含羞草社区

The Japanese competition (antitrust) law is the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade, which is generally abbreviated as the antimonopoly act (AMA) in English. However, the “antimonopoly” aspect has hardly been enforced, and the name of the act does not match its enforcement reality. The AMA was enacted in 1947, and the Japan Fair Trade Commission (JFTC) has since accumulated enforcement experience, including in relation to foreign affiliated companies.

AMA regulatory types

The AMA comprises the following main categories of regulatory types.

(1) “Unreasonable restraint of trade”, which prohibits horizontal restrictions including bid-rigging and hardcore cartels. Violations are subject to: (a) criminal penalties for individuals and corporations (imprisonment and criminal fines); (b) a cease-and-desist order; and/or (c) an administrative monetary penalty (i.e. surcharges payment order) calculated at 10% of sales proceeds. Violations are also subject to civil litigation by victims.

(2) Business combination regulation (or merger filing), which requires that a written notification be filed with the JFTC in advance of any stock acquisition, merger, corporate split-up or business transfer exceeding a certain size, and that closing cannot take place until the maximum 30-day waiting period is completed. If the JFTC does not complete its examination within 30 days, it may initiate a second 90-day examination.

(3) “Private monopolisation” and “unfair trade practices” (excluding abuse of superior bargaining position), which govern vertical trading restrictions. Only private monopolisation is subject to criminal and administrative monetary penalties, but the legal requirements of private monopolisation and unfair trade practices overlap for the most part. They regulate exclusion of others, control of distribution process, and predatory pricing. They are also subject to civil litigation by victims.

(4) “Abuse of superior bargaining position” regulation restricts exploitation of vertical counterparties and aims to protect the weaker company. This clause does not apply only to companies with a high market share (e.g. dominant position), but also to companies if they have a relatively superior position to the other counterparty. The Subcontract Act and the Freelance Protection Act also support the enforcement of abuse of superior bargaining position.

Characteristics of enforcement

Compared to antitrust theory in the US or EU, which have developed through the accumulation of court precedents, the court precedents in Japan are still not enough to determine the interpretation of the AMA. Therefore, the criteria for application of the AMA have not been well discussed and, for example, the “per se illegal” category does not exist in Japan.

The AMA developed as an administrative law enforced by the JFTC, and the various guidelines of the JFTC are extremely important to understand enforcement of the AMA. Civil litigation is not active in Japan due to the lack of treble damages, class actions and presumption of damages provisions.

Although there are criminal penalties for individuals and corporations for unreasonable trade restrictions, there are about only 30 cases in the AMA’s history. In recent years, a leniency system (similar to amnesty in the US and leniency in the EU) was introduced, which exempts from all fines and criminal penalties those who first voluntarily report illegal activities to the JFTC, and this leniency system seems to work well.

One feature of the Japanese leniency system is that even those who voluntarily report to the JFTC and who are not the first whistleblower (the second, third, etc.) are also entitled to a certain amount of surcharge reduction depending on their level of co-operation with the JFTC.

There are no specific gun-jumping regulations in Japan for merger filing, but it could be considered an unreasonable restraint of trade or violation of the waiting period. Since a business combination with a high market share cannot be examined in the waiting period of 30 days, it is customary to initiate prior consultation with the JFTC before formal notification. The JFTC officials are flexible, and the company should take a proactive approach for merger filing.

Abuse of superior bargaining position is a system that does not exist in the US, and has developed differently in Japan from article 102 of the Treaty on the Functioning of the European Union (TFEU). As an important point, the JFTC has stopped formally issuing an order on abuse of superior bargaining position since the 2010s.

Instead, the JTFC enters into a type of settlement called “commitment procedure”, in which companies voluntarily resolve the problem, and the JFCT does not recognise illegal activities. Also, the JFTC has recently published names of companies on the grounds that they may have engaged in illegal activities.

Attorney-client privilege is partially granted, but not fully. The JFTC does not give the right to remain silent and does not allow attorneys to attend during interviews. Although what an attorney can do during a dawn raid is limited, the key point is effective negotiation through attorneys with the JFTC about the scope of the investigation.

The JFTC has the Consultation and Guidance Office, which deals with consultations from corporations on issues regarding the AMA. Companies including foreign affiliated companies can consult with the JFTC about concerns under the AMA in business schemes on a confidential basis. In addition, a consultation casebook is published annually (in Japanese only) and is a useful interpretive guide.

Antitrust enforcement in 2023

The JFTC reported on its enforcement of the AMA for fiscal year 2023, as set out below.

The JFTC issued four cease and desist orders against 18 businesses, approved five commitment plans as settlements, issued three warnings – price cartel, order adjustment and unfair trade practices – and announced three cautions or investigation terminations (two for abuse of a superior bargaining position and one for interference with trade against a competitor).

The JFTC issued administrative surcharge payment orders (i.e. fines or penalties) totalling JPY223.4 million (USD1.4 million) to 16 businesses. This is extremely low compared to the past.

The number of leniency applications filed in 2023 was 156, about double the number filed before the covid-19 pandemic.

Legislation and guidelines

Freelance Protection Act. Freelancers often have weak bargaining power and are forced to conduct business under unfavourable conditions. The Freelance Protection Act was enacted as a special act against abuse of superior bargaining position and is scheduled to come into force in November 2024. The contents include the obligation to make a written contract, not to set payment dates unreasonably late, restrictions on sudden contracts and considerations for childcare, etc.

Green Guidelines. The JFCT established the so-called Green Guidelines in 2023, and updated them in April 2024. The Green Guidelines promote efforts to reduce greenhouse gas emissions, and the guidelines explain when such efforts are illegal and when they are considered lawful for collaboration among horizontal competitors, which was previously thought to be an unreasonable restraint of trade.

Smartphone Software Competition Act. The Smartphone Software Competition Act was enacted on 12 June 2024, and will enter into force by 19 December 2025.

The act is applicable to specified smartphone software (mobile OS, app stores, browsers and search engines) and those that conduct business above a certain scale. The act prohibits designated operators from certain acts (prohibitions) and obligates them to take certain measures (compliance). The main prohibitions and compliance requirements are:

1. Do not prevent other operators from providing app stores;
2. Do not prevent the use of other billing systems;
3. Default settings must be able to be changed by simple operation and a selection screen for browsers, etc. must be displayed;
4. In a search, the company shall not give priority to its own services over those of other companies with which it is in competition, without justifiable reason;
5. The acquired data must not be used to provide competing services; and
6. Application providers must not be prevented from using functions controlled by the OS with the same performance as their own.

In case of a violation, the JFTC may issue a cease and desist order against the designated business operator or issue a surcharge payment order in an amount equivalent to 20% of the sales of the goods or services involved in the violation.