Taxi Fare Change Orders in Japan: Pre-emptive Legal Strategies Against Adverse Dispositions

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

The regulation of taxi fares in Japan is a dynamic area, reflecting an ongoing tension between market liberalization, consumer protection, and the financial stability of taxi operators. While the Road Transport Act (道路運送法 – Dōro Unsō Hō) generally requires government approval for taxi fares, a more recent piece of legislation, the Act on Special Measures for Promotion of Optimization of Taxi Services in Specified and Quasi-Specified Areas (特定地域及び準特定地域における一般乗用旅客自動車運送事業の適正化及び活性化に関する特別措置法 – Tokutei Chiiki oyobi Jun-Tokutei Chiiki ni okeru Ippan Jōyō Ryokaku Jidōsha Unsō Jigyō no Tekiseika oyobi Kasseika ni Kansuru Tokubetsu Sochihō, hereinafter "Taxi Special Measures Act" or "TSMA"), introduces a different regime for designated areas, often involving government-set fare ranges.

This can create complex situations for taxi operators, especially those who have established successful business models based on fares that were previously approved but now fall outside new, mandated ranges. When faced with administrative guidance and the threat of escalating adverse dispositions (such as fare change orders, vehicle use suspensions, or even permit revocation) for non-compliance, operators need to understand their pre-emptive legal strategies. This article explores such strategies, focusing on how businesses might seek to protect their existing fare structures and continue operations.

The Two Tiers of Taxi Fare Regulation in Japan

Understanding the available legal options requires a grasp of the dual regulatory systems for taxi fares:

  1. The Standard System under the Road Transport Act (RTA):
    • Article 9-3 of the RTA generally requires taxi operators to obtain approval (ninka – 認可) from the Minister of Land, Infrastructure, Transport and Tourism (MLIT), often delegated to Regional Transport Bureau Directors, for their fares and charges. Any changes to these fares also require approval.
    • The criteria for approval (Article 9-3, Paragraph 2) include ensuring fares are not excessive (i.e., not exceeding what's based on efficient management, appropriate costs, and appropriate profit), are not unduly discriminatory, do not risk unfair competition, and adhere to any MLIT-set distance calculation methods.
    • Historically, an administrative operational measure known as the "Automatic Approval Fare" (jidō ninka unchin – 自動認可運賃) system existed. Under this system, fares falling within a pre-established upper and lower band were typically approved automatically, while applications for fares below this lower limit were subject to individual, more detailed review of cost structures.
  2. The Special System in Designated Areas under the Taxi Special Measures Act (TSMA):
    • The TSMA was enacted to address issues like taxi oversupply in certain regions. It allows the MLIT to designate "quasi-specified areas" (jun-tokutei chiiki – 準特定地域) (TSMA Article 3-2).
    • Crucially, once an area is so designated, the MLIT also designates and publishes a "publicly set fare range" (kōtei haba unchin – 公定幅運賃) for that area (TSMA Article 16).
    • Operators within these designated areas must then notify (todokede – 届け出) the MLIT of fares they intend to charge, and these notified fares must fall within the publicly set fare range (TSMA Article 16-4, Paragraphs 1 and 2).
    • Significantly, in these designated areas, the RTA's approval system under Article 9-3 is disapplied (TSMA Article 16-3).
    • If an operator notifies a fare that is outside the publicly set range, the MLIT (or its delegated authority) can issue a fare change order (unchin henkō meirei – 運賃変更命令) compelling the operator to change its fare to comply with the range (TSMA Article 16-4, Paragraph 3).
    • Non-compliance with such an order can lead to severe sanctions, including suspension of vehicle use, revocation of the business permit (TSMA Article 17-3), and even criminal penalties for collecting unnotified or non-compliant fares (TSMA Article 20-3, Item 3 and 4).

The Challenge: Existing Lawful Fare vs. New Mandated Range

A conflict arises when a taxi company (let's call it Company A) has been operating successfully with a relatively low fare, fully approved under the RTA system (perhaps after individual review because it was below the old "automatic approval" lower band). Subsequently, its operating area is designated a "quasi-specified area" under the TSMA, and a new, higher "publicly set fare range" is established. Company A notifies its existing, lower fare under the TSMA, believing it to be lawful and essential to its business model. However, the Regional Transport Bureau Director (Director B), to whom MLIT powers are delegated, issues administrative guidance urging Company A to raise its fares to within the new TSMA range. Director B also has publicly announced "disposition criteria" (shobun kijun – 処分基準) outlining a clear sequence of escalating actions: further guidance, then a formal recommendation, then a fare change order, and if non-compliance continues, vehicle use suspension and ultimately permit revocation. Company A, wishing to maintain its competitive low fares, faces the imminent threat of these adverse dispositions.

