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This chapter provides an overview of developments relating to antitrust law in Japan and enforcements made by the Japan Fair Trade Commission (JFTC) from February 2021 to January 2022. While some activities, including dawn raids, may have been limited under covid-19 conditions, the JFTC continues to take enforcement action against cartel conduct and vertical restraints.
- No cease-and-desist order and surcharge (administrative fines) orders were issued for cartel or bid rigging in 2021
- Three cases were closed after the JFTC approved the parties’ voluntary proposals, while two cases were closed under the commitment procedure
- JFTC’s enforcement trends in the digital sector
Referenced in this article
- JFTC – Japan Fair Trade Commission
- Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (AMA)
- Criminal case on Pharmaceutical Wholesalers over Coordination of Bids by Japan Community Health Care Organization
- Surcharge Payment Order against Mainami Aviation Services Co, Ltd
- Approval of the Commitment Plan submitted by BMW Japan Corp
- Approval of the Commitment Plan submitted by Alcon Japan
- Closure of the investigation against Rakuten Group, Inc
- Closure of the investigation against Apple Inc
- Closure of the investigation against UNIQUEST INC
The Japan Fair Trade Commission (JFTC) is the enforcement authority in Japan for anticompetitive conduct prohibited by Japanese antitrust law – the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (AMA). The four main regulation areas of the AMA are:
- cartels and bid riggings;
- private monopolisation;
- unfair trade practices; and
- merger control.
The JFTC may issue a cease-and-desist order against a violation of the AMA and may impose surcharges (administrative fines) for certain conduct designated by the AMA.
Throughout 2021 and under covid-19 conditions, anti-cartel enforcement activities continued to be an important part of the JFTC’s enforcement efforts. The JFTC has also been taking proactive enforcement action in a number of non-cartel cases, including vertical restraints. The JFTC has expressed strong concerns about major companies in digital markets and has investigated them for their alleged anticompetitive conduct.
The amendment to the AMA came into full force in December 2020, one-and-a-half years after it was enacted in June 2019. This amendment includes the revision of the surcharges scheme and leniency programme. In accordance with the amendment, ‘Japanese attorney–client privilege’ was introduced under the JFTC’s rules on investigation. No enforcement and investigation under the revised leniency programme and the newly introduced ‘Japanese attorney–client privilege’ was announced in 2021.
In 2021, the JFTC did not issue any cease-and-desist orders for cartel or bid rigging cases. The media has reported a number of dawn-raids by the JFTC for suspected anticompetitive conduct during 2021. On 13 April, the JFTC conducted dawn raids on Kansai Electric Power Co, Inc (Kansai Electric), Chubu Electric Power Co, Inc (Chubu Electric), Chugoku Electric Power Co, Inc (Chugoku Electric), Chubu Electric Power Miraiz Co, Inc (Chubu Miraiz) and Toho Gas Co, Ltd (Toho Gas), and again on 13 July, targeting Kansai Electric, Chugoku Electric, Kyushu Electric Power Co, Inc (Kyushu Electric) and a subsidiary of Kyusyu Electric, and on 5 October, targeting Chubu Electric, Chubu Miraiz and Toho Gas. The JFTC launched a series of investigations into whether market deregulation has been impeded by the major players in the utilities market since the deregulation of gas and electricity in Japan more than five years ago. The JFTC has also been reported to have conducted dawn raids in industries other than the electric market, including pharmaceutical wholesalers for the alleged bid rigging in Kyusyu region, which is located in western Japan. Covid-19 has not stopped the authorities from conducting dawn raids, and this trend will likely continue in 2022. The authority also maintains a close relationship with competition agencies in other jurisdictions in respect of international cartels.
In addition, the JFTC has a policy to seek criminal penalties in cases that: (1) it considers as serious or having a widespread impact on consumer welfare; or (2) involve firms or industries that are repeat offenders or that have not complied with administrative measures issued by the JFTC. There was no case where the JFTC filed criminal charges in 2021.
