Anticompetitive unilateral conduct

Abuse of dominance

In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market power?

The AMA does not require a firm to have a monopoly or a certain level of market power for it to be held liable under private monopolisation. That said, because the restraint has to be ‘substantial’ for the purpose of private monopolisation, it is considered that market share of the violator (or combined market share of the violators) shall be substantially large in a particular field of trade (see question 32). There are two types of conduct that may be deemed private monopolisation: exclusion of competitors and controlling of competitors.

Anticompetitive unilateral conduct can also be recognised as constituting ‘unfair trade practices’ as long as this conduct falls within one of the categories stipulated by the AMA or designated by the JFTC and the activity tends to impede fair competition (see question 6).

Owing to the difference in the required level of restriction on competition between private monopolisation and unfair trade practices and most activities of private monopolisation overlapping with those of unfair trade practices (see question 6), private monopolisation has only been enforced in a very limited number of cases.

De minimis thresholds

Is there any de minimis threshold for a conduct to be found abusive?

The situation in Japan is far from being consistent with the concept of de minimis threshold. First of all, the AMA does not refer to any de minimis threshold. In addition, for unfair trade practice, the degree of anticompetitiveness is considered low (see questions 6 and 29). Further, in terms of abuse of superior bargaining position, which is one category of ‘unfair trade practice’, superior bargaining position is found if a party’s position is stronger than the other party, without any reference to the first party’s market share or turnover.

Market definition

Do antitrust authorities approach market definition in the context of unilateral conduct in the same way as in mergers? If not, what are the main differences and what justifies them?

The short answer is ‘no’. First of all, in the case of certain types of unfair trade practices, the JFTC’s position is that market definition is not necessary.

The Guidelines for Exclusionary Private Monopolisation under the Antimonopoly Act, issued by the JFTC on 28 October 2009 (the EPM Guidelines), state that the JFTC will ‘assess the scope influenced by the related trade depending on factors such as the objects, regions, and conditions of the conduct and trade and determine the scope where competition is substantially restrained’, while it could secondarily consider the substitutability, which plays the central role in merger case.

Establishing dominance

When is a party likely to be considered dominant or jointly dominant? Can a patent owner be dominant simply on account of the patent that it owns?

There is no definition of ‘dominant’ or ‘jointly dominant’ under the AMA. The meaning of the term ‘dominant’ may be different depending on the context in which the term is used, and the consequence of a firm being considered dominant is not clear. Nonetheless, the EPM Guidelines state that the JFTC, when deciding whether to investigate a case as exclusionary private monopolisation, will prioritise the case, among others, where the market share of a firm exceeds approximately 50 per cent. Thus, as a rule of thumb, a firm with a market share of more than 50 per cent will likely be considered dominant in the context of exclusionary or control types of private monopolisation and should use more caution than other companies.

IP rights

To what extent can an application for the grant or enforcement of a patent or any other IP right (SPC, etc) expose the patent owner to liability for an antitrust violation?

There has not been any case where a patent owner was held liable for an antitrust violation because of the application for patent.

In the area of trademark application, there has been a case of abuse of trademark applications where a dominant local newspaper company filed applications, to solely prevent a new entry and with no intention to use, for nine trademarks relating to the name of local newspapers to be used in the same region. In 2000, the JFTC issued a recommendation decision (which is similar to a consent decree) to prevent it from engaging in the same type of activity, because these activities were a part of exclusionary conduct that fell under private monopolisation (In re Hokkaido Shimbun). However, in the area of patent applications, such arguments would be quite difficult because the filing of applications for patent can seldom be exclusionary, no matter how many applications are filed.

The IP Guidelines do not suggest such a possibility either, even though they state that acquisition of technology used by competitors, followed by refusal to license, or collection of technology by competitors without any intention to use them, as well as exercising certain facets of a standard essential patent (like seeking an injunction against those who are willing to obtain a licence after a ‘fair, reasonable, and non-discriminatory’ declaration), could violate the AMA.

When would life-cycle management strategies expose a patent owner to antitrust liability?

The JFTC has never raised an issue of life-cycle management strategies in regard to an antitrust violation.

Historically, brand-name pharmaceutical companies used to sue generic pharmaceutical companies to delay the entry of a generic drug, on the ground that conducting tests necessary for an application of product-specific approval, under article 14 of the then-current Act during the effective term of the right to a patent that is used in the generic drug, is patent infringement. However, in 1999, the Supreme Court put an end to the argument by holding that such testing would fall under ‘working of the patented invention for experimental or research purposes’ and thus not be considered an infringement of patent rights.

Following this decision of the Supreme Court, it is said that brand name pharmaceutical companies are trying to delay the entry of generic drugs in another way (ie, on the grounds that there is an infringement of patents related to the manufacturing method, whose application was filed later than the one for substance patent).

Communications

Can communications or recommendations aimed at the public, HCPs or health authorities trigger antitrust liability?

While recommendation of a product would be unlikely to trigger antitrust liability, defaming products of competitors may give rise to antitrust liability. In the Daiichikosho case (2009), the IP holder’s refusal to grant a licence for certain popular tunes to a competitor in the karaoke machine industry, followed by spreading notices to the effect that the competitor’s karaoke machines will not be able play those popular tunes, was found to be ‘interference with a competitor’s transactions’. Foreign companies may also bear in mind that comparative advertisement is not widely seen in Japan; as such, any marketing activity that potentially involves downplaying a competitor’s products or services may easily draw the attention of the regulators.

Separately, overaggressive claims may result in violation of the PRA (see question 6) and the Act (see questions 5 and 40).

Authorised generics

Can a patent owner market or license its drug as an authorised generic, or allow a third party to do so, before the expiry of the patent protection on the drug concerned, to gain a head start on the competition?

Yes, it is possible. The first ‘authorised generic’ in Japan was launched in 2013. Such practice is not commonly seen in Japan, because the launch of an authorised generic generally results in a considerable decrease in the price of drugs at the most downstream level calculated according to a notification of the MHLW (see question 1), which has the effect of pushing down the prices at which drug manufacturers sell their drugs at upstream level.

Restrictions on off-label use

Can actions taken by a patent owner to limit off-label use trigger antitrust liability?

To the extent a patent holder’s restriction on off-label use is unreasonable, it may fall under ‘trading on restrictive terms’, one category of ‘unfair trade practices’. However, as the health insurance system is not applicable to off-label use and, at least generally, off-label use comes with higher risk, it is unlikely that such restriction will ultimately be found to be unreasonable. Moreover, as the JFTC is unlikely to be the governmental authority that is best suited to determine ‘reasonableness’ of restriction on off-label use, we do not believe that there will be any JFTC enforcement against such restriction in the near future.

Pricing

When does pricing conduct raise antitrust risks? Can high prices be abusive?

As the prices of drugs are highly regulated in Japan (at least at the most downstream level) (see question 1), it is unlikely that any pharmaceutical company would try to set high prices that may be challenged under the AMA. While OTC drugs are not subject to regulatory control, it is unlikely that demand for a particular OTC drug is so high that sellers thereof would try to set abusively high prices.

Sector-specific issues

To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?

There has not been any case reported in which courts or the JFTC took the specific features of the pharmaceutical sector into account when examining an antitrust issue. However, in a consultation case referred to in question 23, the JFTC accepted the parties’ statement that the medical drugs at issue had to be able to be supplied in a prompt and stable manner, even in cases of large-scale natural disasters. In this case, the JFTC might have implicitly taken the specific features of the pharmaceutical sector into account.