2025.02.26

2024 (Gyo-Fu) 1

Minshu Vol. 79, No. 2

(Civil Case)Decision concerning whether the determination by the court of prior instance is illegal in the case where the court of prior instance determined that it is tentatively found that the change of the range of passenger fares for the motor carrier services for general passengers, which was made by the Director-General of a District Transport Bureau pursuant to Article 16, paragraph (1) of the Act on Special Measures Concerning Regulation and Vitalization of the Motor Carrier Services for General Passengers in Specified Areas and Quasi-Specified Areas, was made beyond the bounds of the Director-General's discretionary power or through an abuse of that power and therefore is illegal

Case of appeal with permission against the ruling rendered by the court of appeal to partially revoke the ruling to partially uphold a petition for a provisional injunctive order

Decision of the Third Petty Bench, quashed and decided by the Supreme Court

Tokyo High Court, Decision of April 16, 2024

In the case where, pursuant to Article 16, paragraph (1) of the Act on Special Measures Concerning Regulation and Vitalization of the Motor Carrier Services for General Passengers in Specified Areas and Quasi-Specified Areas, the Director-General of a District Transport Bureau changed the range of passenger fares for the motor carrier services for general passengers in the area designated as a quasi-specified area under Article 3-2, paragraph (1) of that Act, the court of prior instance determined that it is tentatively found that the Director-General made the change beyond the bounds of their discretionary power or through an abuse of that power and therefore that the change is illegal, on the grounds that in the process of setting the lower limit of the fare range, the Director-General did not take into consideration the degree of the change and the degree of the impact of the change on providers of motor carrier services for general passengers; under the circumstances described in this decision, such as where the Director-General set the relevant fare range after the change by the method outlined below, the abovementioned determination by the court of prior instance is illegal due to the error in the interpretation and application of the laws and regulations concerning the discretionary power to change the abovementioned fare range.

The upper limit of the abovementioned fare range is set by calculating expenses and reasonable profits for the motor carrier services for general passengers operated by the service providers extracted according to the prescribed criteria from among the standard providers of motor carrier services for general passengers that engage in efficient management that were selected from among the service providers with business offices in the relevant area by excluding service providers such as those operating on a small scale, those frequently causing traffic accidents, and those with a low operating ratio; and adopting a fare rate at which transportation revenue from such motor carrier services is balanced with expenses and reasonable profits thus calculated for those services.

The lower limit of the abovementioned fare range is calculated basically by the same method as that mentioned above; but in the calculation of expenses for the services mentioned above, with regard to specific items of expenses such as fuel and oil expenses, depreciation expenses for vehicles, and remuneration for directors, the lowest rate of expenses among the expenses incurred by respective service providers mentioned above applies.

(There is a dissenting opinion.)

Article 3-2, paragraph (1), Article 16, paragraph (1), and Article 16-4, paragraphs (1) through (3) of the Act on Special Measures Concerning Regulation and Vitalization of the Motor Carrier Services for General Passengers in Specified Areas and Quasi-Specified Areas; and Article 16, paragraph (2) of the Act on Special Measures Concerning Regulation and Vitalization of the Motor Carrier Services for General Passengers in Specified Areas and Quasi-Specified Areas (before amendment by Act No. 18 of 2023)

The decision in prior instance is quashed with respect to the part concerning the disposition to order a change to the fares, and the decision in first instance is set aside with respect to the quashed part.

The petition filed by the appellees with respect to the part mentioned in the preceding paragraph is dismissed.

The total court costs for the proceedings shall be borne by the appellees.

Concerning the reasons for appeal stated by the counsel for appeal, MATSUMOTO Shin, et al.

