Silviase/jgov_v1.4_full_ann huggingface dataset:
## References

Bradley, K and Nejad, A (1989) Managing Owners: The National Freight Consortium in perspective

Cambridge University Press, Cambridge

Cooper, J (1995) Structured change in freight transport markets European Conference of Ministers of Transport, Paris (Forthcoming Autumn 1995)

Department of Transport (1985) Competition legislation and the bus industry: Changes made by the Transport Act 1985: A guidance note for bus operators July 1986, London

Department of Transport (1994a) A guide for taking your lorry abroad Department of Transport IRF/OUT GV270 (rev 1/94), HMSO, London

Department of Transport (1994b) Bus and coach statistics 1993/4 HMSO, London

Department of Transport (1994c) Transport Statistics Great Britain 1994, HMSO London

Department of Transport (1994d) The Transport of Goods by Road in Great Britain 1994 HMSO London

Kennedy, D (1994) London Bus Tendering: The Impact on Costs LSE Greater London Group working Paper JEL Classification Numbers: D40, D44

Mulley, C and Wright, M (1986) Buy-outs and the privatisation of National Bus Fiscal Studies

Myers, G (1994) Predatory behaviour in UK competition policy Office of Fair Trading Research Paper Number 5, November 1994

Royal Commission on Environmental Pollution, (1994) Transport and the Environment CM 2674

HMSO, London

Transport Studies Group, University of Westminster (1993) Performance Trends in Road Transport A Report Commissioned by Lloyds Bowater Corporate Finance Division, Bournemouth

Transport Studies Group, University of Westminster (1994) Road Transport Industry - Financial Trends A Report Commissioned by Lloyds Bowater Corporate Finance Division, Bournemouth

Utton, M (1991) Competition policy in the de-regulated local bus market NERA, 1991, London
White, P (1995) Long term impacts of express coach deregulation

Paper presented at Universities' Transport Study Group Conference, Cranfield University, January 1995 (unpublished).

To be presented in revised form at PTRC European Forum, University of Warwick, September 1995
TOP 100 - RANKED BY TURNOVER

