Practical cross-border insights into vertical agreements and dominant firms

Vertical Agreements andDominant Firms

2023
Seventh Edition
Contributing Editor:

Charles F. (Rick) Rule
Rule Garza Howley LLP

Table of Contents

Q&A Chapters
1

9

19

27

Australia
Johnson Winter Slattery: Sar Katdare &Morgan Blaschke-Broad
Belgium
Janson: Bruno Lebrun, Candice Lecharlier &Wafa Lachguer
BrazilCampos Mello Advogados: Luciana Martorano &Maria Wagner
CanadaBlake, Cassels & Graydon LLP: Randall Hofley,
Kevin MacDonald & Tori Skot

35

China
Shihui Partners: Yun Bi & Xiaoni Li

44

European Union
Faros: Emmelie Wijckmans & Frank Wijckmans

52

60

Finland
Borenius Attorneys Ltd: Ilkka Aalto-Setälä,
Henrik Koivuniemi & Leo Rantanen
Germany
Heuking Kühn Lüer Wojtek: Dr. Stefan Bretthauer &Dr. Reinhard Siegert

71
87

99

107

114
121

128

India
AZB & Partners: Bharat Budholia & Shaurya Kumar
Japan
Iwata Godo: Shinya Tago, Manabu Eiguchi &Landry Guesdon
North Macedonia
Debarliev, Dameski & Kelesoska Attorneys at Law:
Jasmina Ilieva Jovanovik & Eleonora Mishevska
Philippines
SyCip Salazar Hernandez & Gatmaitan (SyCipLaw):
Rolando V. Medalla, Jr. & Joanna Marie O. Joson
Singapore
Lee & Lee: Tan Tee Jim, S.C.
Turkey/Türkiye
ELIG Gürkaynak Attorneys-at-Law:
Dr. Gönenç Gürkaynak & O. Onur Özgümüş
USA
Rule Garza Howley LLP: Charles F. (Rick) Rule,
Daniel J. Howley & William E. (Bill) Dolan

Chapter 10

Japan

Japan
Shinya Tago

Manabu Eiguchi

Iwata Godo

12

General

1.1 What authorities or agencies investigate andenforce the laws governing vertical agreements anddominant firm conduct?

The Japan Fair Trade Commission ( JFTC) is the sole enforcement agency established under the Act on the Prohibition ofPrivate Monopolisation and the Maintenance of Fair Trade (ActNo. 54 of 14 April 1947, as amended) (AMA).   It is an independent administrative commission. Its General Secretariat
consists of the Secretariat, the Investigation Bureau and theEconomic Affairs Bureau (including the Trade Practices Department). The Investigation Bureau is in charge of investigations
and the issuance of orders. Criminal sanctions are imposed bya criminal court based on prosecution by the Public Prosecutor’s Office, but the latter cannot prosecute antitrust violations
and seek a criminal indictment without the JFTC’s accusation.
1.2 What investigative powers do the responsible
competition authorities have?

The JFTC has very broad investigative powers. Under the
AMA, 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 keeping books and documents and othermaterials to hand over such materials, or keep these materials in its custody; and■enter the business premises of the persons concerned witha case, or other relevant sites, and inspect conditions ofbusiness operation and property, books and documents,and other materials.
In a criminal investigation, in contrast with administrative investigations, the JFTC must obtain the court’s permission to take theabove steps (except for interviewing suspects and witnesses andrequesting explanations), and a warrant is needed to conduct an
on-site inspection.   The AMA provides for criminal sanctions(imprisonment of up to one year or a fine of up to JPY3 million)
for any individual who refuses, obstructs or evades and eludes
inspection.  Companies can also be fined up to JPY200 million.
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Landry Guesdon

1.3 Describe the steps in the process from the openingof an investigation to its resolution.

Vertical agreements and dominant firm conduct can be challenged by third parties, either as part of a JFTC investigation
or in private litigation. The JFTC can start investigations on
its own initiative based on its own internal information. Third
parties can report suspected violations to the JFTC under
Article 45 of the AMA.   The JFTC must consider the allegations and if the report is sufficiently detailed and in writing, the
JFTC must let the third party know whether it will take action
in response to the report.
When the JFTC becomes aware of suspected AMA violations, whether on its own initiative, after being tipped off by
an employee or a whistleblower, or following a third-party
complaint or notification as aforesaid, it first conducts a casereview and analysis before deciding whether or not to open an
investigation (and, if it so determines, whether to conduct anadministrative investigation or a compulsory investigation of
criminal offences, the latter being typically reserved for pricefixing and bid-rigging, and (potentially) private monopolisation).
The JFTC will issue a prior notice of a cease-and-desist order
if it has identified AMA violations.  Otherwise, the JFTC candecide to close the investigation or simply issue a warning or
caution. If the conduct warrants a surcharge payment order, the
JFTC also issues a prior notice of surcharge payment order. The
recipient can present its views and submit evidence to challenge
the upcoming issue, and the JFTC then decides whether to issue
a formal order.
1.4 What remedies (e.g., fines, damages, injunctions,etc.) are available to enforcers?

