Complaints procedure for private parties

Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?

Article 45, paragraph 1 of the JAMA provides that any person may, when he or she considers that a fact involving violation of the provisions of the JAMA exists, report the said fact to the JFTC and ask for appropriate measures to be taken. Paragraph 2 thereof provides that the JFTC, upon receipt of such report as prescribed in the preceding paragraph, shall make necessary investigations with respect to the case.

Regulatory enforcement

How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?

According to the JFTC’s annual report for 2017 (April 2017 to March 2018) issued in September 2018, the JFTC issued six formal orders regarding unfair trade practices within the past five years. Of these six cases, five concern the categories of violations discussed in this chapter, and two concern abuse of a superior bargaining position, one concerns interference with a competitor’s transaction, one concerns trading on restrictive terms and one deals with resale price restriction (ie, the JFTC issued its administrative order against Coleman Japan for its resale price restriction). In addition, it was publicly reported that, although the JFTC found that One Blue LLC’s conduct (ie, while making a FRAND declaration in connection with its IP consisting of the standard essential patent, notifying the transaction counterpart of Imation, the candidate for its licensing of the alleged infringement of its IP, because of its failure to get to an agreement with Imation on the terms and conditions of the licence) violated the law (ie, interference with a competitor’s transactions), considering the fact that the results of the violation were subsequently remedied appropriately, it would not issue its remedial orders. The JFTC press release regarding One Blue LLC, dated 18 November 2016, may be found at www.jftc.go.jp/en/pressreleases/yearly-2016/November/161118.html. See also ‘Update and trends’. These reports show these are the four major enforcement priorities regarding vertical restraints.

What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?

It is commonly understood that if it is found that a certain contract provision violates the law, it would basically be found void or unenforceable, although this is not necessarily an automatic decision. In addition, while the contractual provision that is found to violate antitrust law may be determined to be unenforceable, the other contractual provisions contained in the same agreement may still be found to be enforceable, even without such explicit severability clause.

May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?

The JFTC has the power to directly impose a monetary sanction (surcharge order), in addition to a cease-and-desist order, in connection with certain categories of the vertical restraints under the JAMA amendment in effect as of January 2010. Besides horizontal restraints, while those constituting private monopolisation or abuse of a superior bargaining position would be subject to a monetary sanction for the violation in question, for the four other categories subject thereto (ie, joint refusal to deal, discriminatory consideration, below-cost pricing and resale price restriction), it is applicable only when the same violation is repeated within 10 years.

Since the said amendment, there have been five cases where a monetary sanction was levied on target companies in connection with unfair trade practices (abuse of superior bargaining position), where it was alleged that the target companies forced their suppliers and so on to unduly bear additional costs for the benefit of those target companies, for instance, by forcing such suppliers to accept the return of unsold goods etc. The JFTC orders re Sanyo Marunaka, 58-1 Shinketsushu 312 (22 June 2011); Toys ‘R’ Us Japan, 58-1 Shinketsushu 352 (13 December 2011); Edion, 58-1 Shinketsushu 384 (16 February 2012); Ralse, 60-1 Shinketsushu 435 (3 July 2013); and Direx, 61 Shinketsushu 103 (5 June 2014) are all subject to the examination procedure with the JFTC’s hearing examiner. For Toys ‘R’ Us Japan, the JFTC issued its hearing decision on 4 June 2015, whereby JFTC’s order was partially reversed and partially retained.

See also question 55.

Investigative powers of the authority

What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?

Under article 47 of the JAMA, the JFTC may:

  • order persons concerned with a case or witnesses to appear to be interrogated, or collect their opinions or reports;
  • order expert witnesses to appear to give expert opinions;
  • order persons holding books and documents and other materials to submit such materials, or keep such submitted materials in its custody; and
  • enter any business office of the persons concerned with a case, or other necessary sites, and inspect conditions of business operation and property, books and documents, and other materials.

Although these powers are available only within its jurisdiction in Japan, the JFTC has demanded information from a supplier domiciled outside Japan (through its representative in Japan), based on the power in the first bullet point.

Private enforcement

To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?

Non-parties do not have standing in private enforcement unless it is found that the agreement at issue causes an anticompetitive effect on such non-party. Parties to agreements can bring damage claims as well as injunction claims at the competent district court. The length of time that a company should expect for such a private enforcement action would depend on the facts and situation. Japanese courts do not usually conduct consecutive-day concentrated hearings or trials, so if witness examination is required, it would likely take at least one year.