Anticompetitive agreements

Assessment framework

What is the general framework for assessing whether an agreement or concerted practice can be considered anticompetitive?

Horizontal agreements and concerted practice are typically analysed in terms of unreasonable restraint of trade among the three types of violations under the AMA (see question 6). For hardcore cartel types of horizontal agreements, if the combined market share of the participants to a conspiracy is significant, it is likely that an unreasonable restraint of trade will be found. In the case of horizontal agreements that are not hardcore cartels, the rule-of-reason test will apply.

As concerted practice itself cannot constitute a violation of the AMA, for a concerted practice to be characterised as a violation, a conspiracy (including those that are established after applying rule-of-reason test) must be established.

Vertical agreements can be categorically ruled out from unreasonable restraint of trade (In re Asahi Shimbun, Tokyo High Court judgment, 9 March 1953). For more information on vertical agreements, see question 24.

Technology licensing agreements

To what extent are technology licensing agreements considered anticompetitive?

The Guidelines for the Use of Intellectual Property under the Antimonopoly Act issued by the JFTC on 28 September 2007 (the IP Guidelines; most recently amended on 21 January 2016) set out the extent to which technology licensing agreements are considered to be anticompetitive. Examples of agreements ancillary to technology licence agreements that are, in principle, considered to be anticompetitive are those that:

  • prohibit a licensee from research and development of the licensed technology or competing technologies; or
  • oblige a licensee to assign improved technology, or grant an exclusive licence for that technology back to a licensor.

The IP Guidelines further cite, as examples of less but still potentially anticompetitive ancillary agreements, agreements that are considered anticompetitive to the extent that their effect may be to impede fair competition that:

  • prohibits a licensee from selling or manufacturing competing products; or
  • obliges a licensee to pay an amount of royalties, which is not calculated according to the use of licensed technology.

However, according to the IP Guidelines, in principle, it is not considered as unfair trade practice for a licensor to:

  • restrict the purpose of a licensee (such as a licence only for either domestic sales or export);
  • restrict the location of production; or
  • set a minimum requirement in relation to the amount of production.
Co-promotion and co-marketing agreements

To what extent are co-promotion and co-marketing agreements considered anticompetitive?

The anticompetitive effect of co-promotion and co-marketing agreements are evaluated on the basis of a rule of reason. These agreements can be pro-competitive, because they can reduce transaction cost or result in improved economies of scale. This is particularly true where promotion or marketing by one of the firms involved is too risky or time-consuming and the relevant pharmaceutical products cannot be sold in Japan without co-promotion or co-marketing. However, such agreements may be considered anticompetitive, because they are in most cases agreements among competitors and may reduce competition between the parties to some extent.

Where the combined market share of parties to such co-promotion or co-marketing agreements is large and the parties want to reduce the risk of such agreements being considered anticompetitive, it would be advisable not to prohibit them from selling passively.

Other agreements

What other forms of agreement with a competitor are likely to be an issue? How can these issues be resolved?

An agreement with a competitor is most likely to be deemed anticompetitive if it is characterised as a hardcore cartel. However, a joint venture can be pro-competitive and is generally evaluated on the basis of the rule of reason.

The JFTC stated in 2004, in response to a consultation request, that it was not against the AMA for two pharmaceutical companies to establish a joint distribution department (or channel) for medical drugs. This was as long as the exchange of information was blocked by a firewall, and the competition between the manufacturing and sales departments of these pharmaceutical companies survived the establishment of the joint distribution department. The JFTC did admit that if each company had access to information regarding the sales of the other company, such access could be used to avoid competition.

Issues with vertical agreements

Which aspects of vertical agreements are most likely to raise antitrust concerns?

Vertical agreements are typically categorised as unfair trade practices among the three types of violations under the AMA (see question 6). In the pharmaceutical sector, resale price maintenance, one of the unfair trade practices, would most frequently raise antitrust concerns.

In 1991, the JFTC ordered Eisai Co Ltd, one of the leading pharmaceutical companies in Japan, to withdraw its directions to retailers that Eisai’s vitamin E products be sold at the retail price stipulated by Eisai and that retailers should not resell the vitamin E products to other retailers, as it held that these directions constituted ‘unfair trade practices’.

Patent dispute settlements

To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?

There has not been any case where the settlement of a patent dispute was challenged as an antitrust violation. There are no guidelines either. However, theoretically, if competitors reach a settlement of a patent dispute and the settlement includes provisions that substantially restrain competition in a particular field of trade, the competitors will be held liable for an unreasonable restraint of trade (see question 20).

Joint communications and lobbying

To what extent can joint communications or lobbying actions be anticompetitive?

In the Paramount Bed case (1998), a dominant manufacturer of beds for medical use approached an official of the Tokyo metropolitan government and influenced said government to adopt a specification for beds that contained its IP rights by misrepresenting that the specification somehow could also be reasonably satisfied by its competitors, effectively excluding the business activities of its competitors. The JFTC held that the activities of Paramount Bed Co, Ltd constituted private monopolisation (exclusionary type) (see question 6).

Public communications

To what extent may public communications constitute an infringement?

Under the AMA, conscious parallelism is not a violation. As such, even if company A makes a press statement to raise a price and Companies B and C follow suit, unless and until a conspiracy that falls under unreasonable restraint of trade is found (see questions 6 and 20), no infringement will be found. However, a conspiracy is not limited to only explicit conspiracy, but instead includes implicit conspiracy.

Exchange of information

Are anticompetitive exchanges of information more likely to occur in the pharmaceutical sector given the increased transparency imposed by measures such as disclosure of relationships with HCPs, clinical trials, etc?

Consistent with similar initiatives in other jurisdictions, a number of trade associations (including the JGA and the JPMA (see question 11)) have published guidelines on transparency with regard to the relationship between pharmaceutical companies and medical institutions. Similarly, certain information on ongoing clinical trials is available at various sources, including the MHLW website. However, we are unaware of any influential arguments that such initiatives for transparency have increased the likelihood of anticompetitive exchanges of information. Conscious parallelism is not a violation of the AMA (see questions 6 and 20).