The JFTC has broad authority to order enterprises engaged in
private monopolies or unfair trade practices to cease and desist
such conduct, transfer part of their business or take other measures necessary to put an end to such conduct. The JFTC typically orders enterprises to cease and desist the conduct (or makesure it has been discontinued), not to engage in this conduct in
the future and to take measures to restore competition in therelevant market and prevent the recurrence of violations. The
JFTC has the authority to order other necessary measures to

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eliminate the conduct and its anti-competitive effects. Administrative and criminal fines can be imposed under the AMA (seequestion 1.5).
1.5 How are those remedies determined and/or
calculated?

Surcharges. The JFTC is required to impose surcharges(administrative fines) if an enterprise is found to be engaged
in a certain conduct. The amount of surcharge is calculated
by applying certain rates to the sales of the relevant goods orservices during the violation period (up to 10 years). The sales
calculation methods and surcharge rates differ according to thetype of conduct:■
Private monopolisation by controlling business activities,
10% of sales (increased by 50%, if the enterprise has beenordered to pay surcharges or subject to a similar order for
private monopolisation or restraint of trade during thepast 10 years), and private monopolisation by specified
exclusionary conduct, 6%.
■
Unfair trade practices (concerted refusal to deal, discriminatory treatment, predatory pricing and resale price maintenance (RPM) corresponding to a repeated violation
within 10 years, 3% of sales. A rate of 1% and a different
calculation method apply to abuses of superior bargaining
position (ASBP) for which a payment order can be imposed
for the first violation.
Fines. Criminal sanctions are also available for private monopolisation under the AMA but have so far never been imposed.  
Enterprises face a maximum criminal fine of JPY500 million.
1.6 Describe the process of negotiating commitments
or other forms of voluntary resolution.

The AMA does not provide for any formal settlement procedure
with the JFTC. In practice, it is possible to voluntarily offer
remedies to the JFTC when it is considering issuing a cease-anddesist order. A commitment procedure has been introducedin the AMA, and the JFTC has adopted commitment procedure rules before publishing related guidelines in 2018. Under
this procedure, an alleged violator can voluntarily resolve AMA
violations by entering into an agreement with the JFTC as analternative to the standard procedure under which the JFTC
issues a cease-and-desist order.   Remedies are identified anddocumented in a plan to be approved by the JFTC aiming at
eliminating violations and competition concerns.
The Code of Criminal Procedure (Act No. 131 of 1948)
provides for a plea-bargaining scheme: an enterprise or individual accused of AMA violations can enter into an agreementwith the prosecutor under which the accused agrees to cooperate through the provision of evidence or testimonies that canhelp convict a third party (an enterprise or individual) and in
exchange the prosecutor agrees to drop or reduce the criminal
charges against the accused.
1.7 At a high level, how often are cases settled
by voluntary resolution compared with adversarial
litigation?

In fiscal year 2022 (1 April 2022 to 31 March 2023), commitment plans were accepted with three companies. One of thesecases concerned trading on restrictive terms (parity/most-favoured nation clauses (MFNs)), one related to interference witha competitor’s transactions (urging municipalities to include in

their orders specifications making it difficult for certain competitors to tender) and one concerning RPM.  In 2022, the JFTC
closed one case after accepting voluntary measures proposed by
the alleged violator rather than accepting a commitment planunder the commitment procedure.
In April 2023, a drugstore chain settled an ASBP probe by
the JFTC under the commitment procedures, agreeing to repay
JPY750 million to its suppliers to compensate them for forcing
them to dispatch employees to its stores being shut down or on
the occasion of a new store opening without compensating for
the use of the dispatched workers and for forcibly returning
products to their supplier due to the COVID-19 pandemic
without any prior agreement on return conditions or compensating the suppliers for their losses.
Investigations by the Task Force Against ASBP have led tothe issuance of cautions to enterprises, including retailers andaccommodation operators, whose practices may lead to violations of the law (46 cautions were issued in 2021–2022). In
contrast, no cease-and-desist order was issued for privatemonopolisation during the same period. A caution was issued
in April 2023 to an investment banking and securities firm
for suspicion of ASBP as initial public offering lead manager
towards its clients to be listed, which restricted their ability toswitch lead manager.
1.8 Does the enforcer have to defend its claims in frontof a legal tribunal or in other judicial proceedings? If
so, what is the legal standard that applies to justify an
enforcement action?

The recipient of a cease-and-desist order may initiate proceedings
to get the order rescinded. The JFTC would have to defend its
claims in front of a court (see question 1.9). The burden of proofof the facts underlying the order lies on the JFTC. However,the Administrative Case Litigation Act (No. 139 of 16 May 1962,
governing actions for the judicial review of administrative dispositions, etc.) and the Code of Civil Procedure apply to lawsuits
for the revocation of orders and, for the order to be revoked, theplaintiff must demonstrate that there was an abuse of discretionin the order, and the court may refuse to entertain such a claim.
1.9

What is the appeals process?