Criminal case on bid rigging by pharmaceutical wholesalers
In December 2020, the JFTC filed criminal charges against three pharmaceutical wholesalers and their employees over their alleged bid rigging involving drugs purchased by the Japan Community Healthcare Organisation (JCHO).
The case came to light because of the 28 November 2019 dawn raid by the JFTC against four wholesalers, and later the 13 October 2020 dawn raid that was jointly conducted by the JFTC and the special investigation unit of the Public Prosecutors’ Office. One of the four wholesalers is reported to have been the first applicant for leniency in the case, and the JFTC refrained from filing criminal charges against the company.
Through the investigations, the JFTC found that in June 2016, at a conference room in Tokyo, five of the seven accused employees set the bid success rate of each of the three companies for orders from the JCHO in relation to the 57 hospitals the organisation operates. To accomplish the set success rates, the employees agreed on the successful bidder in each category of the ordered drugs and conspired to tender at prices that would allow the chosen bidder to win the bids. The JCHO holds the same bid every two years, and in June 2018, six out of the seven accused employees agreed to a similar arrangement for the bids for the JCHO’s 57 hospitals.
On 30 June 2021, the Tokyo District Court sentenced the three companies to a fine of ¥250 million each for their conduct in bid rigging and price negotiations for the sale of drugs to JCHO in 2016 and 2018. Their seven former executives were each sentenced to 18 to 24 months of prison, suspended for a term of three years.
The JFTC’s secretary general commented that bid rigging of necessities, such as drugs, has a serious and widespread impact on consumer welfare. The Ministry of Health, Labour and Welfare eliminated the sales data of the relevant purchases by the JCHO from their calculation basis of the market prices of drugs, which are used in the medical payment revision system once every two years. The Tokyo District Court was in consensus with the JFTC’s secretary general, stating within its reasons for the sentence that the affected bid price of ¥140 billion is considerable and that despite the defendants’ low profit rate, the impact of the defendants’ conduct on the Japanese nationals was considerable. The court also pointed out the defendants’ ‘deep-rooted’ culture of rigging bids in its judgement, foreshadowing the dawn raid by the JFTC against pharmaceutical wholesalers in Kyushu region in November 2021.
Private monopolisation is one of the four main regulation areas under the AMA, and it can be divided into two types: an exclusionary type and a control type. There are not many precedents that the JFTC found to be in violation of the regulation of private monopolisation.
Mainami Aviation Services case
The JFTC issued a cease-and-desist order on 7 July 2020 and a surcharge payment order (¥6 million) on 19 February 2021 against Mainami Aviation Services Co Ltd on its anticompetitive conduct, which was deemed an exclusionary type of private monopolisation. The last cease-and-desist order for an exclusionary type of private monopolisation was issued in 2009, and this is also the first case where the JFTC imposed surcharges for private monopolisation. Since Mainami Aviation Services continued the alleged conduct when the JFTC issued the cease-and-desist order in 2020 and the JFTC could not determine the amount of surcharge, the JFTC was unable to issue a surcharge payment order at that time.
Mainami Aviation Services supplies aviation fuel at airports located in Japan. At Yao Airport in Osaka Prefecture, the company was the sole supplier until a new company entered the market in 2016. After the new supplier started offering fuel at Yao Airport, Mainami Aviation Services notified its customers that it would not provide fuel to those who purchased from the new supplier, and required them to sign a disclaimer absolving Mainami Aviation Services from any responsibility for accidents caused by mixing its fuel with the new entrant’s fuel.
The company filed a lawsuit in court to cancel the cease-and-desist order and the surcharge payment order, arguing that the alleged conduct was a result of safety and quality control and that it did not intend to exclude its competitors. The court is expected to deliver a verdict in 2022.
