Understanding Japan's approach to competition and big data

25 July 2017

Understanding Japan's approach to competition and big data

iStock / zhanghaitao

Interaction between competition and big data is globally discussed. Japan recently addressed this cutting-edge issue through a report published by a study group at the country's Fair Trade Commission. Yusuke Takamiya, an antitrust attorney at Mori Hamada & Matsumoto and a visiting researcher at the Competition Policy Research Centre at the Japan Fair Trade Commission, explores Japan's approach by outlining the report together with relevant developments.

A study group report on data and competition policy


The JFTC study group on data and competition policy mainly consisted of academic professionals and antitrust law practitioners. Their report, released on 6 June, discusses how Japan's Anti-Monopoly Act may address issues caused by today's data-driven society.

The report clearly endorses the notion that accumulation and utilisation of data promotes competition and creates innovation. On the other hand, it also mentions that some situations justify intervention under the Anti-Monopoly Act, and provides possible application of the Act in each such situation. 

The report provides some suggestions for analysing competition concerns when business combination accompanies significant data accumulation, including that free services such as social networking services can be recognised as a relevant market for the purpose of market definition. 

With respect to competition analysis, the report suggests that whether a proposed business combination with data accumulation harms competition should also be examined from the following perspectives: competition for artificial intelligence techniques or goods and services related to data; or competition in a "data market", in the situation where similar data are bought and sold.

As for data collection, the report says it may be an abuse of market power when a company with a superior bargaining position unilaterally demands that the other company provide data to it when the latter company wants to enter an alliance with the former company. In addition, the report points out that a digital platform's collection of personal information that does not accord with relevant laws in Japan may be an issue for antitrust law if its service "locks in" the customers, although such conduct is primarily addressed by the Act on the Protection of Personal Information.

Regarding data hoarding, the report suggests that refusing competitors and/or customers access to data may be a violation of the Anti-Monopoly Act if the data is essential for competitors' business in certain conditions. These would be where the refusal of access has no reasonable grounds other than exclusion of the competitor, based on the fact that the data has been disclosed to the competitor; or the refusal of access may result in exclusion of the competitor based on the company's obligation to allow customers to access the data.

The report also suggests that it may be a violation of the Act in certain conditions if a company ties data provision and data analysis services together, or demands that its customer not trade with its competitors on condition of providing data or analysis techniques. 

While the report indicates that joint collection and joint use of data generally fosters competition, it notes that businesses should pay attention to joint data collection that would allow estimation of competitors' price and output.

Reflection from Society and Business Community

The media covering the release of the report has been rather sensationalist at times.

For instance, one of the major Japanese newspapers covered the report with the headline, "The AMA will be applied to Big Data according to the JFTC-announced report." Also, an international media outlet that focuses on regulatory affairs reported the release of the report with a reaction of the business community that shows frustration over a potential deterrent effect on the business environment caused by the report. 

Media coverage may give the impression that the report reflects a brand new policy of the JFTC in handling big data issues. In light of the approach of the report, however, it is an issue of discussion whether such sensationalistic reflections from society and business community accurately reflect the nature of the report.


Approach of the report

It should be borne in mind that the report does not aim to provide a brand new approach to nor a new way of regulating competition in data-driven society.  

As mentioned above, the report generally emphasises positive effects on competition associated with accumulation and utilisation of data. In addition, though the report mentions some circumstances in which competition law issues may arise with regard to data accumulation or utilisation and tries to provide some suggestions on how to approach those issues, the suggestions provided in the report are basically guided from regular interpretation of the Anti-Monopoly Act. 

Since the Act has no exemption for accumulation or utilisation of data, it is natural that regular interpretations are applied to them. In this regard, the report may not provide substantial surprises for antitrust law practice in Japan.

Nonetheless, however, it seems that the report provides some interesting suggestions based on the meticulous observation of the latest discussion in international arenas such as the OECD and various jurisdictions.

The report's suggestions 

For example, the report clearly indicates that free services are to be recognised as relevant markets.  

Although the JFTC has previously defined a service-for-free business as a relevant market (eg, "non-paid video provision service" was defined in the Kadokawa/Dwango joint share transfer case), it still seems eye-opening that the report considers multi-sided markets and provides a clear view of the market definition in such markets as a general matter. In a process of defining a service-for-free market, the report discusses that demand substitutability shall be evaluated based on the result of the review of the customers' recognition on the target service - although the "small but significant and non-transitory increase in price" test is difficult to apply in defining a service-for-free market.

The report also provides an interesting discussion on merger review thresholds in Japan. Currently, merger review thresholds in Japan are defined primary by the relevant companies' domestic turnovers in Japan. Although even non-notifiable deals may also be subject to merger review under the existing system, the report suggests that the revision of the thresholds should be on the agenda when needed to make an appropriate assessment during the early stage of a deal that may create significant market power in relevant markets. This remark of the report may show the JFTC's clear concern about the deals that probably result in considerable data accumulation. 

As for specific conduct that may cause antitrust concerns with respect to accumulation and utilisation of data, the report discusses possible applications of the Anti-Monopoly Act for each type of conduct. 