Once a cease-and-desist order or surcharge payment order isissued, the recipient can challenge the JFTC’s decision before
the Tokyo District Court by filing a lawsuit for rescission against
the JFTC within six months of becoming aware of the order orwithin one year of the date of the order.   The District Court
decides on the facts and the law and can rule differently fromthe JFTC. Any further appeal lies to the Tokyo High Court and,ultimately, to the Supreme Court.
1.10 Are private rights of action available and, if so, how
do they differ from government enforcement actions?

Parties found by the JFTC to be engaged in private monopolisation, unreasonable restraint of trade or unfair trade practices are liable to indemnify those they have injured (Article 25of the AMA).  A cease-and-desist order or a surcharge payment
order must be finalised before the claimant can take action under
Article 25. Although the claimant can alternatively file a damage
action under Article 709 of the Civil Code before the JFTC order
becomes final, in an Article 25 action the claimant does not haveto prove the defendant’s intent or negligence (strict liability). The
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Iwata Godo

court will instead rely on the JFTC’s findings from the orderor hearing decision. The JFTC’s decision creates a rebuttablepresumption of AMA violation but, in practice, it is difficult
for the defendant to rebut it. Claimants in an Article 25 action
still need to prove the amount of damage and reasonable causation between the defendant’s illegal conduct and the damage.
However, the AMA allows the court to request an opinion fromthe JFTC on the amount of damage in an Article 25 action andthis can reduce the burden of proof. An Article 25 action by a
private claimant must be brought before the Tokyo High Court.
The downside of such action is that it must be based on violations
established by the JFTC’s orders and claimants cannot add otherclaims, only recipients of the JFTC’s order can be sued and orders
do not bind the courts in a civil action (they can be quashed) andclaimants must prove the violation.
Under Article 24 of the AMA, plaintiffs may seek a provisional or permanent injunction against certain unfair trade practices (e.g., RPM, predatory pricing).  Article 24 actions must be
brought before the district courts.
1.11 Describe any immunities, exemptions, or safe
harbours that apply.

The AMA does not provide for any minimum thresholds.  
However, the JFTC’s Guidelines Concerning Distribution
Systems and Business Practices of 11 July 1991 (Distribution
Guidelines, last amended on 16 June 2017) define a safety zone
for certain vertical non-price restraints that may otherwise beillegal as unfair trade practices, if such restraints were imposedby an “influential enterprise in a market”. As a rule of thumb,under the Distribution Guidelines, to determine whether amanufacturer meets the “influential manufacturer” test, onemust consider whether a manufacturer has a market share above
20% (meaning a product market that consists of a group of products with the same or similar functions and utility as the productcovered by a particular conduct, and competing with each otherbased on certain criteria, and which is defined, in principle, interms of substitutability).  Even if an enterprise meets the test,a restriction is not systematically unlawful. It is only illegal if it
has foreclosure or price maintenance effects. Within the 20%
market share safe harbour, enterprises do not usually tend to
distort fair and effective competition.
A substantial restraint of competition is a prerequisite to
private monopolisation and the Exclusionary Private Monopolisation Guidelines of 28 October 2009 (last amended in 2020)
provide guidance on how to assess the impact of a particular
conduct on competition. In case law, a “substantial restraintof competition” means “establishing, maintaining, or strengthening the state in which a certain entrepreneur or group of
entrepreneurs can control the market at will by being, to someextent, free to influence prices, quality, quantity, and various
other terms and conditions after competition has decreased”.
The JFTC, when deciding whether to investigate a case as exclusionary private monopolisation prioritises cases where the shareof the product supplied by the entrepreneur exceeds approximately 50% after the commencement of the conduct, and the
conduct is deemed to have a serious social impact.  Even if thesecriteria are not met, a case may still be subject to investigation
depending on the type of conduct, market conditions, positionof competitors, and other factors.
With respect to unfair trade practices and the “likeliness ofimpeding fair competition” (see question 2.12), the courts andthe JFTC assess such likeliness according to the circumstances,
but the test is typically subject to a lower standard of anti-competitive effect than that required for private monopolisation.
Vertical Agreements and Dominant Firms 2023

The AMA does not apply to acts constituting the exercise
of a right under the Copyright Act, Patent Act, Utility Model
Act, Design Act or Trademark Act (Article 21 of the AMA), but
the JFTC’s Guidelines for the Use of Intellectual Property lay
down limits to curb abuses.  RPM of certain copyrighted literary
and musical works between competitors is exempt (Article 23-4of the AMA).  According to the JFTC’s interpretation, “copyrighted works” for the purposes of this provision only include
newspapers, books, magazines, music records and music CDs.
1.12 Does enforcement vary between industries orbusinesses?