Unfair trade practices
The AMA prohibits unfair trade practices, which consist of 12 types of conduct:
- refusal to deal (concerted or other);
- discriminatory pricing and discriminatory treatment;
- unjust low price sales;
- deceptive customer inducement;
- unjust high-price purchasing;
- tie-in sales;
- abuse of superior bargaining position;
- resale price restriction;
- dealing on exclusive terms;
- dealing on restrictive terms;
- interference with competitors’ transactions; and
- interference with internal operations of competitors.
The JFTC may issue a cease-and-desist order for unfair trade practices and may impose surcharges for certain types of unfair trade practice, as follows:
- concerted refusal to deal;
- discriminatory pricing;
- unjust low price sales;
- abuse of superior bargaining position; and
- resale price restriction.
Abuse of superior bargaining position
The JFTC has of late been proactively taking action against anticompetitive conduct deemed as abuse of superior bargaining position, in particular against the activities of platform operators, including Rakuten. The relationship between franchisor and franchisee has also been getting attention from the JFTC in terms of abusive conduct by franchisors.
When a company, by making use of its superior bargaining position over another party, establishes trade terms and conditions that are disadvantageous to the other party in light of normal business practices, it may be deemed to be committing an abuse of superior bargaining position.
The term ‘superior bargaining position’ means a relatively superior bargaining position as compared to the other transacting party. It is not required to have a dominant market position or an absolutely dominant bargaining position in a relevant market. For example, Company A makes a request that is substantially disadvantageous to Company B. Since Company B’s business would be substantially impeded if Company B encounters difficulty in continuing to deal with Company A, Company B is unable to refuse such a disadvantageous request. In such a case, Company A is deemed to have a superior bargaining position over Company B. In determining the presence or absence of a superior bargaining position, the JFTC considers:
- the degree of dependence of Company B on transactions with Company A;
- the position of Company A in the market;
- the possibility of Company B changing its business counterpart; and
- other facts that show Company B needs to carry out transactions with Company A.
This type of unfair trade practice has been found traditionally in the relationship between suppliers and retailers. The JFTC has been trying to expand the application of this regulation to several sectors, including digital markets, franchise business, the credit card market, start-up business and freelance business, and continues to monitor business activities in these sectors from the perspective of abuse of superior bargaining position.
Investigation closed under the commitment procedures or by accepting voluntary measures
Since the introduction of the commitment procedures in December 2018 under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the JFTC has closed several investigations regarding unfair trade practices under the commitment procedures.
Under the CPTPP, a member country is required to ‘authorize its national competition authorities to resolve alleged violations voluntarily by consent of the authority and the person subject to the enforcement action’. The commitment procedures allow the JFTC to close an investigation into suspected violations of the AMA, following a commitment provided by the relevant party to the JFTC.
The guidelines on the commitment procedures (Policies Concerning Commitment Procedures) issued by the JFTC in September 2018 include the basic framework for the commitment procedures, such as the scope of application and requirements of commitment measures to be submitted for approval, including typical examples, such as cessation of the suspected violation, development of a compliance programme and amendments to contracts. The guidelines also clarify that the commitment procedures are not to be applied to:
- hard-core cartels, including bid rigging and price-fixing;
- repeated suspected violations by the same entities within the previous 10 years; and
- other vicious and serious suspected violations that would be subject to criminal prosecution.
The commitment procedures enable competition law concerns to be solved swiftly and potential anticompetitive conduct to be terminated. When the proposed commitment measures are approved by the JFTC, neither a cease-and-desist order nor a surcharge payment order will be issued to the suspected party.
While five cases were closed in 2020 after the suspected companies submitted the commitments, of which two cases related to abuse of superior bargaining position, two to restrictive conditions and one to private monopolisation and interference with a competitor’s transaction, there were only two cases closed under the commitment procedures in 2021, of which one related to abuse of superior bargaining position and the other to restrictive conditions. As is the new trend, the JFTC closed the investigations after accepting the voluntary measures proposed by the party involving the alleged conduct rather than under the commitment procedures. The JFTC has not provided clear guidance on the distinction between the commitment procedures and the proposal of voluntary measures and has expressed the position that it would take most appropriate measures to resolve anticompetitive issues and restore competition promptly.