RANK COMPANY NAME	DATE OF LATEST YEAR END (£m)	TURNOVER (£m)	PREVIOUS TURNOVER (£m)	PRETAX PROFIT (£m)	PREVIOUS PRETAX PROFIT	EMPLOYEES
1	NFC plc	1/10/94	2034.9	1901.6	105.6	104.9
2	LPP Group plc	31/12/93	1283.9	1346.6	6.5	4.3
3	P&O Industrial Services Div	31/12/93	1280.0	1560.7	83.4	104.4
4	Ocean Group plc	31/12/94	1026.1	963.7	50.5	51.0
5	Parcelforce	27/3/94	498.0	501.0	-19.0	-13.0
6	Transport Development Group	31/12/94	496.5	549.5	33.9	26.9
7	Tibbett & Britain Group plc	31/12/94	460.0	360.4	26.9	24.2
8	Hays plc	30/6/94	396.5	304.2	46.4	36.7
9	BET Distribution Services	2/4/94	381.8	400.1	30.8	23.3
10	Securicor Group plc	30/9/94	312.5	241.1	9.9	5.7
11	WincantonTransport Ltd	31/3/94	304.0	284.9	22.5	18.2
12	TNT Express (UK) Ltd	2/7/94	257.6	242.6	19.2	15.8
13	BOC Distribution Services	30/9/94	202.4	168.3	19.0	16.9
14	Christian Salvesen Distribution	31/3/94	168.0	158.7	15.5	13.7
15	Mayne Nickless (UK) Ltd	3/7/94	156.3	153.2	6.4	10.0
16	DHL International (UK) Ltd	31/12/94	156.2	131.1	5.1	2.3
17	TNT Express Worldwide (UK) Ltd	2/7/94	149.3	139.5	-4.2	-2.0
18	UPS (UK) Ltd	31/12/93	144.8	104.5	-0.5	1.2
19	DFDS Transport Ltd	31/12/94	134.7	110.0	1.7	1.4
20	United Carriers Group Ltd	31/12/94	123.5	108.6	1.9	1.7
21	Ryder plc	31/12/94	120.0	100.4	5.8	3.8
22	AAH Holding plc	31/3/94	100.5	90.2	2.3	3.6
23	NYK Holding (UK) Ltd	31/12/93	95.4	60.2	-2.2	-9.2
24	British Rail Parcels	31/3/93	88.7	101.5	-22.9	-32.3
25	Hogg Robinson Transport Limited	31/3/94	86.1	90.3	4.7	6.0
26	Frans Maas (UK) Limited	31/12/93	83.7	78.5	2.7	2.9
27	Kuehne & Nagel Limited	31/12/94	83.7	66.9	2.1	1.7
28	Russell Davies Limited	31/12/92	78.6	68.4	2.6	2.2
29	NFT Distribution Limited	31/3/94	78.2	80.8	2.3	1.0
30	MAT Group Limited	30/9/94	73.6	70.6	0.6	0.5
31	Frigoscanida Limited	31/12/92	69.1	68.1	4.0	2.9
32	Taylor Barnard Group Limited	31/12/92	57.3	49.3	3.9	4.2
33	Inter Forward Limited	31/12/92	53.6	60.2	-5.8	-9.7
34	Dart Group plc	31/3/94	52.2	42.8	2.3	1.7
35	Sommer Holdings Limited	30/6/93	51	60.0	0.5	0.9
36	Davies Turner & Co Limited	31/3/94	50.6	43.9	1.5	1.8
37	Humberside Holdings Limited	31/3/94	50.6	48.6	6.7	5.0
38	Exxtor Group limited	31/12/93	49.5	50.5	6.6	5.6
39	Danzas (UK) Limited	31/12/93	49.2	48.2	0.0	0.0
40	ANC Limited	31/12/94	47.8	42.2	4.8	2.9
41	Gefco UK Limited	31/12/93	47.2	41.8	6.9	8.1
42	GB Express Limited	31/12/94	45.6	33.7	1.6	1.0
43	Business Post Group plc	31/3/94	41.8	33.7	5.3	4.2
44	Eddie Stobart Limited	30/11/94	41.1	34.8	2.4	1.2
45	The Currie Group Limited	31/10/93	38.7	27.0	1.6	0.7
46	Thc ICS (Management Services) Ltd	31/3/94	37.6	32.5	0.1	0.2
47	Schenkers UK Limited	31/12/93	36.2	34.5	-0.1	-1.4
48	Thomas Cradley Holdings Limited	30/4/94	34.6	29.4	2.9	3.1	425
49	Merlin Distribution Limited	31/3/94	34.4	28.5	2.3	1.8	625
50	Mercantile (GB) Limited	31/12/93	33.7	29.3	2.7	1.9	33
51	Applied Distribution Limited	31/12/94	32.2	26.4	4.2	3.6	871
52	Hoyers (UK) Limited	31/12/93	33.1	32.2	0.4	0.2	397
53	Target Express Parcels Limited	31/10/93	33.0	27.7	5.8	4.8	497
54	CAT-GB Services Limited	31/12/93	32.6	24.4	2.9	1.5	104
55	Tuffnells Parcels Express Limited	31/12/93	31.9	27.8	2.9	1.8	907
56	W H Malcolm Limited	31/12/93	30.6	26.9	2.2	1.0	667
57	Burlington Air Express	31/12/93	29.2	27.6	-1.0	-0.6	349
58	Star Cargo plc	30/9/94	28.5	25.1	1.0	0.7	124
59	Cave Wood Transport Limited	31/12/94	27.0	19.4	0.2	-0.7	350
60	Carmens Transport Limited	31/12/93	26.4	24.3	0.8	0.3	219
61	Bibby Distribution Services	31/12/93	25.7	23.7	1.5	0.4	535
62	Dukes Transport (Craigavon) Limited	31/12/93	25.0	20.8	0.9	0.3	550
63	Rockfield Union Limited	1/1/94	24.1	25.6	-0.5	-0.9	159
64	Amtrak holdings Limited	29/5/94	23.5	19.2	1.9	1.6	183
65	Group 4 Nightspeed Limited	31/12/93	22.6	23.0	-0.7	0.4	820
66	A A Griggs & Co Limited	30/4/94	21.2	17.4	1.1	1.0	300
67	Redland Distribution Limited	31/12/93	20.3	18.3	0.2	0.0	214
68	Archbolds Freightage Limited	31/12/93	20.2	20.2	0.9	1.3	147
69	S Jones Industrial Holdings Limited	31/3/94	19.5	17.0	0.2	-0.2	230
70	Otis Transport Services Limited	30/9/94	19.1	16.4	0.7	0.4	137
71	Murfitts Transport Limited	31/5/94	18.0	13.1	1.0	0.8	211
72	Rosier Transport Group Limited	31/12/93	17.7	8.9	0.2	0.4	185
73	Cert plc	30/6/93	17.6	19.4	0.3	0.2	340
74	John G Russell (Transport) Limited	31/3/94	17.6	15.4	0.5	0.0	365
75	W H Bowker Group Limited	31/12/93	17.5	16.2	0.7	0.4	143
76	Turners (Soham) Limited	31/12/93	17.4	16.5	2.3	2.0	396
77	R P C Transport Limited	31/12/93	17.1	17.4	1.0	1.6	n/a
78	A & J Bull Limited	31/7/94	16.7	10.2	0.2	0.0	127
79	John Raymond Transport Limited	30/9/94	16.5	12.7	0.3	0.0	315
80	Road Ferry Limited	2/10/93	16.4	15.1	0.4	0.1	58
81	Mainland Car Deliveries Limited	31/3/94	16.3	12.8	0.2	0.1	199
82	Fred Sherwood & Sons (Trans) Ltd	31/3/94	16.0	14.9	0.8	0.3	81
83	F B Aitkins & Sons Limited	31/12/94	15.4	11.9	1.2	0.1	156
84	Panick Link plc	31/12/94	15.4	13.2	1.8	1.0	204
85	Trans Euro plc	31/1/94	15.4	12.8	0.4	0.4	159
86	Falcon Distribution Group Limited	31/12/93	15.0	10.6	0.3	0.0	183
87	Gloystame & Co Limited	1/1/94	14.5	14.1	0.6	0.0	379
88	Transcontinental (Rosslare) Limited	31/12/93	14.4	13.5	-0.5	0.1	102
89	Bullmatt Limited	31/12/93	14.3	13.5	0.8	1.0	538
90	A One Transport (Leeds) Limited	31/12/93	14.1	15.3	-0.1	-0.3	248
91	Maxi Caledonian Holdings (Scot) Ltd	30/9/93	13.6	11.8	1.9	0.9	223
92	City Link Transport Holdings Ltd	26/12/93	13.1	9.2	1.8	0.8	349
93	Gregory Distribution Limited	30/9/94	13.1	9.7	1.1	1.4	490
94	Eleco Holdings	30/6/94	12.8	13.5	0.1	-0.1	n/a
95	Laser Transport International Limited	31/12/93	12.3	11.7	0.2	0.1	185
96	S A M Anderson (Newhouse) Limited	30/9/93	11.3	10.3	0.4	0.2	n/a
97	Leggett Freightways Limited	31/3/94	10.0	9.4	0.0	-0.2	235
98	R Durham & Sons	1/5/94	9.9	9.0	-1.1	0.0	214
99	Norbert Dentressangle Transport Ltd	31/12/94	9.6	7.6	0.2	0.1	28
100	Michael Gerson Limited	31/10/94	9.5	8.1	2.0	1.8	76
5. Japan