The AMA does not discriminate between industries or businesses, and it applies equally to all economic sectors, except for
those excluded from its scope of application. The JFTC’s policy
is to actively deal with those sectors in which the preservationof competition is problematic or will become more problematicin the near future. Currently, the focus of its enforcement activities is on the IT and digital sectors, as illustrated by the latest
JFTC guidelines, case investigations and study group reports(e.g., B2C e-commerce, digital platforms and marketplaces, andconsumer protection).
1.13 How do enforcers and courts take into
consideration an industry’s regulatory context whenassessing competition concerns?

Express exemptions from the AMA (usually for cartels and not
for unilateral conduct) are entrenched in more than a dozen
laws. Certain industries are specifically regulated but not necessarily exempt from the application of the AMA and, dependingon the purpose of the regulation, a special law may supersede
the AMA in case of conflict, or an alleged violation of the AMA
may be justified.
1.14 Describe how your jurisdiction’s politicalenvironment may or may not affect antitrust
enforcement.

The JFTC is an independent agency which is enforcing the
AMA more vigorously than ever before and, in principle, it
should not be affected by the political environment. The JFTC
and other ministries and agencies it is cooperating with often
share the same concerns (e.g., big data, digital platforms, andconsumer protection).
1.15 What are the current enforcement trends andpriorities in your jurisdiction?

See question 1.12. Also, the explosive growth in companies’
exploitation of big data is drawing intense scrutiny from the
JFTC. The regulator has raised exclusionary concerns and fears
that big data can create barriers to entry and market power, especially where companies hold unique customer datasets that cannot
be replicated by competitors. The perception is that limited accessto big data may create barriers to entry and stifle the growth ofthe digital economy in Japan. The JFTC had launched investigations into Rakuten, Amazon and other major technology companies to assess whether the data-holders have a dominant positionand engage in abusive conduct. For example, Apple had beensuspected of restricting business activities of enterprises that sell
digital content and distribute applications (developers) based on

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the App Store Review Guidelines in force in Apple’s App Store,
where the developers distribute these apps for iPhones.  During
the JFTC’s investigation, Apple proposed to take measures whichwere accepted by the JFTC, which closed its investigation in
September 2021. Similarly, the commitment procedure was used
for Booking.com BV and Expedia Lodging Partner Services Sarlin 2022, in both cases for suspicion of trading on restrictive terms
through the use of narrow parity clauses.
The JFTC monitors certain industries, including digitalmarkets, to sanction ASBP (see question 2.22).   In 2022, it
conducted a survey in 22 industries to see how current circumstances (increasing oil prices and yen depreciation) were affecting
business relations and in particular pricing terms between smalland medium-sized enterprises (SMEs) and companies in a superior bargaining position. The JFTC sent warning letters toseveral thousand companies involved in problematic conduct
and published a list of key companies involved in conduct that
may be deemed an ASBP in December 2022.   
1.16 Describe any notable recent legal developments
in respect of, e.g., vertical agreements, dominant firms
and/or vertical merger analysis.

See questions 1.6 and 1.7 on the commitment procedure, thefairly recent introduction of which has led to an increase in
enforcement activity by the regulator.

22

Vertical Agreements

2.1 At a high level, what is the level of concern over,and scrutiny given to, vertical agreements?

The JFTC will investigate and may pursue vertical agreementsthat are prohibited by the AMA, whether as unfair trade practices or private monopolisation. The main focus is on unfair
trade practices. See question 1.7.
2.2 What is the analysis to determine (a) whether there
is an agreement, and (b) whether that agreement isvertical?

The AMA’s focus is not on the existence of a vertical agreement but on the existence of a vertical restraint and whether it isprohibited under the AMA.  There is no definition of agreement
for the purpose of vertical restraints (which can include unilateral conduct) and there is no need for a formal agreement. An
agreement can be found where a party compels another party tocomply with a certain obligation.  For example, for RPM, it issufficient to show that the supplier has successfully coerced its
distributor into following its pricing instructions.
2.3

What are the laws governing vertical agreements?

The main piece of legislation is the AMA.   The AMA distinguishes between horizontal and vertical agreements and practices and provides, in its Article 3, that “an enterprise must notengage in private monopolisation or unreasonable restraint oftrade”.  Restraints of trade (mainly cartels and bid-rigging) arecaught by Articles 2 to 6 of the AMA, which prohibit anti-competitive agreements and concerted practices, and are typicallyhorizontal in nature.  Restrictive agreements and practices thatare vertical in nature are generally classified as unfair tradepractices referred to in Articles 19 and 2(9) of the AMA anddescribed in the JFTC’s Designation of Unfair Trade Practices.