For regulating anti-competitive practices, the Act has two primary legal tools in addition to the prohibitions of cartels and bid-rigging. One is the prohibition of abuse of dominance, or private monopolisation, as defined in articles 2(5) and 3; and the other is the prohibition of unfair trade practices as defined in articles 2(9) and 19.

Considering that unfair trade practices include various types of conduct, some of which prohibitions are not so common in other jurisdictions (eg, an abuse of superior bargaining position) and usually requires fact-specific and elaborate analysis, the report may increase predictability and legal stability for businesses by showing examples of the Act's application for each situation where it matters.

One should bear in mind that - unlike the European Commission's vigorous application of article 102 of the Treaty on the Functioning of the European Union against platform businesses such as Google - the JFTC takes a conservative view toward making a case under the clause prohibiting private monopolisation. In this regard, the possible applications of that clause suggested in the report seem relatively theoretical compared to ones of the prohibition of unfair trade practices.

As well as discussions of possible applications of the relevant clauses of the Act, the report provides some interesting suggestions. It discusses a situation where a platform company with market power can form, maintain or strengthen its market power by changing its data policy for customers - compare to the investigation by Germany's Federal Cartel Office against Facebook for alleged abuse of a dominant position in the social networking market. 

The report suggests that the Act on the Protection of Personal Information or other consumer protection laws are the primary choices to handle such situations. But it also argues that the Anti-Monopoly Act may be an option to address the issue when an anti-competitive effect arises, and identifies legal issues to consider when applying the prohibition of private monopolisation as well as prohibition of an abuse of superior bargaining position.

Interactions with Other Topics

Procedural reforms

The release of the report may have some interactions with procedural reforms currently ongoing in Japan.

The main topics of the procedural reforms are, among others, introductions of the commitment procedure and the discretionary fining system. 

Under the commitment procedure, the JFTC may terminate its investigation without issuing any cease-and-desist or administrative fining order when an investigated company voluntarily proposes effective remedies to the JFTC and the commission approves them. The law that introduces this procedure has been enacted but has not come into effect so far.

With respect to the amount of the administrative fine, unlike US and European enforcers, the JFTC has no discretion about the amounts. However, a recent report of the Anti-Monopoly Act study group, released as of 25 April, suggests that the JFTC be empowered with such discretion. On receiving the report, the JFTC may begin elaborate consideration of the introduction of the discretionary fining system. 

Since these procedural reforms will provide the JFTC with the power to complete its investigation in a more flexible manner, one expects that the agency may more aggressively enforce the Act against complex infringements.

Given that antitrust issues in today's data-driven society are rather complex compared to traditional infringements, equipping the JFTC with the above-mentioned flexible enforcement tools may be necessary when it takes actual enforcement actions against some antitrust concerns suggested in the report.

Algorithms and cartels

Data accumulation and utilisation also may cause competition issues in the form of collusion among companies, especially when data is used with algorithms. According to submissions to the OECD roundtables in 2017, some competition enforcers already have faced collusion among companies that made use of data and algorithms. 

Ukraine's Anti-Monopoly Committee investigated an anticompetitive concerted practice in retail food commodities market in Kiev and found that the use of optimised automated pricing systems by various distribution networks with the information provided from only one source created a mechanism substantially reducing the level of uncertainty.  

In addition, Russia's Federal Antimonopoly Service is currently conducting an investigation on software products used in sales of electronics and household appliances market on suspicion that the software products used for optimising price setting with various data might be used as programmes for identifying price deviations. 

There are vigorous discussions on whether collusions with algorithms need a new model of competition law to deal with. The JFTC plans to explore the issue shortly, as the report clearly mentions that it needs to be addressed.

A study group at METI

A different part of the government of Japan has also discussed big data and competition policy. 

The competition enhancement office of the Ministry of Economics, Trade and Industry (METI) is holding a study group "for ideal approaches to competition policies for the fourth industrial revolution," which released its report on 28 June. 

Although some people argue that it is not entirely clear how discussions of the METI study group are different from those of the JFTC study group, the METI group likely has paid more attention to encouraging growth in data-related industries in Japan through maintaining a fair competition environment because of METI's industrial policy mission. 

In its report, the METI study group categorises data-related businesses into four different models in accordance with the level of the utilisation of data, and suggests factors to be considered together with steps to be examined so as to analyse competition law issues in each model. Although the JFTC is the sole enforcer of the Anti-Monopoly Act, given that METI is involved in the enhancement of sound competition environment in Japan, conducting further analysis on the report of the METI study group is also important to foresee coming antitrust law and policy trends for data-related businesses.


Interaction between competition law and policy and data is becoming an important agenda in Japan. Though the JFTC study group report does not aim to provide an entirely new approach, its release is certainly an important milestone on the road to exploring this cutting-edge issue. We should understand the implications of the report correctly as well as some other developments that this article touches upon, and keep our eyes on ongoing discussions aimed at providing some guidelines on how businesses should care about competition rules in a data-driven society.

The views expressed in this article may not reflect those of entities with which the author is affiliated, including Mori Hamada & Matsumoto and the Competition Policy Research Centre of Japan Fair Trade Commission.

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