A lonely fax machine in the corner of an office at the Fair Trade Commission (FTC) in Tokyo could well be its most important weapon in the fight against bid-rigging and collusion.

Affectionately called Genmen-kun (Mr. Leniency) by FTC staff, the fax machine has been on a classified mission for more than a decade collecting information from whistle-blowers and companies that want to come clean or avoid penalties.

The machine records which whistle-blowers are the first to report illegal activity, a key feature in gaining leniency in exchange for incriminating information.

The building is located in the capital’s Kasumigaseki district and faces Hibiya Park.

FTC staff members rarely use the multi-room floor where the fax is set up. Only a limited number of FTC officials are allowed to operate the machine.

Specifications of the fax machine are treated as secrets, although FTC officials say it can continue working for a certain period even when power to the building is cut off.

A leniency system to promote whistle-blowing was introduced when the Anti-Monopoly Law was revised in 2006.

Bid-rigging groups and cartels involve more than one company to avoid price competition. So FTC investigations often start after one of the offenders becomes an informant.

The speed in coming forward is crucial. The companies that notify the FTC of improper deals the earliest receive the most leniency from the FTC.

Genmen-kun is solely responsible for determining the order of the whistle-blowers.

Under the current system, the first informant is exempt from fines imposed in the case if the information arrives before the FTC opens an investigation. The second whistle-blower’s potential fine is reduced by 50 percent.

The third to fifth companies can receive 30-percent reductions in their fines, but after that, any informant will have to pay the full penalty.

After the FTC investigation has started, the first to third whistle-blowing businesses can receive 30 percent off their fines. The fourth and beyond whistle-blowers are out of luck.

In one cartel case, where the FTC decided to impose a record high total fine of 40 billion yen ($372 million), the company that first confessed its involvement to the FTC was exempted entirely from the payment.

The four companies that showed up second to fifth were allowed to pay fines reduced by 30 to 50 percent. As the result, 1 billion to 5 billion yen was slashed from the initial amount in fines for those companies.

HIGH ACCURACY, SIMPLE OPERATION

Genmen-kun is the only means of contact available for companies wanting to use the leniency system.

But why did the FTC adopt a fax machine in this age of online communications?

Before it introduced the fax machine, FTC officials discussed the best way to accurately and easily record the order of whistle-blowers.

They floated the idea of whistle-blowers meeting in person with FTC officials at its office in Tokyo, but companies located far from the capital would be put at a disadvantage.

A telephone-based system was also ruled out because it would be difficult for FTC staff to decide when exactly the whistle was blown in phone conversations.

The use of e-mail posed problems because whistle-blowers’ messages may not arrive promptly or at all because of network congestion or other data capacity issues. In addition, officials of small and midsize companies in rural areas may not be equipped with the technology to send e-mail.

The FTC officials decided that the fax machine would be the most reliable device for receiving reports in the order in which they were sent. The FTC also found that fax machines were widely accessible for any potential whistle-blower.

PERFECT WORK FOR 13 YEARS

One challenge was how to prevent companies from fraudulently setting the clocks back on their fax machines to move up the time printed on the receipt paper, thereby “cutting in line.”

Officials altered the mechanisms in Genmen-kun so that it would register the exact time the fax was received, not the time when it was sent.

Many trials were conducted to ensure the accuracy of the order of the informants. The tests included the simultaneous sending of data from multiple fax machines.

Genmen-kun’s performance was confirmed to be significantly high.

Over the 13 years through March this year, the fax machine has received 1,237 reports, or one every four days on average.

In at least one case, multiple whistle-blowing faxes arrived within minutes. But no trouble or errors have been reported in connection with Genmen-kun so far, according to the FTC.