Cases closed under the commitment procedures
In 2021, two cases were closed under the commitment procedures. One of the cases related to abuse of superior bargaining position was an investigation against BMW Japan. BMW Japan was suspected of abusive conduct, including requests to its dealers to set unreachable sales targets and forcing them to purchase the cars before selling them to customers. The commitment proposed by BMW Japan included the termination of the alleged anticompetitive conduct and training for employees as the general proposals under the commitment procedures. Moreover, the company proposed to prepare guidelines on sales targets of dealers, which should be set based on discussions with dealers. Having accepted the commitment plan, the JFTC closed the case in March 2021 and did not rule on whether BMW Japan’s alleged conduct was an infringement of the AMA. Accordingly, no sanctions, including cease-and-desist orders, were imposed on BMW Japan.
In addition, the JFTC approved the commitments proposed by a contact lens manufacturer in March. The JFTC raided three contact lens manufacturers in June 2019 on suspicion that they had requested retailers of their disposable contact lenses not to display the retail prices in their advertisements and not to sell the lenses online to customers who had a prescription. While the manufacturers’ alleged conduct may be deemed restrictive and the type of unfair trade practice prohibited by the AMA, two of them proposed commitment plans that the JFTC accepted in June and November 2020. The remaining company also proposed a commitment plan that included ceasing the alleged anticompetitive conduct; giving notice to retailers, customers and employees about the cessation; and conducting training for employees like the two companies’ commitments. 
Cases closed by accepting voluntary measures
The JFTC closed three cases in 2021 after accepting the voluntary measures proposed by the suspected companies, rather than accepting the commitment plan under the commitment procedures. One of the cases was an investigation into Apple. The JFTC suspected that Apple might restrict business activities of app developers under the App Store Review Guidelines (Guidelines), under which app developers were required to use a specific payment system for sales of digital contents within the app, and the fee for using the payment system was charged on app developers. While app users can purchase digital contents via other distribution channels, including app developers’ website, the requirement under the Guidelines may restrict app developers from selling digital contents via channels other than the Apple-designated payment system. These conducts might be deemed restrictive conditions or private monopolisation, which are prohibited under the AMA. Apple voluntarily proposed to change the Guidelines to allow app developers of reader apps to link to their websites directly, and to address uncertainness on the Guidelines and the reasons for rejecting apps. Having accepted the voluntary measures, the JFTC closed the case in September 2021. 
Another case was an investigation against Rakuten, one of the biggest online mall operators in Japan, on suspicion of abuse of superior bargaining position. In February 2020, the JFTC filed a petition to the court for an urgent injunction order against Rakuten’s planned free shipping services programmes, which was withdrawn after Rakuten announced its decision to postpone the uniform introduction of the programmes. Under the free shipping services programmes, customers who spend ¥3,980 or more in Rakuten’s online mall would get free shipping, while suppliers would bear the shipping costs. The JFTC continued the investigation after the withdrawal of the petition and found that Rakuten forced some merchants to join the programme by implying a disadvantage, for instance, the products of merchants that did not join the plan were ranked lower in search results. In response to the JFTC’s investigation, Rakuten proposed voluntary measures including that Rakuten would respect the merchants’ decision on whether to join the programme and would not disadvantage non-joiners. The JFTC concluded Rakuten’s proposed measures would resolve its concerns and decided to close the investigation in December 2021.
In addition, the JFTC closed its investigation against a platform operator providing funeral services in December 2021 after it accepted the voluntary measures. While the JFTC did not announce the background and reasons for its decisions on the three cases clearly, the JFTC’s secretary general said that JFTC decided to accept the companies’ voluntary proposals since it was most appropriate to resolve the anticompetitive issues and restore competition promptly.