1. In this case, the appellees, which are providers of motor carrier services for general passengers (referred to below as "taxi service providers") that have their business offices in the area designated as the quasi-specified area under Article 3-2, paragraph (1) of the Act on Special Measures Concerning Regulation and Vitalization of the Motor Carrier Services for General Passengers in Specified Areas and Quasi-Specified Areas (before amendment by Act No. 18 of 2023; referred to below as the "Special Measures Act"), submitted a notification of fares that fall below the lower limit of the range of passenger fares for the motor carrier services for general passengers (referred to below as the "taxi services") as changed under Article 16, paragraph (1) of the Special Measures Act (the fare range designated or changed under that paragraph is referred to below as the "official fare range"); because there was a possibility that due to this notification, they might receive an order to change the fares issued by the Director-General of the Kanto District Transport Bureau under Article 16-4, paragraph (3) of that Act (referred to below as a "fare change order"), etc., the appellees filed an action for an injunctive order against a fare change order, etc., and while designating this action as the action on the merits, they seek a provisional injunctive order against a fare change order, etc. pursuant to Article 37-5, paragraph (2) of the Administrative Case Litigation Act.

2. According to the case records, the developments of this case are as follows.

(1) The appellees are taxi service providers licensed under Article 4, paragraph (1) of the Road Transportation Act (before amendment by Act No. 18 of 2023; the same applies below). They have their business offices in the area consisting of the special wards, Mitaka City, and Musashino City in Tokyo, which is designated as a quasi-specified area under Article 3-2, paragraph (1) of the Special Measures Act on the grounds that the taxi services in this area are likely to be in excess supply (this area is referred to below as the "Traffic Area").

(2) In February 2014, the Director-General of the Kanto District Transport Bureau to whom the authority of the Minister of Land, Infrastructure, Transport and Tourism was delegated (the Minister of Land, Infrastructure, Transport and Tourism or the Director-General of a District Transport Bureau to whom the authority of the Minister has been delegated is referred to below as the "Minister of Land, Infrastructure, Transport and Tourism or other relevant authority") designated the official fare range for the Traffic Area as the fare range within which the taxi services may be operated legitimately in the area. On August 30, 2019, the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority changed the official fare range upon the consumption tax increase.

(3) On October 11, 2022, the Director-General of the Kanto District Transport Bureau changed the official fare range for the Traffic Area as specified in the "Revision" column of Attachment 4 of the decision in first instance, with the applicability date being designated as November 14, 2022 (below, this change is referred to as the "Change"; the official fare range before the Change is referred to as the "Former Official Fare Range" and the official fare range after the Change is referred to as the "Official Fare Range"). As a result, both the upper limit and the lower limit of the official fare range for the Traffic Area were supposed to be raised beyond those of the Former Official Fare Range.

(4) a. In the public notice titled "Methods for Designating the Official Fare Range" (Public Notice by the Director-General of the Kanto District Transport Bureau, dated January 27, 2014), the Director-General of the Kanto District Transport Bureau specified the method for setting the official fare range for a specified area or quasi-specified area as summarized below (this method is referred to below as the "Fully Distributed Cost Method").

(a) The upper limit of the official fare range is set by calculating expenses and reasonable profits for the taxi services operated by the taxi service providers extracted according to the prescribed criteria (refereed to below as "service providers subject to cost accounting") from among the "standard providers of motor carrier services for general passengers that engage in efficient management" that were selected from among the taxi service providers with business offices in the relevant area by excluding taxi service providers such as those operating on a small scale, those frequently causing traffic accidents, and those with a low operating ratio; and adopting a fare rate at which transportation revenue from such taxi services is balanced with expenses and reasonable profits thus calculated for those services.

(b) The lower limit of the official fare range is calculated basically by the same method as that mentioned in (a) above, based on the idea that the lower limit is set as the fare rate at which income and expenses are balanced when service providers subject to cost accounting engage in particularly efficient management. In the calculation of expenses for the taxi services mentioned above, with regard to specific items of expenses such as fuel and oil expenses, depreciation expenses for vehicles, and remuneration for directors, the lowest rate of expenses among the expenses incurred by respective service providers subject to cost accounting applies.

b. The Director-General of the Kanto District Transport Bureau determined the Official Fare Range by the Fully Distributed Cost Method. No clear mistake or omission can be found in the calculation process.

