Antitrust: restrictive agreements and dominance
The JFTC has also conducted investigations and enforced the law proactively in non-cartel cases (i.e., involving unfair trade practices such as abuse of superior bargaining position, especially in the IT and digital sectors). A contact hotline was set up in 2016 in such sectors, as well as in the agricultural and electricity and gas sectors, in order to gather information on conduct that may raise competition law issues. More than 100 contacts were received during the fiscal year ending March 2018. In 2018, the JFTC issued cease-and-desist orders in three non-cartel cases (relating to discriminatory treatments in a trade association and an agricultural cooperative association, and interference with a competitor's transaction). The JFTC also expressed strong concerns about major companies in the IT sector, as well as online platforms' activities, and probed several activities of such companies or platforms including Amazon, Airbnb and Apple on suspicion of infringing the AMA by abusing a superior bargaining position and exclusive dealing.i Significant casesAmazon case
According to the media, the JFTC raided Amazon Japan in March 2018, as it was suspected of having abused its superior bargaining position by requiring suppliers to bear the 'cooperation fees', which included a part of the discounting cost as well as the cost of updating the system. It would be difficult for the suppliers to refuse the requests from Amazon Japan, which has a strong position in the online retail market, and, as such, it may be considered as abusive conduct.
Previously, Amazon Japan was investigated from 2016 to 2017 on suspicion of restricting the business activities of sellers on the Amazon Marketplace by enforcing price parity clauses and selection parity clauses ('most favoured nation' clauses) in contracts. The JFTC closed the case in response to Amazon Japan's commitments to take prompt voluntary measures, including removing the clauses in question from the relevant contract to avoid a violation of the AMA.
The investigation concerning the abuse of superior bargaining position started within one year of the case relating to MFN clauses being closed and it is ongoing.Airbnb case
In October 2017, the JFTC raided Airbnb Japan, a Japanese subsidiary of a home-sharing platform, on the suspicion that it has restricted home management companies from doing business with Airbnb's competitors. These home management companies provide home lenders with a number of services such as communications with renters, management of reservations, or room cleaning.
Given the JFTC was concerned that such conduct might result in the exclusion of competitors from the market, during the JFTC's investigation, Airbnb Ireland UC and Airbnb Japan proposed a commitment to waive its rights to enforce these provisions. The JFTC determined that the proposed measures would address its concerns and decided in October 2018 to close its investigation in this case after confirming that such measures were complied with.
Similar to the Airbnb case, the JFTC probed a Japanese online pet shop for dogs and cats, 'Minnano Pet Online', for suspected infringement of the AMA by restricting certain breeders from posting advertisement on other online pet shops. Minnano Pet Online reported to the JFTC the termination of these restrictions, and, as a result of this, the JFTC decided to close the investigation in May 2018.Apple case
In July 2018, the JFTC decided to close an investigation against Apple, which it had been conducting since 2016.
Apple was suspected of restricting business activities of three domestic mobile network operators (MNOs), NTT Docomo, KDDI and SoftBank. This was allegedly done through the following clauses included in a sales agreement with the MNOs called 'the iPhone Agreement': (1) restrictions on the quantity of iPhones that the MNOs should place orders for with Apple Japan; (2) restrictions on the telecommunication service plan that the MNOs provided to iPhone users; (3) restrictions on the distribution in Japan of used iPhones that users traded with the MNOs; and (4) an obligation to provide subsidies that the MNOs and their sales agencies offered users purchasing iPhones. With regard to the above (1) through (3), the JFTC concluded that these provisions did not restrict MNOs' business activities since the relevant clauses were not compulsory and there was no penalty mechanism for failure to comply with the clauses. For the above (4), the MNOs and their sales agencies were required to provide subsidies to iPhone purchasers under the iPhone Agreement. The JFTC considered that such provision would have an effect of lessening competition between mobile telecommunication businesses by restricting the price reduction of telecommunication services and others.
Responding to the JFTC's concerns, Apple proposed to amend the iPhone Agreement to allow MNOs to offer iPhone purchasers a pricing plan for telecommunication services either with subsidies or without subsidies. After reviewing Apple's proposal, the JFTC determined that the proposed amendment would address the suspected violation of the AMA and decided to close the case.