Digital markets and e-commerce
A new law affecting digital markets came into force on 1 February 2021 to ensure that platforms operate with transparency and fairness. Under the new law, major overseas/domestic digital platform operators designated by the authority (Specified DPF Providers) are required to disclose the terms and conditions of their contracts with users; take other measures, including the establishment of procedures and administrative organs to ensure the fairness of transactions and dispute settlement procedures; and submit annual reports and self-assessments to the authority on the status of their implementation of the above measures. Only large-scale online malls (where domestic sales in Japan of the operator and its users exceed ¥300 billion) and app stores (where domestic sales in Japan of the operator and its users exceed ¥200 billion) have been initially defined as Specified DPF Providers under the relevant rules. Digital platform operators that meet the thresholds submitted notifications, and the relevant authority has designated five overseas/domestic platform operators, including Amazon, Rakuten, Apple and Google, as Specified DPF Providers based on the notifications. When the authority finds any conduct that is deemed likely to violate the AMA, it will request that the JFTC take actions under the AMA.
The number of merger filings at the JFTC has been relatively stable, with only a slight decrease compared to the immediately preceding year. From April 2020 to March 2021 (FY2021), the JFTC accepted 266 notifications, of which 258 were cleared in Phase I (including 199 with early termination), seven were voluntarily withdrawn by the parties, and one was brought into Phase II. In terms of the competitive landscape between the parties, 176 involved horizontal overlaps, 118 involved vertical relationships and 125 involved conglomerate business combinations.
Effective use of pre-notification consultation with the JFTC was key to the high Phase I clearance rate. Parties may benefit from informal discussions with the authority during the pre-notification phase, which often extends to substantive competition issues. Sometimes, the parties discuss and agree on remedies to obtain conditional clearance during Phase I.
The JFTC is also keen to employ economic analysis in complex cases. Out of 10 notable decisions published by the authority for FY2021, four involved the use of economic analysis. The JFTC has announced the introduction of a new position of director in charge of economic analysis, which shows its considerable interest.
In 2021, two decisions relating to the digital market were announced by the JFTC: Integration of salesforce.com and Slack Technologies in July and Acquisition of Siltronic by GlobalWafers in November. These cases were reviewed in accordance with the amended portion of the Merger Review Guidelines, which provides key considerations for the authority’s scrutiny of digital markets.
In order to facilitate survival of regional banks and bus operators from the tough corners caused by the decrease of the population, temporary legislation for a period of ten years took effect in November 2020 to exempt mergers and joint operations between regional banks and bus operators from the merger control regulation, on the conditions that (i) the parties would be unable to survive without the proposed merger or joint operation; and (ii) there is no concern that the parties would unreasonably increase prices or otherwise cause disadvantages to customers. The competent regulatory authority and the JFTC are supposed to jointly review the eligibility for the exemption, and monitor the parties’ behaviour following the transaction. In 2021, the Ministry of Land, Infrastructure, Transportation and Tourism (MLIT) approved three proposed joint operations of regional bus operators in Kumamoto, Okayama and Maebashi respectively. Each joint operation enabled the operators to effectively coordinate the competing routes and their frequency.
The JFTC conducted several market studies and published reports on digital markets, including digital advertising and the data market as well as algorithms and AI. While the JFTC did not find any specific anticompetitive conduct in the market studies, it did flag a number of potential cases of anticompetitive conduct and made the relevant parties aware.
With regard to the market research on digital advertising, which was published in February 2021, the JFTC conducted a questionnaire survey of related businesses, including advertisers, advertising agencies and media companies, and consumers, and interviewed related businesses and digital platform operators such as Google, Yahoo, Facebook and Twitter. The JFTC indicated potential competition law issues regarding abuse of superior bargaining position, which digital platform operators may have against business partners, as well as other unfair trade practices, such as interference with competitors’ transactions. The Headquarters for Digital Market Competition, which was established in the Cabinet Secretariat in 2019 to promote competition and innovation in digital sector, also analysed the digital advertising market and published a report in April 2021. The report indicated that rules would be necessary to address the issues related to digital advertising, and the relevant authorities are considering having the digital advertising market be subject to the Digital Platform Transaction Transparency Act.