What pre-emptive legal strategies can Company A employ?

Is the Designation of the "Publicly Set Fare Range" Itself an Actionable Disposition?

A preliminary question is whether the initial act by Director B of designating the "publicly set fare range" (honken shitei – 本件指定) is an administrative disposition that Company A can directly challenge in a revocation suit. Based on Supreme Court precedents concerning general standards or designations not addressed to specific parties but applying broadly to an indeterminate number of operators in a region (e.g., the Shinkansen noise/vibration standards case, Supreme Court, First Petty Bench, Judgment of April 22, 1982, Minshu Vol. 36, No. 4, p. 705), such a designation is likely not considered an administrative disposition. It's seen as a general, normative act, akin to a regulation, rather than a decision directly and individually affecting Company A's rights at that initial stage. Therefore, a direct revocation suit against the designation itself is unlikely to be a viable primary strategy.

If the designation itself is not directly challengeable as a disposition, Company A's focus must shift to pre-empting the anticipated specific adverse dispositions that flow from non-compliance with the new fare range. A prohibitory injunction suit (差止訴訟 – sashitome soshō) under ACLA Article 3, Paragraph 7, is a potential tool.

  • Targeting Impending Dispositions: Company A could seek injunctions to prevent Director B from issuing a fare change order, a vehicle use suspension order, or a business permit revocation.
  • Meeting ACLA Requirements for a Prohibitory Injunction:
    • Likelihood of Dispositions Being Issued (ACLA Art. 3(7) "about to be made"): Director B's publicly announced "disposition criteria" (the honken shobun kijun), which detail a clear sequence of enforcement actions for non-compliance, strongly suggests a high likelihood that these dispositions will indeed be issued if Company A persists in its current fare structure.
    • "Grave Harm" (ACLA Art. 37-4, Para. 1): The plaintiff must show that the issuance of the disposition will cause "grave harm for the avoidance of which there is an urgent necessity." The Supreme Court's reasoning in the Tokyo Teachers' National Flag/Anthem Case (Judgment of February 9, 2012, Minshu Vol. 66, No. 2, p. 183) is instructive here. Company A can argue that the escalating series of threatened sanctions—culminating in potential permit revocation and criminal penalties for charging non-compliant fares—combined with the forced abandonment of its successful and lawful low-fare business model, constitutes grave and irremediable harm. Such harm is not easily remedied by challenging the dispositions after they are issued, especially given the short timeframes and compounding effects.
    • Supplementarity (ACLA Art. 37-4, Para. 1 proviso "no other appropriate means"): This requires showing that there are no other adequate remedies. The availability and adequacy of other actions (like a declaratory action, discussed next) would be scrutinized.
  • Interim Relief: Preliminary Prohibitory Injunction (ACLA Art. 37-5, Para. 2): To prevent the dispositions from being issued while the main prohibitory injunction suit is pending, Company A can apply for a "preliminary prohibitory injunction" (仮の差止め – kari no sashitome). This requires demonstrating, among other things, a likelihood of grave harm and a prima facie case on the merits of the main suit.

Another, potentially more focused, strategy is to seek a judicial declaration regarding Company A's current legal status and rights.

