Japan: Fair Trade Commission

Seventieth anniversary of the Anti-Monopoly Act

In 2017, the Anti-Monopoly Act (AMA) commemorates its seventieth anniversary. In 1947, soon after the Second World War ended, the AMA was enacted and came into effect. The Japan Fair Trade Commission (JFTC) also marks 70 years of history as an enforcement agency of the AMA.

In the current economic society, securing the economic activity infrastructure of a fair and free competitive environment is essential to promote the sustainable and stable growth of the economy. The mission of the JFTC is to maintain a competitive environment to ensure appropriate functioning of market mechanisms, to contribute to the realisation of optimal allocation of resources through invigorating the market economy and enrichment of consumer interests and overall society. We believe that our role is to bring competition itself to non-competitive markets and further fair and free competition to competitive markets through the rule-making and law enforcement.

Keeping an eye on today’s issues, such as economic globalisation, the widening wealth gap and the evolving digital economy, and fixing our eyes on 10 or 20 years down the road, it is critical for us to push forward with a competition policy that leads to further innovation, consumer benefits and economic growth.

Law enforcement

The JFTC has vigorously enforced the AMA against anticompetitive activities and practices. During 2017, the JFTC issued nine cease-and-desist orders and the total amount of surcharge payment orders reached ¥7.5 billion, including such noticeable administrative cases as the bid-rigging conducted by manufacturing distributors selling equipment for fire rescue digital radio.

Also, in cases where the JFTC receives information regarding a suspected violation of the AMA in the IT/digital sector, its IT Task Force conducts an investigation in an efficient manner. Moreover, for the purpose of receiving the information regarding a suspected violation of the AMA in the IT/digital sector, the JFTC set the special contact point in October 2016.

In 2017, the JFTC closed an investigation against Amazon Japan G.K. on suspected violation of the AMA, taking into consideration that the parties concerned would promptly take voluntary measures to eliminate competitive concerns of the price parity clauses and the selection parity clauses (1 June 2017).

Merger review

The JFTC makes active efforts to operate merger regulations in an appropriate manner to ensure a competitive market structure in Japan. During 2017, the JFTC received 297 merger case applications. One case proceeded to secondary review and two secondary review cases (one of which is proceeded to secondary review in 2016) were closed. In January 2017, the JFTC closed the secondary review on the proposed acquisition of shares of Nisshin Steel Co, Ltd by Nippon Steel & Sumitomo Metal Corporation. Although this acquisition had a large impact on the steel industry in Japan, we approved it given the remedies such as providing competing companies with the licence of patents and business information. In December 2017 the JFTC also closed the secondary review on the proposed joint share transfer by The Daishi Bank, Ltd and The Hokuetsu Bank, Ltd without remedies.

In addition, in November 2017, for the purpose of ensuring the transparency of reviews undertaken by the JFTC and of improving the predictability of reviews on cases, the JFTC started to publish the list of merger notifications on a quarterly basis, which includes information on each case such as notification date, names of the parties and clearance date.

Guidelines and market surveys

It is also our task to make and revise guidelines to catch up with the changes in the economy and society in order to enhance predictability for enterprises and raise awareness of competition law and policy. In 2017, we revised guidelines as follows.

Revised ‘Guidelines for Proper Gas Trade’

As full liberalisation of entry to gas retail business would be in place from April 2017, the JFTC revised the Guidelines for Proper Gas Trade on 6 February 2017. Through this revision, examples were added to illustrate expected issues under the AMA caused by the recent system reform.

Revised ‘Guidelines for Proper Electric Power Trade’

As negawatt trade (specified wholesale supply) which allows resale of electricity saved by consumers would be institutionalised from April 2017, the JFTC revised the Guidelines for Proper Electric Power Trade on 6 February 2017. Through this revision, examples were added to illustrate expected issues under the AMA concerning actions by an electricity retailer or electricity generation utility that is a former general electricity utility in a certain area.

Revised ‘Guidelines Concerning Distribution Systems and Business Practices under the Antimonopoly Act’

To make the Guidelines easier to understand, versatile and useful for enterprises and trade associations, the JFTC amended the Guidelines on June 2017. These Guidelines are, therefore, wholly restructured especially by resorting the description of conduct by each standard. In addition to that, the standards are better clarified as follows:

• the Guidelines clarify the analytical process;
• stipulate the policy for vertical restraints related to online transactions; and
• add some case examples based on hearing decisions, court judgements and consultation cases.

Furthermore, the JFTC conducts market surveys and examinations of issues concerning competition policy in individual sectors. Based on the surveys, the JFTC has published reports including what activities are to be prohibited under the AMA, what practices are to be desirable and how regulations are to be deregulated in the view of competition policy. In 2017, the JFTC conducted surveys on the wedding service market, the funeral service market, LNG (liquefied natural gas) trades and trade in public junior high school uniforms.