(5) Before the Change, the appellees had operated the taxi services at the fares set within the Former Official Fare Range. As of November 11, 2022, after the Change, they submitted a notification to the Director-General of the Kanto District Transport Bureau concerning the fares they set within the Former Official Fare Range but below the lower limit of the Official Fare Range, as specified in Attachment 2 of the decision in first instance (this notification is referred to below as the "Notification").

3. The court of prior instance partially upheld the appellees' petition for a provisional injunctive order against a fare change order, determining as summarized below.

The discretionary power to change an official fare range is restricted to a certain extent from the perspective of protecting the business interests of taxi service providers. In changing an official fare range, the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority should take into consideration various circumstances, such as the degree of the change, the degree of the impact of the change on taxi service providers, the probability that the change would cause excessive fare competition in terms of the supply-demand situation of taxies, and the probability that such competition would lead to deterioration of the working conditions for taxi drivers. However, when setting the lower limit of the Official Fare Range, the Director-General of the Kanto District Transport Bureau at least failed to consider the degree of the change of the official fare range and the degree of the impact of the change on taxi service providers. The Director-General's determination was unreasonable, and it is tentatively found that the Director-General made the Change beyond the bounds of their discretionary power or through an abuse of that power and therefore that the change is illegal. Accordingly, the Director-General of the Kanto District Transport Bureau is not allowed to issue a fare change order on the grounds of the Notification, and the appellees' petition for a provisional injunctive order against a fare change order should be regarded as a petition that has been filed where the action on the merits seems well-grounded.

4. However, the abovementioned determination by the court of prior instance cannot be upheld, for the following reasons.

(1) a. Taxi service providers are in principle allowed to operate taxi services at fares they set themselves, although they need to obtain approval of the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority for the fares regarding their conformity to the prescribed criteria (Article 9-3, paragraphs (1) and (2) of the Road Transportation Act, paragraph (2) of the Supplementary Provisions). As a special rule applicable to fares in specified areas and quasi-specified areas, the Special Measures Act provide that taxi service providers with business offices in these areas must set fares within the official fare range (Chapter VIII; this special rule is referred to as the "official fare range system"). The purpose of this rule is understood as follows. Based on the presupposition that there is a risk of degradation of transportation services and safety along with the deterioration of the working conditions for taxi drivers in specified areas or quasi-specified areas where taxi services are found to be or likely to be in excess supply, the Special Measures Act provides for measures to solve or prevent such excess supply (Articles 8-2, 8-3, 8-7, 8-10, 8-11, 9, 10, etc.). Under the circumstances where there is a risk of excessive fare reduction competition among taxi service providers, there is a concern that taxi service providers would be reluctant to reduce the number of vehicles they operate due to fears of reduced income, thereby hindering the implementation of these measures. Because of this, the Special Measures Act is intended to temporarily restrict fare reduction competition by requiring that the fares in those areas be set within the official fare range.

b. Article 16, paragraph (2) of the Special Measures Act provides for the criteria for an official fare range as follows: the fare range is set by applying the standard fares calculated by adding a reasonable profit to a reasonable cost regarding the taxi services operated by standard taxi service providers engaging in efficient management (item (i)); the fare range does not treat any specific passengers in an unfair and discriminatory manner (item (ii)); and the fare range is not likely to cause an unfair competition among providers of motor carrier services for general passengers prescribed in Article 9, paragraph (6), item (iii) of the Road Transportation Act (item (iii)). In order to designate or change an official fare range in accordance with these criteria, it is vitally necessary to make a decision from the viewpoint of public interest based on specialized technical knowledge concerning the taxi services in the relevant specified or quasi-specified area, and therefore it is considered that a decision as to the designation or change of an official fare range is left to the discretion of the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority.

In view of the purpose of the official fare range system mentioned in a. above, it should be said that the Special Measures Act assumes as a matter of course that taxi service providers with business offices in a specified area or quasi-specified area would be subject to certain restrictions in setting fares for their taxi services. Even in light of the details of the criteria for an official fare range mentioned above, it is not understood that the Special Measures Act goes so far as to require the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority to take into consideration such various circumstances as pointed out by the court of prior instance when exercising their discretionary power to designate or change an official fare range from the perspective of protecting the business interests of individual taxi service providers that are currently operating taxi services in the relevant area.