  • The Claim: Company A could file a public law party litigation suit (ACLA Art. 4) seeking a declaration that it possesses the legal right to continue operating and collecting fares based on its currently notified (and previously RTA-approved) low-fare structure, notwithstanding the new TSMA-designated fare range.
  • Navigating Supreme Court Precedents on Pre-emptive Declaratory Actions:
    • The Tokyo Teachers' case (Sup. Ct., Feb. 9, 2012) denied a similar declaratory action sought by teachers to confirm they had no obligation to perform certain duties, viewing it as an impermissible attempt to pre-emptively challenge future disciplinary dispositions and thus an "innominate administrative appeal."
    • However, the Pharmaceuticals Net Sales Case (Supreme Court, Second Petty Bench, Judgment of January 11, 2013, Minshu Vol. 67, No. 1, p. 1) allowed a declaratory action by businesses seeking to confirm their right to sell pharmaceuticals online despite a new ministerial ordinance restricting such sales. The key distinction appeared to be that the primary aim was not merely to block future specific sanctions, but to protect an existing business model and the current right to operate from ongoing economic harm and legal uncertainty caused by the new regulation.
    • Company A could frame its suit similarly to the Pharmaceuticals case, arguing its primary goal is to confirm its existing right to operate under its established, lawful fare structure, which is crucial for its business viability and is now under direct threat due to the TSMA designation and Director B's actions.
  • "Interest to Sue for Declaration" (Kakunin no Rieki): Company A would need to demonstrate an immediate and concrete threat to its established business and its competitive strategy arising from the new fare range and the ensuing administrative pressure. The ongoing administrative guidance and the explicit threat of sanctions based on the published criteria provide strong evidence of this.
  • Interim Relief: Provisional Disposition (Civil Provisional Remedies Act): If the declaratory action is characterized as a public law party litigation not directly concerning a "disposition," ACLA Article 44 (which generally excludes provisional dispositions under the Civil Provisional Remedies Act for ACLA suits) might not apply. In such a case, Company A could seek a provisional disposition (仮処分 – karishobun) to temporarily affirm its right to operate with its current fares while the main declaratory action is pending.

Substantive Arguments: Challenging the Legality of the Fare Range and Subsequent Orders

Beyond pre-emptive procedural strategies, Company A must have substantive arguments challenging the legality of the new fare range designation and any ensuing orders.

  • Illegality of the "Publicly Set Fare Range" Designation Itself (Honken Shitei):
    • Abuse of Discretion: Company A could argue that Director B abused his discretion in setting the fare range. The TSMA's stated purpose for this system is primarily to curb excessive fare-cutting competition that could undermine industry-wide efforts to reduce taxi oversupply in designated areas. If Company A's low fares are not contributing to such harmful, destabilizing competition but are, for example, expanding the overall market by attracting new customer segments who wouldn't use taxis at higher prices, then mechanically applying a standard, higher fare range to Company A without considering its specific business model and market impact could be deemed unreasonable and contrary to the TSMA's nuanced objectives.
    • Irrational Basis: If the new "publicly set fare range" was simply a mechanical carry-over of the old "automatic approval fare range" (which served a different purpose under the RTA – mainly administrative efficiency for standard fare applications) without a fresh, rational assessment based on the specific goals of the TSMA (i.e., targeted intervention against harmful competition in oversupplied areas), this could be argued as an irrational exercise of power.
  • Illegality of Applying "Disposition Criteria" Mechanically to Issue Fare Change Orders/Sanctions:
    • Even if the fare range designation itself is upheld, the application of Director B's pre-published "disposition criteria" (honken shobun kijun) to Company A could be challenged.
    • Failure to Exercise Discretion / Abuse of Discretion: If these criteria are applied rigidly, leading automatically from guidance to recommendation to fare change order to sanctions, without any individualized consideration of Company A's specific circumstances (e.g., its market-expanding rather than predatory pricing model, its compliance history under the RTA), this could constitute an illegal failure to exercise discretion (裁量権の不行使 – sairyōken no fukōshi) or an abuse of discretion where discretion effectively becomes zero (裁量権の零濫 – sairyōken no rei randa). Administrative agencies generally have a duty to consider the individual facts of a case, even when applying guidelines.
    • Unreasonableness of the Disposition Criteria Themselves: If the criteria leave no room for such individualized consideration and mandate a purely mechanical escalation of sanctions based solely on non-conformity with the fare range, the criteria themselves might be challenged as unreasonable or contrary to the nuanced purposes of the TSMA.

Conclusion

The regulatory landscape for taxi fares in Japan, particularly in areas designated under the Taxi Special Measures Act, presents significant challenges for operators wishing to maintain competitive, often lower, fare structures that were previously lawful. When confronted with administrative pressure to adopt new, higher "publicly set fare ranges" and the threat of sequential adverse dispositions for non-compliance, operators are not without pre-emptive legal recourse. Carefully structured prohibitory injunction suits against specific anticipated sanctions, or public law declaratory actions focused on affirming existing operational rights, may offer pathways to judicial review. The success of such actions will often depend on the evolving jurisprudence regarding pre-emptive challenges and the ability to demonstrate substantively that either the new fare range itself or its application to the specific operator is an unreasonable or unlawful exercise of administrative power, unsupported by the true objectives of the governing legislation.