Private monopolisation (Articles 3 and 2(5) of the AMA),
defined as business activities that exclude or control the business activities of other enterprises thereby causing a substantial restraint of trade in a particular field of trade contrary to
the public interest, covers unilateral exclusionary or controlling
conduct by dominant firms. It covers both horizontal andvertical restrictive practices, as there is some overlap between
the types of conduct covered by private monopolisation andunfair trade practices, such as boycotting and exclusive dealing.
The Distribution Guidelines also affect vertical agreements
and provide important guidance.   The JFTC’s Exclusionary
Private Monopolisation Guidelines of 28 October 2009 (lastamended in 2020) provide guidance on how to assess the impactof a particular conduct on competition. Other JFTC guidelines
detailing the types of conduct that can be characterised as unfair
trade practices include (inter alia) the Guidelines Concerning
Joint Research and Development of 20 April 1993 (Development
Guidelines), the Guidelines on Abuses of Superior Bargaining
Position of 30 November 2010, last amended on 16 June 2017,
the Guidelines on Unjust Low Price Sales, last amended on
23 June 2011, the Guidelines for the Use of Intellectual Property of 2007, last amended on 21 January 2016, and the Guidelines for the Promotion of Competition in the Telecommunications Sector, last amended on 25 December 2002.  Recently,
several laws and regulations relevant to distribution have been
adopted or revamped, including data protection and privacy laws
and the AMA itself.   For example, on 17 December 2019, the
JFTC published Guidelines Concerning Abuses of a Superior
Bargaining Position in Transactions between Digital Platform
Operators and Consumers that Provide Personal Information.
The Act against Delay in Payment of Subcontract Proceeds,
Etc. to Subcontractors (Act No. 120 of 1 June 1956, as amended)
aims to ensure the fairness of subcontracting transactions andprotect the interests of subcontractors. This Subcontract Act
prohibits large companies with capital exceeding a certain
amount from coercing SMEs into unfair transactions and fromengaging in certain trade practices in relation to manufacturingcontracts, repair contracts, information-based product creation
contracts, and contracts for services. The JFTC’s Guidelines
for the Subcontract Act provide detailed guidance with respect
to prohibited trade practices. The JFTC clamps down on violations, including by conducting regular written investigations
with subcontractors and their employers to collect more information on dealings and practices that may put SME operators at a
disadvantage through breaches of the Subcontract Act or ASBP.
In addition to these laws, regulations and guidelines, legal
sources dealing with vertical restraints include court precedents
and JFTC precedents (recommendations and orders).
2.4 Are there any types of vertical agreements or
restraints that are absolutely (“per se”) protected? Are
there any types of vertical agreements or restraints thatare per se unlawful?

See question 1.11.  The Distribution Guidelines define a safetyzone for certain vertical non-price restraints that may otherwise be illegal as unfair trade practices (restrictions on dealing
with competitors, strict territorial restrictions and tie-in sales),if such restraints were imposed by an “influential enterprise ina market” and have foreclosure or price maintenance effects.
Within the 20% market share safe harbour, enterprises do not
usually tend to distort fair and effective competition.
By contrast, given that the justifiable grounds exception can
only exceptionally be relied upon, RPM could be treated asillegal per se.
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2.5 What is the analytical framework for assessing
vertical agreements?

The analytical framework depends on the nature of the vertical
restraint (see questions 2.2–2.16 et seq.). Vertical agreements
are classified as unfair trade practices or exclusionary privatemonopolisation. The regulator will consider if the restraint
substantially lessens or prevents competition and has foreclosure effects (in cases where the conduct is not illegal per se).
2.6 What is the analytical framework for defining amarket in vertical agreement cases?

The market definition is not drastically different from thatwhich is used for horizontal restraints. A market has a productand a geographic dimension.  The definition used in the Distribution Guidelines refers to a product market that consists of agroup of products with the same or similar functions and utility
as the product covered by a particular conduct, and competingwith each other based on certain criteria, and which is defined,
in principle, in terms of substitutability for users and also, whennecessary, substitutability for suppliers.
2.7 How are vertical agreements analysed when one ofthe parties is vertically integrated into the same level as
the other party (so-called “dual distribution”)? Are thesetreated as vertical or horizontal agreements?

The exchange of information between a supplier and buyer
can contribute to the pro-competitive effects of vertical agreements, in particular the optimisation of production and distribution processes, and a vertical agreement would not necessarily be problematic under the AMA even where competitors
are involved in a vertical relationship. The JFTC is yet to issue
its official opinion, such as guidelines addressing the topic ofdual distribution. However, the JFTC has already been officiallyconsulted on the validity of specific transactional scenarios
similar to dual distribution, involving raw materials and spareparts. The JFTC’s viewpoint is that such situations are notimmediately problematic under the AMA but, depending on
the facts of the matter and the effects of the arrangements
concerned, there could be room for unreasonable trade practices(e.g., trading on restrictive terms) or unreasonable restraints oftrade under Article 3 of the AMA (as the exchange of certain
types of information may raise horizontal concerns between
competitors also in a vertical relationship).
2.8 What is the role of market share in reviewing a
vertical agreement?

