Toward a theory of jurisdictional competition: the case of the Japanese FTC

The Japanese antitrust agency (the J-FTC) holds a jurisdictionalmonopoly over most issues. Because overlapping jurisdictionswould enable politicians to gauge relative bureaucratic performance,this monopoly prevents politicians from monitoring the agencyon most issues. In response, J-FTC bureaucrats have chosen notto enforce those statutory provisions like criminal penaltiesthat firms might contest, and firms face virtually no criminalsanctions for antitrust violations. Most Japanese markets arestill competitive—but primarily because they are large,fluid, and easy to enter. The J-FTC enforces the law only inareas where politicians can monitor its performance, and politicianshave the information they need to monitor only on issues aboutwhich they care deeply. Although monopolist agencies will regulateless actively than competitive agencies, politicians do notwin elections by creating agencies they cannot control, andeven monopolist agencies will regulate actively when politicianscan gauge their performance. In equilibrium, therefore, politicianswill grant agencies a jurisdictional monopoly over electorallyimportant issues only when they have access through other sourcesfor information by which they can monitor their bureaucrats.