# REGULATORY REFORM AND CHANGES IN THE JAPANESE TRUCKING INDUSTRY

Hirotaka YAMAUCHI

Faculty of Commerce,

Hitotsubashi University

and

Economic Research Institute,

Economic Planning Agency
### 1. Introduction

The trucking industry is one of the rare cases in Japan in which regulatory changes were brought about by new legislation. In 1989, the Japanese Diet passed two bills that relax the requirements for new entry and conditions of fare setting in the industry. In a sense, this was an epoch-making event, because the change was accomplished without any “foreign pressure.” It is true that we experienced big institutional and regulatory changes in telecommunication and railway industries, but in these fields, changes were accompanied by privatization of public corporations. On the other hand, in trucking industry, in which there are large numbers of carriers and almost all are private, except for very small companies owned by local authorities, the purpose of the new laws was only to relax the economic regulations.

It should be noted, however, that new enactment does not always lead to a substantial change in administrative policy. In the trucking industry, economic regulations was not as tight as in other transport fields. For example, it was much more difficult for a newcomer to enter into bus or taxi service than in the trucking industry. Thus we can say that the results of the new laws were nothing more than the ratification of the existing state of affairs before the statutory change in the market.

Needless to say, this does not mean that there was sufficient competition in the trucking industry. Many researchers and shippers insisted that there should have been and should be much more competition in the market. The recent report of the Ministry of International Trade and Industry pointed out that the high cost of freight transport including trucking caused by lack of sufficient competition is one element that is reducing the international competitiveness of Japanese manufacturing industry. And indeed, it was the political pressure from industrial consignors that lead to the new legislation.

Judging from some statistical surveys, we could not find clear evidence that the new laws made substantial impact on the trucking market, although we cannot obtain enough data. This means that there is likely to be much room for further regulatory change or deregulation; we also need to show how competition works in this market, and how we can develop it.

