MEMO FOR RECORD: (SCAPIN - 1741/1)
WFM/RMG/LNS/ERH/gg
6 October 1949
1. References are:
a. SCAP Memo AG 004 (3 Jul 47) ESS/AC, SCAPIN-1741, subject: Dissolution of Trading Companies.
b. Memo for Mr. T. Cohen, ESS/SA, from ESS/FTP, 11 Sep 50, subject: Proposed Re-examination of SCAPIN-1741 (3 Jul 47) - Dissolution of Mitsui and Mitsubishi Trading Companies - Conditions as to Successor Companies.
2. SCAPIN 1741, reference la, above, ordered the dissolution of the Mitsui and Mitsubishi trading companies and established safeguards considered the minimum necessary for preventing the resurgence of those cartel-type organizations.
3. Among such safeguards were prohibitions against certain types of regrouping of former officials and employees as set forth below:
"2c. Prohibit any persons who have been officers, directors, advisors, branch managers of foreign or domestic branches, or department or section heads of said companies, during a period of ten (10) years prior to the date of this memorandum, from associating together to form a new company, or more than two (2) being employed by or advising any one (1) existing company or company hereafter formed.
"2d. Prohibit any group of employees in addition to those specified in paragraph c, above, exceeding one hundred (100) in number, from organizing a new company, being employed by any one (1) existing company, or any company hereafter formed, without permission of the Holding Company Liquidation Commission or such other agencies as may be designated. The Holding Company Liquidation Commission or such other agencies shall grant such permission if it shall conclusively appear that a possibility of recreation of the dissolved companies or other monopolistic combinations shall conclusively appear that a possibility of recreation of the dissolved companies or other monopolistic combinations shall not result."
4. Dissolution of the two companies has contributed materially to opportunity, freedom and other concepts of democratic enterprise in the business of foreign trade in Japan. Re-examination of the provisions of SCAPIN 1741 from the standpoint of its continuing fairness and feasibility as applied to current conditions, leads to the conclusion that no revocation is warranted and that its continued efficacy is an important factor in assuring freedom of entry and competition in Japan's foreign trade activities.
5. It would appear, however, that, in the interest of avoiding undue hardship in individual instances by too rigid insistence in all cases on the limitation of two persons set forth in paragraph 2c of reference SCAPIN, and of removing the basis for the justifiable criticism that such absolute limit is arbitrary and unreasonable, the same degree of discretionary power to approve applications for permission to exceed that number should be given, as in paragraph 2d of reference SCAPIN, to the HCLC or such other agencies as may be designated.
6. Investigation discloses that in spite of the clear intent of the SCAPIN to give the HCLC, or such other agencies as may be designated, authority to receive applications pursuant to paragraph 2d, the Japanese Government has failed to implement such intent through proper ordinances. Accordingly, no regulations have been issued setting forth the procedure by which such applications can be filed. As a matter of fact, no such applications have ever been filed pursuant to reference SCAPIN. It is understood from recent discussions with officials of the Japanese Government that its failure to implement SCAPIN 1741 by an ordinance was based on a reliance on two factors: (a) general awareness on the part of the public of the provisions of the SCAPIN, and (b) existence of Imperial Ordinance 311 of 1945 which provides penalties for violation of any SCAPIN, whether or not implemented by Japanese law. It was felt that said ordinance would serve as sufficient deterrent to violations of reference SCAPIN. The inaction of the Japanese Government has had the undesirable collateral effect of failing to provide the mechanics for making exceptions to the strict limitations of the SCAPIN on a case-by-case basis where justice would so dictate.
7. The Japanese Government should, therefore, be required forthwith to take necessary steps to designate and properly empower the HCLC or some other competent agencies to receive and pass on applications submitted under paragraphs 2d and 2c and revised. The implementing ordinance should also grant the competent agencies normal powers of surveillance and provide appropriate penalties for violations of the provisions thereof.
8. This is an administrative matter.
9. Concurrence is not necessary.
E. R. Harris 26-6560
/s/ Lns
R. M. G.