Further, the media reported in August 2018 that the JFTC was investigating Apple on suspicion of hampering a competitor's dealing. In particular, in July 2017 Yahoo! Japan started a new online gaming service, which allowed users to play without downloading apps and would thus compete with Apple's App Store. Last autumn, however, Yahoo! suddenly cut its budget and ceased promotions for such services and, according to the media, this was due to pressure from Apple. It was said that Apple threatened Yahoo! Japan with a refusal to deal if it continued to expand the gaming service while Yahoo! Japan provides its apps through Apple's App Store. It appears the investigation is ongoing, although the JFTC has not made any announcements in respect of this case.ii Trends, developments and strategiesIntroduction of the Commitment Procedures
The amendment of the AMA introducing the Commitment Procedures came into effect on 30 December 2018 when the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) became effective. Under the CPTPP, member countries are required to 'authorise [their] 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 JFTC issued guidelines on Commitment Procedures (Policies Concerning Commitment Procedures) on 26 September 2018. These were finalised after a public consultation conducted from July to August 2018. The guidelines 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 Commitment Procedures are not to be applied to (1) hardcore cartels, including bid rigging and price fixing; (2) repeated suspected violations by the same entities within the previous 10 years; and (3) other vicious and serious suspected violation which would be subject to criminal prosecution.
Commitment Procedures enable competition law concerns to be solved swiftly and a 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.
Recently, the JFTC closed some of its investigations after the relevant suspected parties proposed voluntary remedies, such as the cases against Amazon in 2017, Airbnb and Apple as mentioned above. The Commitment Procedures may be applied to similar cases, such as private monopolisation or abuse of a superior bargaining position.iii OutlookTrade environment for digital platforms
The Japanese government intends to establish rules to deal with the rise of online platform businesses from a competition, information protection and consumer law perspective. In July 2018, three government agencies, the JFTC, the Ministry of Economy, Trade and Industry (METI), and the Ministry of Internal Affairs and Communications (MIC), established a panel consisting of academics and practitioners specialised in competition, information protection and consumer law in order to consult on this matter. On 12 December 2018, following a public consultation, the panel published an interim report.
The interim report first determined that digital platforms are likely to have a dominant or oligopolistic position due to concentration of data through network effects and scale of economy. It then reviewed several issues from each perspective. With regard to competition law, two issues were primarily addressed: (1) creating transparency to maintain fairness; and (2) implementing free and fair competition in the digital market. For the first point, as unclear transactional situations between digital platforms and their users might lead to anticompetitive practices, the interim report suggested that a large-scale comprehensive survey should be conducted to understand the current situation of digital platform businesses, and that a special unit should be established to perform research and analysis in this sector on a continuing basis. In relation to the second point, several matters were listed as needing further consideration, such as how network effects in multilateral markets or data accumulation would affect competition, and how mergers and acquisitions conducted by digital platforms should be assessed.
Following the framework announced by the JFTC, METI and MIC in accordance with the above interim report, the JFTC decided to launch a survey to analyse the current situation of digital platform businesses. In addition to a hotline set up in January 2019 to collect information relating to platforms' conduct, the JFTC plans to request information from users of digital platforms, by issuing an order under Article 40 of the AMA to gather information if necessary (this would be protected by non-disclosure agreements).Survey on e-commerce
In January 2018, the JFTC launched a survey on consumer e-commerce to consider competition law issues arising out of business practices in this sector and their pro- and anticompetitive effects. A questionnaire was sent to around 4,000 online retailers, consumer goods manufacturers and distributors in order to gather information about online sales methods adopted by manufactures and distributors, transactional terms and conditions between manufactures and distributors, and current practices in online transactions. In addition, the JFTC conducted interviews of online mall operators as well as online retailers and manufacturers.
According to the report issued in January 2019, three major online mall operators have a leading position in the online mall market since 50 to 70 per cent of retailers sell their products on these websites and 60 to 85 per cent of consumers shopped on the websites of these three malls. It is also said that they may have a superior bargaining position vis-à-vis business partners. The JFTC stated that it is highly likely that competition law issues may arise if they exclude other online mall operators from the market or unfairly change transaction terms with retailers. Further, the survey found certain cases where about one in four retailers had received requests relating to sales prices from manufacturers, and where manufacturers somehow restricted online sales in order to maintain a brand image, which might be regarded as a violation of the AMA such as resale price maintenance and dealing on restrictive terms, respectively. The JFTC will continue to gather information in this sector and take strict enforcement measures for breaches of the AMA, particularly focusing on conduct of online mall operators.Study group on business tie-up/collaboration
In December 2018 the CPRC, a research centre for the JFTC, established a study group on business tie-up/collaboration and started an analysis considering (1) systematic theories under the AMA surrounding business tie-up/collaborations reflecting recent practices; (2) individual or concrete considerations as per the categories of tie-up and collaboration (e.g., joint production, joint marketing, joint purchase, collaboration in logistics, joint R&D, collaboration in technologies, collaboration in standardisation); and (3) such types of tie-up or collaboration that have not been usual practice so far but are becoming more and more widely utilised. The study group is expected to publish a report in summer 2019.