Japan Taxis Run Into Fewer Curbs

The Osaka District Court dealt a rare blow Thursday to what is known in Japan as “administrative guidance” by ruling that the Transportation Ministry acted illegally in refusing to allow a Kyoto taxi company to lower its fares.

All government ministries in charge of business activities in Japan exercise broad powers that enable them, without specific legal authority, to force businessmen to adhere to government-fixed guidelines in such areas as prices, production levels, investments and acquisition of raw materials.

This so-called guidance is not exercised as widely as it once was, but it continues in service industries and depressed industries, many of which are of interest to potential American exporters. And it is used to enforce “voluntary export restraints” for some of Japan’s most prosperous industries, among them the automotive and electronics industries.

Thursday’s court ruling was the first challenge ever to a 34-year-old Transportation Ministry policy of enforcing uniform regional taxi fares.

The firm involved, MK Taxi Co., the second largest in Kyoto with 450 cabs, brought suit in 1982 after the ministry had rejected its request for permission to lower fares 12.6% to the level that was in effect before 1981, when a general increase became effective.

No taxi firm had ever before asked for a decrease in fares, and the government rejected the request on grounds that lower fares for one company would lead to “unfair competition.”

Politicians, bureaucrats and businessmen here all use the term unfair competition to mean simply competition, and laws banning unfair competition are often enforced to control or outlaw competition.

The MK firm argued that the ministry’s policy was designed to protect taxi company owners at the expense of customers and that, moreover, it had no basis in law.

Judge Isamu Goto agreed, ruling that the ministry’s policy of uniform fares amounted to “a form of cartel,” in violation of the Highway Transportation Law, which outlaws only “unfair competition.” Goto said “there is a suspicion that it (the ministry policy) may violate the anti-monopoly law” as well.

“It cannot be said that there is a danger of unfair competition occurring if different fares exist in the same region,” he ruled.

The ministry immediately announced that it will appeal the ruling. Meanwhile, the ban on fare reduction remains in force unless the taxi firm seeks an injunction.

If upheld, the ruling will have considerable impact. More than 7,300 taxi companies and another 47,000 individual cab owners operate 250,000 taxis in Japan, 40,000 of them in Tokyo. Fares are enforced uniformly in 77 separate regions.

The ministry enforces similar competition-inhibiting rules for buses, airplanes, shipping and trucking.

The rebellion by MK Taxi has already made itself felt. When taxi fares were raised in February, 1984, in all other major cities, the Transportation Ministry refrained from approving a fare increase in Kyoto. MK Taxi Co. and its two affiliated firms bolted the Kyoto Passenger Car Assn., a regional body of taxi owners, and refused to join 45 other Kyoto firms in requesting the 1984 fare increase.

In other major cities, including Tokyo, the basic fare was raised to 470 yen ($1.88), but it is still pegged at 430 yen ($1.72) in Kyoto.

Only once before, in a 1980 price-fixing ruling against petroleum company executives, has a Japanese court ever questioned a decision made on the basis of administrative guidance.

However, the 1980 ruling, by the Supreme Court, focused on procedural faults in a price-fixing arrangement after the 1974 oil crisis and did not question the authority of the Ministry of International Trade and Industry to exercise discretion in issuing orders to private firms.

By contrast, the Osaka court decision constitutes a direct challenge to the government’s discretionary powers.

Any Supreme Court decision ordering government ministries to abandon use of laws forbidding “unfair competition” as an excuse to enforce uniform price fixing would have implications ranging far beyond the taxi business.

The Fair Trade Commission, which is in charge of enforcing the Anti-Monopoly Law, in 1977 and 1982 issued recommendations to the Transportation Ministry urging it to abandon its enforcement of uniform regional taxi fares.