the Unfair Competition Law of 1934, which primarily dealt with imitating and palming off one's goods as those of another, Japanese legislation did not embody any rules against unfair trade practices generally and did not recognize any concept of free, competitive enterprise as being in the public interest'; but SCAP also acknowledged that 'many civil servants in various departments of the Government exhibited a strong lack of sympathy or support for the antitrust program.'
50
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As originally drafted, the law prohibited collusive activities among entrepreneurs to set prices, restrict the volume of production or sales, divide markets or customers among themselves, limit the construction or expansion of facilities, or refuse to share new technologies or methods of production. Article 9 of the lawas famous in its own right as article 9 of the constitution, which outlaws the use of armed forcebanned holding companies, and this article has survived intact to the present day. Holding companies in fact do not exist in the postwar Japanese economy; the zaibatsu were rebuilt on another basis entirelythat of the banking keiretsu discussed above. The law also created the Fair Trade Commission, composed of seven members who are appointed by the prime minister with the consent of the House of Representatives for five-year terms.
Modifications to the law began almost as soon as it had been passed. SCAP discovered that firms could evade the law by creating 'trade associations' as noncommercial unions or foundations (
, or
) under the terms of the Civil Code. Because of this, SCAP ordered the Japanese government to enact the Trade Associations Law (number 191 of July 29, 1948), which required any association of two or more businessmen to register with the FTC within thirty days of its establishment. MITI had this law abolished in 1953.
Another problem was that ever since Yoshino's industrial unions law of 1925, medium and smaller enterprises had depended on their cartels to remain in business without resorting to dumping. SCAP agreed that they needed some special help, but rather than authorize their cartels as exceptions to the Antimonopoly Law (AML), it sponsored the creation on August 1, 1948, of the Medium and Smaller Enterprises Agency (MSEA) as an external agency first of MCI and subsequently of MITI. This organ was supposed to gather, analyze, and freely distribute information on the procurement of materials, marketing possibilities, business methods, and so forthin effect, to act as a cartel headquarters for the small business sector. The first director of the MSEA, Ninagawa Torazo * (former dean of economics at Kyoto University), fought vigorously with both SCAP and the Yoshida government to get more powers and a secure budget for his unit; he particularly wanted governmental financing for small businesses.
After SCAP pressured the government to do as Ninagawa asked (law number 108 of April 24, 1950, amending the MITI Establishment Law), he resigned and was elected mayor of Kyoto, a city with many medium and smaller enterprises. Backed by the socialists and communists, Ninagawa served from 1950 to 1978 as mayor of Kyoto,
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where he became a persistent thorn in the side of the national conservative establishment. MITI was never very enthusiastic about the MSEA, but it had no choice other than to support it because of the political clout the small-business sector wields. Moreover, some MITI officials discovered that the directorship of the MSEA was an excellent place from which to build support for their own postretirement political careers. MITI's attitude toward the MSEA has consequently remained ambivalent over the years; it is today an integral, if non-mainstream, unit of the ministry.
By far the most serious problem with the original Antimonopoly Law was its ban on agreements that provided for the exclusive use of technologies or know-how. SCAP historians have rather lamely acknowledged after the fact that ''such a proposal represented advanced antitrust thinking.'
51
In fact, the stipulation was so advanced it did not exist in the United States, where know-how and trade secrets can be legally protected under the laws of the various states, not to mention the constitutional protection of patent rights (art. I.8.8). The original AML seemed to ban exclusive patent licensing agreements, which stopped in their tracks all Japanese efforts to import technology.
SCAP does not appear to have realized how long the issue of industrial property rights had been a bone of contention between Japanese and foreign firms. The problem went back at least to the Firestone Rubber Company's suit of 1933 against Japan's Bridgestone Rubber Company, founded in 1931, because of the similarity in their names (Bridgestone won the case when its founder, Ishibashi Shojiro*, demonstrated that 'bridgestone' was a literal translation of his family name). In 1949 these issues were still highly salient because the government had extended all prewar patents issued to foreigners (Japanese patents normally run for 15 years, American patents for 17 years), and because the du Pont Company was just then charging Toray Textiles with infringing on its patent for Nylon 6 (this was settled out of court, and du Pont and Toray became partners).
52
Under the AML many foreign companies concluded not just that they could not protect their know-how and trade secrets in Japan (Japanese law had never provided protection against 'breach of trust' with regard to know-how), but that even patent-licensing agreements would not be honored. Most refused to sell their patents until the law was clarified. Thus, to promote economic recovery, SCAP authorized the first formal amendment to the AML itself (law number 214 of June 18, 1949), which liberalized the provisions covering patent and exclusive agent contracts and allowed foreign corporations to acquire stock
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in Japanese firms. This amendment of course also spurred MITI to enact the Foreign Capital Law in order to give the Japanese government control over who licensed what patents and how much they paid for them in royalties.
These various challenges to and changes in the AML were all preliminary to MITI's actions of 1952. As noted in the preceding chapter, from 1946 on MCI, the ESB, and their subsidiary public corporations (kodan *) exercised absolute control over all commodities in the domestic economy under the terms of the Temporary Materials Supply and Demand Control Law. This lawapproved by SCAP as an emergency replacement for the wartime National General Mobilization Lawwas due to expire on April 1, 1948; but SCAP extended it for two more years because of the continuing shortages and consequent need for rationing. In 1950, when the government wanted to extend it again, SCAP balked: 'To SCAP this proposal looked very much like a bid by the Government to continue the controls system as a government institution instead of ending it.'
53
However, SCAP finally went along with a one-year extension because the Japanese feared that abandoning the materials supply-and-demand plans would destabilize the economy. During April, 1951, the effects of the 'truce