Pursuant to the Distribution Guidelines, depending on the typeof vertical restraint involved, the role of market share can besignificant in determining whether an enterprise is influential ina market and whether competition is adversely affected.
2.9 What is the role of economic analysis in assessing
vertical agreements?

Economic analysis can be used to determine whether competition is adversely affected by a vertical restraint. The JFTC tries
to utilise economic analysis in various enforcement situations,
including to establish theories of harms, define a relevant market,
evaluate the impact of anticompetitive conduct or the contents ofa commitment plan.
Vertical Agreements and Dominant Firms 2023

2.10 What is the role of efficiencies in analysing verticalagreements?

The role of efficiencies would be relevant as a defence to argue
that a conduct does not impede fair competition. See question
2.16 on efficiencies in an RPM context (and question 2.7 on dual
distribution).
2.11 Are there any special rules for vertical agreements
relating to intellectual property and, if so, how does theanalysis of such rules differ?

See question 1.11.  Also, as specified in the Guidelines on Exclusionary Private Monopolisation (EPM Guidelines), the Guidelines for the Use of Intellectual Property under the Antimonopoly Act of 28 September 2007 are relevant to assess whether
restrictions pertaining to the use of technology fall under exclusionary conduct, and the Development Guidelines and the
Guidelines on Standardisation and Patent Pool Arrangementsof 29 June 2005 are relevant to determine whether joint R&D
of technologies that will lead to standardisation falls under
exclusionary conduct.  The Development Guidelines cover joint
R&D arrangements and their implementation.  Even if the joint
undertaking of R&D itself presents no problem under the AMA,
arrangements accompanying the implementation of a joint R&D
project may still affect competition in the market and create
problems under the AMA.  If an arrangement unjustly restricts
the business activities of a participant and may thereby impede
fair competition, the arrangement will constitute an unfair tradepractice.   Furthermore, in implementing a joint R&D project
between competitors in a product market, if business activities
are mutually restricted as to price and volume, that may constitute an unreasonable restraint of trade.  The R&D Guidelines
provide guidance to distinguish between arrangements that
may, in principle, fall or not fall under unfair trade practices.
2.12 Does the enforcer have to demonstrate
anticompetitive effects?

The JFTC has to demonstrate a tendency to impede fair competition in relation to unfair trade practices, and a “substantial
restraint of competition” in a particular field of trade is required
for exclusionary private monopolisation. In case law, a “substantial restraint of competition” means “establishing, maintaining,or strengthening the state in which a certain entrepreneur orgroup of entrepreneurs can control the market at will by being,
to some extent, free to influence prices, quality, quantity, andvarious other terms and conditions after competition has
decreased”. With respect to unfair trade practices and the “likeliness of impeding fair competition”, the courts and the JFTC
assess such likeliness according to the circumstances of the case,but this test is typically subject to a lower standard of anti-competitive effect than the one applied to private monopolisation.
2.13 Will enforcers or legal tribunals weigh the harmagainst potential benefits or efficiencies?

The JFTC will consider the potential benefits or efficiencies toassess the legality of a vertical restraint (both for unfair tradepractices and exclusionary private monopolisation).
2.14 What other defences are available to allegations
that a vertical agreement is anticompetitive?

If a parent company owns all of the shares in a subsidiary,

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transactions between the parent company and its wholly owned
subsidiary are, in substance, deemed to be equivalent to
intra-company transactions and they are, in principle, not subject
to the rules governing unfair trade practices.  Likewise, the same
principle applies if the parent company owns less than 100% –but more than 50% – of the shares.
With respect to agency agreements and RPM, a principal isgenerally allowed to set the prices at which the agent will beselling to customers.  According to the Distribution Guidelines,
in specific transactional situations (e.g., certain consignment
sales), where an enterprise’s direct trading partner only operates
as a commission agent and a sale can, in substance, be deemed to
be done by the enterprise, the sale is usually not illegal, even if theenterprise imposes a resale price on the direct trading partner.
2.15 Have the enforcement authorities issued any
formal guidelines regarding vertical agreements?

See question 2.3.
2.16 How is resale price maintenance treated under thelaw?