In response to the results of market studies, the JFTC often publishes related guidelines. In 2021, the guidelines on collaboration with start-up businesses and the revised guidelines on franchising business were published following the conduct of market studies regarding start-up business and franchising business in the convenience stores sector in 2020.
The JFTC has been conducting market studies regarding cloud services and smartphone OS markets. It continues to carefully scrutinise the digital sector as well as other sectors, and may conduct surveys or market research on these sectors if it considers it necessary.
Outlook in 2022
The JFTC is expected to continue to focus on cartel enforcements, enforcements against vertical restraints, particularly in digital markets, and merger control enforcements. In the area of cartel enforcements, it is worth observing how the new leniency regimes and attorney-client privilege will be applied in actual cases going forward.
 ‘The Fair Trade Commission’s Policy on Criminal Accusation and Compulsory Investigation of Criminal Cases Regarding Antimonopoly Violations’, the JFTC, revised 16 December 2020, p. 1 (www.jftc.go.jp/en/legislation_gls/210312.pdf).
 See the JFTC press release of 9 December 2020 (www.jftc.go.jp/en/pressreleases/yearly-2020/December/201209.html).
 See the JFTC press release of 7 July 2020 (www.jftc.go.jp/en/pressreleases/yearly-2020/July/200707.html).
 See the JFTC press release of 19 February 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/February/210219.html).
 ‘Policies Concerning Commitment Procedures’, the JFTC, published on 26 September 2018 (www.jftc.go.jp/en/legislation_gls/antimonopoly_rules_files/policies_concerning_commitment_procedures.pdf).
 See the JFTC press release of 12 March 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/March/210312.html).
 See the JFTC press release of 4 June 2020 (www.jftc.go.jp/en/pressreleases/yearly-2020/June/200604.html) and 12 November 2020 (www.jftc.go.jp/en/pressreleases/yearly-2020/November/201112.html).
 See the JFTC press release of 26 March 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/March/210326.html).
 See the JFTC press release of 2 September 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/September/210902.html).
 See the JFTC press release of 28 February 2020 (www.jftc.go.jp/en/pressreleases/yearly-2020/February/200228.html).
 See the JFTC press release of 6 December 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/December/211206.html).
 See the JFTC press release of 2 December 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/December/211202.html).
 See the JFTC press release of 7 July 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/July/210707.html).
 See the JFTC press release of 1 July 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/July/21071.html).
 See the JFTC press release of 26 November 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/November/211126.html).
 ‘Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination’, the JFTC, revised on 17 December 2019 (www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/191217GL.pdf).
 See the JFTC press release of 17 February 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/February/210217.html).
 See the JFTC press release of 25 June 2021 (https://www.jftc.go.jp/en/pressreleases/yearly-2021/June/210625.html).
 See the JFTC press release of 31 March 2021 (www.jftc.go.jp/en/pressreleases/yearly-2021/March/210331.html).
 See the JFTC press release of 29 March 2021 (www.jftc.go.jp/houdou/pressrelease/2021/mar/210329.html), which is available only in Japanese.
 See the JFTC press release of 28 April 2021 (www.jftc.go.jp/houdou/pressrelease/2021/apr/210428fcgl.html), which is available only in Japanese.
 See the JFTC press release of 27 November 2020 (www.jftc.go.jp/houdou/pressrelease/2020/nov/201127pressrelease.html), which is available only in Japanese.
 See the JFTC press release of 2 September 2020 (www.jftc.go.jp/houdou/pressrelease/2020/sep/200902_1.html), which is available only in Japanese.