In this paper, we examine the contents and processes of regulatory changes in the trucking industry, try to evaluate the effects of the regulatory reform, and discuss necessary change in policy. In the next section, we describe briefly the transport markets in Japan. We the investigate and inspect the legal changes in the succeeding section. In Section 4, we examine changes in the industrial organization of trucking markets and we also try to measure the welfare changes in case competition would drive fares down. Section 5 evaluates these policy changes. The last section contains our concluding remarks.

### 2. Transport Markets in Japan

In order to understand trends of transport in Japan we first of all examine overall transport
### 3. The Evolution of Regulatory Policy on Trucking Industry

As noted in the previous section, since 1970 the trucking has become the major transport mode in Japan. In the first stage, faced with the rapidly growing trucking business, the government tried to coordinate between trucks and the railways, because the deficits of JNR were steadily increasing. It was the regulation on the trucking industry that the government intended to make use of as a measure of this coordination. The government, however, did not succeed in this coordination. The railway lost its business, while the trucking industry became bigger and bigger.

Although transport markets differ country by country, the story was same in many major countries. First a competition occurred between railway and trucking. The government introduced economic regulation on the trucking industry in order to calm the competition, but the government failed in this attempt. Next, the regulation on the trucking industry became an obstacle to efficient transport, followed by a surge of deregulation movements. We will look at these processes in Japan in this section.

#### 3.1. Before the statutory change

The trucking industry in Japan had been regulated by the Road Transport Law until the end of 1990, when the new laws covering freight transport came into effect. The purpose of the new laws was to relax the trucking regulation. This was not complete deregulation, especially compared with events that had occurred in the United States and other advanced countries, but it is true that the new laws are regarded as big regulatory policy changes by Japanese policy standards. We will examine this policy change in detail later.

Since the first version of the Road Transport Law was enacted in 1951, when Japan was under occupation by the Allied Forces, the content of that law was influenced by the regulatory system of the United States. The law adapted a decentralized regulatory system. For example, it provided that the regulatory decision-making process should have been done by the Regulatory Commissions that were established region by region. This system, however, did not get acclimated to Japanese decision-making style, because the Japanese government attaches much importance on the nation-wide uniformity of the policy.

The Road Transport Law was revised in 1953. The revision of that time was so comprehensive that it is not an exaggeration to say that a completely new law was legislated. The new version of the law provided the license system of new entries and approval system of fares, and this authority was basically in the hand of the Minister of Transport (the MoT hereafter). $ ^{1} $ The revision of the Road Transport Law in 1953 centralized the decision-making authority, and the regulation of road transport was carried out based on this version until the end of 1990, although
some minor revisions were made during that period.

One characteristic of the Road Transport Law was that it dealt with all modes of road transports. In other words, passenger road transports such as bus and taxi services and freight road transport were all regulated under one legislature. In this situation, it was quite natural that the regulator, the MoT, could use a great deal of administrative discretion in carrying out the regulation, because it is impossible to administer several transport services on the same standards. Wide administrative discretion means that authority and power are much more centralized than the statutory expression of that law.

Generally speaking, freight transports are in the situation that economic regulation is likely to be more lenient than passenger transports. This is because social regulations, and in particular safety considerations, are not really stressed in freight transport. If economic and social regulations could be distinguished clearly and administered separately, the possibilities of deregulation of both services would not differ so much, nor would it depend only on the market structure of each industry. In many cases, however, especially in Japan, these two kinds of regulations are administered as a whole; it seems to be true that the regulators or politicians are more reluctant in promoting competition in passenger transport than freight transport.

Reflecting these facts, regulations on the trucking industry under the Road Transport Law were much more relaxed than the regulations for passenger transport. For example, with respect to fare regulation, the MoT permitted only deterministic fare level in the case of passenger transports, while the tariffs for trucking were free to be set as much as its level permitted; it was this tariff band that the MoT permitted for freight transport. For new entry, it was much more difficult to enter markets of bus or taxi services than freight transport. The Road Transport Law provided that new entries could be licensed only if the balance of supply and demand in that market would not be disturbed by those entries. In the bus and taxi markets, the MoT itself judged the proper supply level (and this system remains today), while in the trucking industry, it was possible for a new operator to enter into that market if it could prove that there was a demand for their services. $ ^{2} $

The regulation under the Road Transport Law distinguished trucking services into five categories: General Line-haul Trucking Business, General Aerial Trucking Business, Contract Trucking Business, Free Trucking Business and Small Vehicle Freight Transport Business. The regulator then issued operating licenses separately (see the left side of Figure 3). Of the five categories, the first two trucking services carried the majority of freight for trucks. Thus, we will
The most serious problem of the supply-demand balancing clause of the Road Transport Law is that it is almost impossible for the regulator to get accurate and sufficient information about the market. Analyzing regulatory policy with imperfect information is the latest subject of economic theory of regulation (for example, see Sappington and Stiglitz [1987]). Such a tendency of research itself shows the difficulty of getting information in the regulatory setting.