Some categories of conduct can be viewed as likely to haveanti-competitive effects and this is the case with RPM.   Basically, a supplier is only permitted to impose fixed resale prices
on an agent and not on a distributor.  Under the AMA (Article2(9)(iv) and Article 19), RPM is an unlawful unfair trade practice (except in very limited circumstances where proper justification exists), as it restricts the distributor’s ability to determine its
resale prices and reduces or eliminates competition.
Exceptionally, RPM can be lawful if it has “justifiable grounds”.  
Justifiable grounds exist only within a reasonable scope and fora reasonable period, in cases where RPM has actual pro-competitive effects, which could not have been achieved through lessrestrictive means, promotes inter-brand competition, increases
product demand, therefore benefitting consumers, and has
public benefits that outweigh any detriment suffered by the
public.  For example, RPM may have competitive effects whensome dealers are “free riding” on others by underinvesting in the
supply of associated retail services necessary to support the saleof products and are accordingly only seeking to compete on pricewithout providing those services.
A supplier is nonetheless allowed to suggest or recommend
resale prices to the extent it is only a recommendation. A supplier
may not use certain expressions in relation to a suggested resale
price, including: true price (seika); set price (teika); and the pricealone. A supplier may use non-binding indicative expressions
such as reference price (sanko kakaku) or supplier’s (manufacturer’s) suggested retail price, and the supplier must provide a clear
message to distributors that the suggested resale price is given
solely for their reference and that each distributor should determine its resale price independently.
In May 2022, the JFTC expeditiously closed an investigation
regarding suspected RPM under the commitment procedure forthe first time instead of issuing a cease-and-desist order uponcompletion of its investigation.
2.17 How do enforcers and courts examine exclusive
dealing claims?

Exclusive Purchase Obligations.   According to the Distribution Guidelines, the AMA, in principle, permits a supplier torequire its sole distributor to buy the products covered by thecontract exclusively from the supplier or from the parties it designates.  However, there must be no abuse, and the Designationof Unfair Trade Practices defines “trading on exclusive terms”(that is, unjustly trading with another party on condition that the
party shall not trade with a competitor, thereby reducing trading
opportunities for the competitor) as an unfair trade practice.
Exclusive Distribution.  Distribution agreements are not specifically regulated by the Civil Code or any other statute. There is,therefore, no statutory definition of exclusive distribution, but“exclusive” is generally understood to mean that the appointment
excludes the activity of the supplier and the appointment by the
supplier of any other distributor in the territory.
The Distribution Guidelines provide guidance on various business practices, highlighting some of the potential legal pitfalls.
With respect to restrictions imposed on trading partners’ dealings with competitors or their handling of competing products,
an enterprise may legitimately restrict its trading partners fromdealing with its competitors to market its products. However,these restrictions might impede current competitors’ businessactivities or raise entry barriers depending on the enterprise’s
position in the market. Certain types of conduct by an influential enterprise in a given market may have foreclosure effects andcould consequently be illegal as unfair trade practices. This may
be the case with restrictions on sales territories.  Enterprises may
impose restrictions on distributors with respect to their sales
territories as part of their marketing activities and strategy, andan agreement may validly assign a specific area to a distributor
if it does not preclude the distributors from selling to customers
outside such area on request (in other words, passive sales, as
opposed to active sales, remain permissible), except as explained
below. Business models typically include the following arrangements: an enterprise assigns a specific territory to each distributor as its area of primary responsibility and requires the distributor to carry out active marketing and sales activities within its
own territory, without the restrictions associated with the lasttwo business models described below (the area-of-responsibility
system); an enterprise limits areas where a distributor may establish outlets or determines the location of the outlets, without
imposing the restrictions associated with the last two businessmodels (the location system); an enterprise assigns a specificarea to each distributor and restricts the distributor’s sales ofthe enterprise’s products outside the assigned area (strict territorial restrictions); and an enterprise assigns a specific area to each
distributor and limits the distributor’s sales of the enterprise’s
products to customers outside this area to passive sales (restrictions on passive sales to outside customers). Because thesesystems do not usually have price maintenance effects, it is notillegal for an enterprise to adopt an area-of-responsibility systemor a location system to develop efficient outlets or offer better
after-sales services for the products, unless the restrictions are“strict territorial restrictions” or “restrictions on passive sales
to outside customers”. If an influential enterprise in a market
imposes strict territorial restrictions on distributors and such
restrictions have price maintenance effects, the restrictions areillegal as unfair trade practices. If an enterprise imposes restrictions on a distributor’s passive sales to outside customers andsuch restrictions have price maintenance effects, the restrictions
are illegal as unfair trade practices. In the latter case, anti-competitive effects are typically stronger, as restricting intra-brandcompetition more than strict territorial restrictions.
2.18 How do enforcers and courts examine tying/supplementary obligation claims?

The JFTC acknowledges in its Distribution Guidelines that
Vertical Agreements and Dominant Firms 2023