Study group report on Data and Competition Policy

In recent years, it has been expected that knowledge derived from ‘big data’ analysis will inspire further innovation across the existing industrial boundaries in the context of the spread of the Internet of Things and the advancement of artificial intelligence-related technology. Under these circumstances, the JFTC established the ‘Study Group on Data and Competition Policy’ in Competition Policy Research Center (CPRC), and the Study Group has held six meetings since January 2017 to clarify the issues of competition policy and the AMA relating to accumulation and utilisation of data.

CPRC has compiled a report of the Study Group based on the discussions and published it in June 2017. This report mainly clarifies the views on data collection (eg, collection from client companies, data collection by digital platforms, collective data collection) and ‘data hoarding’, such as unilateral or collective refusal to access. This report also concludes that the current approach is applicable to most of those issues. The report points out that the following conducts related to data collection and utilisation could become a problem under the AMA.

Regarding unjust data collection, along with a business alliance, an enterprise in superior bargaining position as a party of the alliance unilaterally demands that the other party provides data to it. A digital platform (if its service ‘locks in’ the customers) collects personal data by unjust conduct under Japanese laws and regulations. Although such conduct fundamentally constitutes a problem under the Act on Protection of Personal Information, it could be subject to the AMA if it is liable to have harmful effects on competition.

As for unjust data hoarding by monopolistic or oligopolistic enterprises, it refers to a refusal to admit access to the data that are essential to competitors’ business and for which it is technically or economically difficult to obtain data substitutable by competitors or customers without justifiable grounds, for example, in the cases shown as follows:

• if the data has been disclosed to the competitors and there is no rational reason to do so other than exclusion of competitors; or
• if there is an obligation to allow customers, etc, access to the data and if refusal of access would exclude competitors.

Study group on human resource and competition policy

Based on the changes in lifelong-employment system and the appearance of online platforms that makes matching enterprises and workers easier, working style has become diversified (eg, freelance, side job) in Japan. On the other hand, it is pointed out that supply-demand balance becomes tight in some labour markets such as skilled labors as a result.

The JFTC has established a study group on human resources and competition policy in the CPRC to theoretically sort out the issues related to competition in human resources between employers – in particular no-poaching agreements, wage-fixing agreements and transfer restrictions against workers – although the study group will not review existing specific practices and not focus on specific industries. The study group held the first meeting in August 2017, and five meetings have been held by the end of 2017.

International cooperation

Facing the globalisation of markets, supply chain and business activities, the JFTC is constructing an international framework for further proceeding cooperation and information sharing with foreign authorities in case of investigations and merger reviews by expanding cooperation agreements, EPAs and memoranda that have attained a number of successful results in our enforcement activities. We also put weight on multilateral frameworks, such as the OECD, the ICN and UNCTAD, and maintain an active role in those frameworks.

In 2017, the JFTC concluded three memoranda of understanding with the Authority for Fair Competition and Consumer Protection of Mongolia, the Canadian Competition Bureau (CCB), and the Competition Commission of Singapore. In particular, the memorandum with CCB is the second international arrangement that focuses on international communication, including information obtained from alleged violators through enforcement activities, next to the arrangement with the Australian Competition and Consumer Commission. We continue to make efforts to build new memoranda of understanding with other foreign authorities. We also started negotiations to amend the ‘Agreement between the Government of Japan and the European Community Concerning Cooperation on Anticompetitive Activities’ (concluded in 2003). This amendment will also enable us to exchange information obtained from alleged violators through enforcement activities.

Furthermore, the JFTC has brought focus on technical assistance to younger competition authorities in foreign countries. In particular, the JFTC has mainly supported the competition authorities in East Asia.

Amendment to Antimonopoly Act

In December 2016, the amendment bill of the AMA passed the Diet of Japan. This amendment was based on the Trans-Pacific Partnership (TPP) agreement, which was signed in February 2016 by 12 countries, including Japan. There is an article that says: ‘Each party shall authorise its national competition authorities to resolve alleged violations voluntarily by consent of the authority and the person subject to the enforcement action.’ (chapter 16, article 16.2, 5.) Because the current AMA does not have such a voluntary consent system, a ‘commitment procedure’, the government of Japan submitted the amendment bill to the Diet to introduce the system. Then, it passed the Diet in December 2016. Believing we will be able to deal with more case investigations efficiently by this new procedure, we expect the amendment to become effective soon.

Our priority in 2018

As the guardian of the market, the JFTC has been playing an important role in eliminating anticompetitive acts that would harm economic growth and consumer benefits. Our enforcement activities motto is: ‘No competition, no economic growth’ – that is, free and fair competition is a very important engine for steady economic growth. Responding to the dynamic change of the global economy and rapid technological progress, we are determined to fulfil our mission, which is to make sure the market force works freely and fairly by keeping our market competitive.

The JFTC will further accelerate competition policy for realising vigorous economy based on free trade activities and innovation, and fulfilling consumers’ benefits, considering that it will become more important to promote innovation through dynamic competition and encourage sustainable economic growth. In 2017, the JFTC will continue all its efforts to ensure ‘fair and free competition’ as a competition authority, paying more attention to economic globalisation, digitisation and implementation of a system to enable further effective and efficient enforcement.