In the practical administrative process, the problems of imperfect information are also being given much importance. In the case of privatization in United Kingdom, the government had to create a new regulatory scheme because there had been no explicit regulatory system before privatization. As a result, they established regulatory office and introduced the price-cap scheme in fare setting. The feature of price-cap regulation is that regulators do not necessarily need cost information, at least in principle. So we can say that there is a fundamental understanding that, in this regime, the regulator cannot obtain enough information. $ ^{3} $

Even if regulators could attain necessary information, there remain other problems in the supply-demand balancing clause of the Road Transport Law. This clause does not work in the case of declining demand. In this situation, regulators cannot balance supply and demand, because the regulator has no ability to reduce the number of operating licenses. Reductions of truck services occur only if some carriers stop offering their services. Without any application, regulators have no measure to decrease supply. It is true that in the case of declining demand, general economic principles would drive away some trucking companies, and that this is one solution to the problem. However, in many regulated industries, especially in those that have strict entry regulations, incumbents are very conscious about their vested interests, and never try to decrease their supply or terminate some of their services. In many cases, industrial associations play some roles in reducing total supply in Japan. Of course, such conduct is likely to be against the spirit of anti-monopoly laws, but some transport business laws have exemption clauses from anti-monopoly law. $ ^{4} $

The Motor-truck Transport Business Law requires only permission for the business. There are large differences between permissions in new law and licenses in the old, at least in principle. Some researchers in administrative law in Japan insist that an operating license in transport business laws can be interpreted as a special authorization for public business. According to this interpretation, a public business means a business that should be done exclusively by public bodies or the government itself. So at the conceptual first stage, new entities are prohibited from doing this business. Such a prohibition is likely to be against the provision of the Constitution of Japan which says that everyone has freedom to choose his or her occupation (Article 22). But a scholar
advocating the theory of a special authorization for public business insists that there are some areas in which restriction on such freedom should be imposed because of public interest. A special authorization is the conceptual second stage. In this stage, business prohibitions are removed, and private entities with ability and fitness to do the business are authorized. According to this interpretation of licenses, the government has unlimited discretion over the licensed companies. $ ^{5} $

The operational permission of the new law does not give much administrative discretion to regulators. In this case, supply-demand balancing actions are not taken by the regulator. In the first place, supply-demand balancing is closely related to the interpretation of operating license as a special authorization for public business. If we follow this interpretation, licensed firms are doing business on behalf of the government or other type of governmental bodies, and so the competition between companies is thought to be very curious. On the other hand, operational permission of the firm must be issued if the applicant has ability and fitness to carry out the business, and it is quite natural for them to compete with each other in the market.

One point at issue is that the new law has a safeguard clause for excessive supply. Under this clause, regulators can sustain operational permission, in case supply of truck services is judged to be very excessive. This clause can be very powerful if regulators interpret it in their favor, although the ability of regulators is different from the supply-demand balancing clause of the old Road Transport Law. Under the new law, regulators have only limited administrative direction. It is true that in practice, there is no report that this clause is used to stop new entry, but we should bear in mind that this clause gives the regulator potential power to intervene in the market.

With respect to fares and charges, the new law changed the regulation from an approval system to a filing system. Under the old system, carriers had to apply their fare level and structure to the regulator and obtain approvals for them. As we saw in the previous section, if fares and charges were in the tariff band, the application was approved automatically, but in this case regulators surely have discretion power, at least in principle. The new law reduced such power of regulators, but it should be noticed that the regulator has the authority to refuse filing if he deems that the proposed fares and charges are too high or too low compared with costs.

The Motor-Truck Transport Business Law repealed the distinction between the Aerial Operation and the Consolidate Operation. The main purpose of this is to allow carriers to introduce more flexible operation. Aerial trucks were especially criticized, and experienced impediment regarding back-haul freight and empty miles caused by the regulation. Anyway, the MoT insisted that carriers change their operation so that they may establish the most efficient operation by this regulatory change.

However, precisely speaking, the distinction is not completely erased in the new law. It