As mentioned above, the Fully Distributed Cost Method is a method for setting an official fare range on the basis of the fare rate at which, with regard to the taxi services operated by the taxi service providers subject to cost accounting extracted from among the standard taxi service providers with business offices in the relevant area that engage in efficient management, transportation revenue from such taxi services is balanced with expenses and reasonable profits calculated for those taxi services. Such a method for setting an official fare range is designed while taking into account the business interests of taxi service providers in general with business offices in the relevant area and cannot be said to be unreasonable in light of the provisions of the items of Article 16, paragraph (2) of the Special Measures Act.

(2) In making the Change, the Director-General of the Kanto District Transport Bureau determined the Official Fare Range by the Fully Distributed Cost Method. In light of the explanation mentioned in (1) above, it cannot be said that the Director-General was required to further take into consideration such various circumstances as pointed out by the court of prior instance.

The court of prior instance determined that it is tentatively found that the Director-General of the Kanto District Transport Bureau made the Change beyond the bounds of their discretionary power or through an abuse of that power and therefore that the change is illegal, on the grounds that in the process of setting the lower limit of the Official Fare Range, the Director-General did not take into consideration the degree of the change of the official fare range and the degree of the impact of the change on taxi service providers. However, it should be said that this determination is illegal due to the error in the interpretation and application of the laws and regulations concerning the discretionary power to change an official fare range.

5. According to the above, the determination by the court of prior instance contains a violation of laws or regulations that has clearly influenced the judgment. The counsel's arguments are well-grounded, and the decision in prior instance should inevitably be quashed with respect to the part concerning the fare change order. There are no circumstances due to which the appellees' petition for a provisional injunctive order against a fare change order should be regarded as a petition that has been filed where the action on the merits seems well-grounded. Accordingly, the Court sets aside the decision in first instance with respect to the part that partially upheld that petition, and dismisses the appellees' petition concerning that part.

For the reasons stated above, the Court unanimously decides as set forth in the main text of the decision, except that there is a dissenting opinion by Justice UGA Katsuya.

The dissenting opinion by Justice UGA Katsuya is as follows.

Dissenting from the majority opinion, I consider that the determination by the court of prior instance can be affirmed and the appeal should be dismissed, for the following reasons.

1. The official fare range system should be considered to have been established for the purpose of avoiding a situation in which the deterioration of the profitability of the taxi industry resulting from a price competition at low fares that are so unprofitable that they could be described as dumping would cause taxi drivers to work longer hours under the commission system that is common in this industry, in an attempt to make up for a decrease in profits earned by the taxi service providers, and would result in compromising passenger safety. Although taxi drivers tend to be overworked, this is because they work on a commission basis. This problem should be addressed by means of labor regulations, such as controlling working hours and increasing the percentage of fixed pay, and there is no clear rationale to address this problem by controlling fare rates under the official fare range system. Therefore, it is particularly necessary to consider this system in a manner that it would not impose an excessive restriction on freedom of business activity. Consequently, if the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority, in setting an official fare range, rejects the fares notified by taxi service providers as illegal fares even when these taxi service providers have operated under efficient management at fares calculated by adding a reasonable profit to a reasonable cost, and approving such fares would not be expected to intensify competition with other taxi service providers and would not raise concerns about a decline in safety of the services provided by these service providers, such rejection of the fares deviates from the purpose of the official fare range system mentioned above and constitutes an excessive restriction on freedom of business activity and therefore it should not be permitted.

