inpolicies orcontinued restrictions oflarge stores ..279
(e) Conclusions ...............................282
5. PROMOTION "COUNTERMEASURES" ...................283
(a) General overview ............................283
(b) JFTC Notifications under thePremiums Law...........284
(i) Competitive position ofimports ..............284
(ii) Objectivesunderlyingthepromotion
"countermeasures" ......................286
(iii) Causal connection .......................288
(iv) Change inpolicies ......................289
(c) FairTrade Councils andFairCompetition Codes ........290
(i) Promotion Council ......................291
(ii) Retailers 'Council .......................292
(iii) Coverage ofphotographic materials ............293
(d) Conclusions ...............................294
E. REASONABLE ANTICIPATION ...........................295
1. THELEGAL TEST ................................295
2. SPECIFIC NEGOTIATING ROUNDS ONTARIFF CONCESSIONS ..301
(a) General overview ............................301
(b) Kennedy Round .............................302
(i) Distribution "countermeasures" ..............303
(ii) Restrictions onlarge stores .................305
(iii) Promotion "countermeasures" ...............305
(c) Tokyo Round ..............................306
(i) Distribution "countermeasures" ..............306
(ii) Restrictions onlarge stores .................307
(iii) Promotion "countermeasures" ...............309
(d) Uruguay Round .............................311
(i) Distribution "countermeasures" ..............312
(ii) Restrictions onlarge stores .................313
(iii) Promotion "countermeasures" ...............315
F. THE COMBINED EFFECT OFTHE THREE SETS OFMEASURES ....317
VII. LEGAL ARGUMENTS CONCERNING VIOLATION CLAIMS ..........321
A. ARTICLE IIIOFGATT .................................321
1. INTRODUCTION .................................321
2. ARTICLE III:1 ..................................323
3. ARTICLE III:4 ..................................325
(a) "Laws, regulations orrequirements" within thescope of
Article III:4 ...............................325
(i) Thelegaltest..........................325
(ii) Japan's"administrativeguidance"inthelightofGATT
precedents ...........................327WT/DS44/R
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(iii) Arespecific distribution measures "laws, regulations
andrequirements"? ......................329
(iv) Measures "nolonger ineffect" ...............330
(b) "Less favourable treatment" inthemeaning ofArticle III:4..332
(i) Thelegaltest..........................332
(ii) "Less favourable treatment" based onproduct origin
orproduct characteristics ..................334
(iii) Impact oncompetitive conditions forimported film
andpaper ............................336
(iv) Causal connection .......................337
(c) Causation ofmarket structure bygovernmental measures or
private practices .............................339
(d) Conclusions .............................341
B. ARTICLE XOFGATT ..................................342
1. INTRODUCTION .................................342
2. THELEGAL TEST ................................343
(a) "Laws, regulations, judicial decisions oradministrative
rulings" ..................................343
3. MEASURES TAKEN INTHE CONTEXT OFTHE PREMIUMS
LAW .........................................345
(a) Premiums Lawenforcement actions ................345
(b) Actions under "Fair Competition Codes" .............347
(c) Requests forinformation anddisclosure ofconfidential
information ................................348
4. MEASURES TAKEN INTHECONTEXT OFTHELARGE STORES
LAW .........................................349
(a) MITI's"prior explanation" procedures ..............349
(b) "Local explanation" procedures ...................349
(c) Specific examples: TheMCA andJFTC studies ........351
(d) Administrative rulings "made effective" ..............353
(e) "Affecting thesaleordistribution ofimports" ..........353
5. CONCLUSIONS ..................................354
VIII. ARGUMENTS OFTHIRD PARTIES .............................355
A. THE EUROPEAN COMMUNITIES .........................355
1. FACTUAL ASPECTS ...............................356
2. LEGAL ASPECTS .................................358