2. It seems that the appellees can set lower fares than those of other taxi service providers because they secure reasonable profits by focusing on reservation-based transportation services and providing services mainly to specific regular customers. Their fares set in this manner would not cause an unfair competition for excessive fare reduction. As mentioned above, the appellees operate their services based on a business model that is different from that of general taxi service providers, and their competitors are not service providers in the taxi industry but rather providers of other transportation services, such as buses, hire vehicles, and railways. Therefore, even if the appellees' fares that fall below the lower limit of the fare range calculated by the Fully Distributed Cost Method are approved, it is unlikely that their fares would intensify a competition with other taxi service providers. Furthermore, as the appellees secure reasonable profits as mentioned above, even if they are allowed to continue operating at the same fares as before, there is no concern that their taxi drivers would become overworked and passenger safety would deteriorate. However, there has been a significant revision of the official fare range through the Change and the upper limit of the Former Official Fare Range has come to significantly fall below the lower limit of the Official Fare Range, and as a result, the appellees are no longer able to operate at the same fares as before and are likely to face a management crisis due to a significant decrease in reservations caused by customers switching to providers of other transportation services, such as buses, hire vehicles, or railways, rather than service providers in the taxi industry.

It follows that the Director-General of the Kanto District Transport Bureau, in making the Change, should have been aware of the existence of such taxi service providers and careful to try to minimize the impact of the change on them.

Furthermore, the phrase "by applying the standard fares" as referred to in Article 16, paragraph (2), item (i) of the Special Measures Act does not require the uniform application of the criteria based on the fully distributed cost method that were applied in this case but should instead be interpreted as allowing fares to be set flexibly when the circumstances mentioned above exist.

According to the above, it should be said that the Change was made without giving consideration to its impact on taxi service providers such as the appellees, and that it deviates from the purpose of the official fare range system and constitutes an excessive restriction on freedom of business activity and therefore is illegal.

3. In addition, a quasi-specified area is to be designated when the taxi services in the relevant area are "likely to be in excessive supply" (Article 3-2, paragraph (1) of the Special Measures Act), and the designation is to be lifted when it is found that such circumstances no longer exist (Article 3, paragraph (3) and Article 3-2, paragraph (2) of that Act). Thus, the restrictions on the setting of fares under the official fare range are imposed based on the presupposition that the taxi services in the relevant area are likely to be in excess supply.

In the Traffic Area, taxi demand decreased temporarily during the COVID-19 pandemic (the Change was made as of October 11, 2022, when the pandemic had not yet come to an end completely), but as the pandemic came to an end, taxi demand recovered and rapidly increased due to inbound tourists. In addition, due to the difficulty in recruiting taxi drivers to make up for those laid off during the pandemic, the retirement of elderly drivers, and a surge in inbound tourism, the shortage in taxi supply has become a nationwide problem. In fact, in many traffic areas across the country, specified areas have been changed into quasi-specified areas and the designation of quasi-specified areas has been lifted one after another. Furthermore, a Japanese version of ride-sharing services has been introduced under certain conditions, starting in the Traffic Area in April 2024 and gradually spreading across the country.

Article 16-4, paragraph (3) of the Special Measures Act provides that when the Minister of Land, Infrastructure, Transport and Tourism finds that the notified fares do not conform to the official fare range, the minister "may order" the notifying service provider to change the fares, by specifying the time limit, but it does not state that the minister "must order" to that effect. The intention of this provision should be understood as follows. In the situation where changes in circumstances following the designation of a quasi-specified area would reasonably allow the designation to be lifted, such as in the Traffic Area, imposing a fare change order even on taxi service providers that have not engaged in any conduct contrary to the purpose of the official fare range system is highly likely to constitute an excessive restriction on freedom of business activity. Therefore, this provision grants discretion to the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority regarding the decision of a legal effect, that is, to decide whether to issue a fare change order. If the Minister of Land, Infrastructure, Transport and Tourism or other relevant authority issues a fare change order to the appellees so that they would operate at fares within the Official Fare Range, such order should be deemed to go beyond the bounds of their discretion to decide a legal effect or constitute an abuse thereof, and it should be judged to be illegal in this respect as well.

4. According to the above, the appellees' petition for a provisional injunctive order against a fare change order should be regarded as a petition that has been filed "where the action on the merits seems well-grounded," and a provisional injunctive order should be granted based on that petition.

Justice HIRAKI Masahiro

Justice UGA Katsuya

Justice HAYASHI Michiharu

Justice WATANABE Eriko

Justice ISHIKANE Kimihiro