3. ARGUMENTS INREPLY BYJAPAN .....................361
B. MEXICO ...........................................362
IX. INTERIM REVIEW ........................................364
X. FINDINGS ...............................................370
A. PRELIMINARY ISSUES .................................370
1. SPECIFICITY OFTHE"MEASURES" IDENTIFIED INTHEPANEL
REQUEST .....................................371
(a) Article 6.2andtherequest forestablishment ofthePanel ...371WT/DS44/R
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(b) Analysis ofArticle 6.2.........................372
(c) Theeight "measures" inlightofArticle 6.2...........374
2. SUMMARY .....................................376
B. CLAIMS OFTHE PARTIES ..............................377
C. SEQUENCE OFCLAIMS TOBEADDRESSED .................378
D. BURDEN OFPROOF ...................................378
E. ARTICLE XXIII:1(B) -NON-VIOLATION NULLIFICATION OR
IMPAIRMENT .......................................380
1. OVERVIEW OFTHENON-VIOLATION REMEDY ............380
2. THREE REQUIRED ELEMENTS .......................382
(a) Application ofameasure .......................383
(i) General considerations ....................383
(ii) Governmental versus private actions ...........385
(iii) Measure versus continuing effect .............386
(iv) Summary ............................387
(b) Benefit accruing under theGATT ..................387
(i) Benefits under successive Rounds .............388
(ii) Legitimate expectations ofabenefit ............391
(c) Nullification orimpairment ofbenefit: causality .........394
3. DISTRIBUTION "MEASURES" ........................396
(a) General ..................................396
(b) 1967 Cabinet Decision ........................397
(c) 1967 JFTC Notification 17onpremiums tobusinesses .....400
(d) 1968 Sixth Interim Report ......................403
(e) 1969 Seventh Interim Report ....................407
(f) 1969 Survey Report onTransaction Terms ............411
(g) 1970 Guidelines forRationalizing Terms ofTrade for
Photographic Film ...........................413
(h) 1971 Basic PlanfortheSystemization ofDistribution .....418
(i) 1975 Manual forSystemization ofDistribution byIndustry:
Camera andFilm ............................421
(j) Concluding observations ondistribution "measures" ......425
4. RESTRICTIONS ONLARGE RETAIL STORES ..............426
5. PROMOTION "MEASURES" ..........................432
(a) 1967 Cabinet Decision .........................433
(b) 1967 JFTC Notification 17onpremiums tobusiness ......437
(c) 1977 JFTC Notification 5onpremium offers toconsumers ..440
(d) 1981 JFTC Guidance onDispatched Employees .........443
(e) 1982 Self-Regulating Measures onFairness InTrade and
Establishment oftheFairTrade Promotion Council ......446
(f) 1984 Self-Regulating Standards ...................452
(g) 1987 TheRetailers FairCompetition Code andtheRetailers
Council ..................................454
(h) Concluding observations onpromotion "measures" .......462
6. COMBINED EFFECTS .............................462
F. ARTICLE III:4-NATIONAL TREATMENT INRESPECT OFLAWS,
REGULATIONS AND REQUIREMENTS ......................467WT/DS44/R
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(a) Laws, regulations orrequirements .................468
(b) Nolessfavourable treatment .....................470
G. ARTICLE X:1-PUBLICATION OFADMINISTRATIVE RULINGS OF
GENERAL APPLICATION ...............................471
1. GENERAL CONSIDERATIONS ONTHE LEGAL TEST UNDER
ARTICLE X:1 ...................................472
2. "MEASURES" TAKEN INTHE CONTEXT OFTHE PREMIUMS
LAW .........................................473
(a) Premiums Lawenforcement actions ................473
(b) Actions under "Fair Competition Codes" .............474
3. "MEASURES" TAKEN INTHECONTEXT OFTHELARGE STORES
LAW .........................................475
H. CONCLUSIONS ......................................476
XI. ANNEX ONTRANSLATION PROBLEMS .............................477
A. LIST OFTRANSLATION ISSUES ..........................477
1. APPENDIX TOTRANSLATION ISSUE 16..................485
2. APPENDIX TOTRANSLATION ISSUE 19..................492
B. RESPONSES BYTHE TRANSLATION EXPERTS ...............492