Iwata Godoadding new value by offering multiple products tied or integrated to trading partners can have positive effects (e.g., foster
technological innovation). Tying in and of itself does not immediately constitute a problem under the AMA, but if an enterprise compels its trading partners, in connection with the
supply of a product (tying product) to the trading partners,
to purchase another product (tied product), this conduct may
impede current competitors’ business activities or raise entry
barriers in the market for the tied product, depending on theenterprise’s position in the market for the tying product. If an
influential enterprise in a market for a tying product compels its
trading partners to purchase a tied product in connection with
the influential enterprise’s supply of the tying product and suchconduct has foreclosure effects in a market for the tied product,
then it is illegal as an unfair trade practice. Tie-in sales tend to
impede the freedom of choice of customers and are unlawful
as unfair trade practices if they are not justifiable on the merits
from a competition standpoint, focusing on prices, quality andservices. Whether or not tie-in sales are unjustifiable as a means
to compete is assessed taking into account the tying product’s
attractiveness, the tied product’s characteristics, the tie-in sales
method, and the popularity of the practice.
Likewise, in the Exclusionary Private Monopolisation Guidelines of 28 October 2009 (last amended in 2020), the JFTC
considers that offering multiple products tied or integrated
together to trading partners is not per se a conduct that would
automatically constitute an exclusionary conduct. However,where an enterprise supplies the tying product only on condition
that the trading partners also purchase the tied product, this may
adversely affect the business activities of competitors who areunable to easily find alternative trading partners in the market
for the tied product, and therefore this may impede competitionin the tied product market. In that case, “tying” with anotherproduct may fall under the exclusionary conduct qualification.
Whether the product required to be purchased as a condition
for the supply of a product is deemed to be “another product” isassessed based on whether the combined products have distinctive characteristics and are traded independently.  More specifically, the following factors are considered: whether users aredifferent; whether contents and functions are different (including
whether the contents and functions of the combined products
differ substantially from those of each individual product before
combination); and whether users can buy them separately (andwhether each product is normally sold or used as a single unit).
The JFTC considers the following factors as a whole to assess
whether an entrepreneur’s conduct is exclusionary and has foreclosure effects in the market for the tied product:■
Conditions prevailing on the market of the tying and thetied products (such as the degree of market concentration,
characteristics of the products, economies of scale, degreeof differentiation of the products, distribution channels,
dynamics of the market, and market entry difficulty).
■
Position of the entrepreneur in the tying product market(such as its share of the tying product, its ranking, brandvalue of the tying product, excess supply capacity, and thescale of operations).
■
Position of the entrepreneur and its competitors in themarket for the tied product (respective share of the tied
product, their ranking, brand value of the tied product,
excess supply capacity, and scale of operations).
■
Duration of the conduct, number of trading partners,and volume of transactions (duration of the tying period,
number of counterparties for whom the tying is intended,and volume of trade).
■
Conditions of the conduct (such as the price of the tied
products, tying conditions and degree of coercion by, andintentions of, the entrepreneur.
Vertical Agreements and Dominant Firms 2023

2.19 How do enforcers and courts examine pricediscrimination claims?

In principle, an enterprise has full discretion to select its trading
partners and on what terms it is willing to trade and supply goods.
Accordingly, if an enterprise independently selects a party towhom the product is supplied and determines supply conditions,
including as to price, in consideration of the details and resultsof supply transactions with its trading customers, this practicedoes not fall under exclusionary conduct and does not, in general,
constitute an unfair trade practice. However, if an enterprise
engages in discriminatory treatment beyond a reasonable degreewith respect to certain customers concerning a product necessary for the said customers to carry out their downstream market
business activities, such discriminatory treatment may constituteexclusionary private monopolisation or an unfair trade practice.
2.20 How do enforcers and courts examine loyalty
discount claims?

Loyalty and volume discounts and rebates constitute a classicalform of price competition and an effective commercial tool byproviding price breaks to buyers that remain sufficiently loyal toa supplier. Shifting incremental purchases from a rival supplier
may allow a buyer to satisfy a loyalty requirement and thereby
enjoy lower prices. However, under particular conditions, loyalty
and volume discounts and rebates may have an exclusionary
effect. For the JFTC, giving rebates can be treated as exclusionary dealing (where an entrepreneur deals with its trading partners on the condition of prohibition or restraint of transactions
with competitors, and competitors cannot easily find an alternative supply destination to the said trading partners, such conduct
may adversely affect the business activities of said competitors
and undermine competition) under certain circumstances. In the
Guidelines for Exclusionary Private Monopolisation, the JFTC
recognises that rebates can have pro-competitive effects by stimulating demand or involving prices adjustments reflecting the actual
market situation. Therefore, offering rebates does not in and of
itself immediately qualify as an exclusionary conduct. However, if
an entrepreneur offers rebates to its trading partners on the condition that the amount or volume of purchases from the entrepreneur or the proportion of the volume of purchases from the entrepreneur to the total amount of their purchases reaches a particularthreshold during a specified period, such conduct may affect thetrading partners’ ability to buy a competitor’s products. Thus,
loyalty discounts may have the same effect as exclusive dealing,competitors may be foreclosed, and the corresponding conduct
could fall under exclusionary conduct. The JFTC considers thefollowing factors to assess whether offering rebates can restrain
dealings in the competing products of rival suppliers in the samemanner as exclusive dealing:■
Rebate levels.  Where the amount or rate of rebate is set ata high level, trading partners are more likely to purchasemore products from the entrepreneur to the detriment ofcompetitors.
■
Thresholds.   Where rebates are subject to high thresholds within the achievable range of the trading partners,
rebates function more effectively to induce trading partners to buy multiple products from a single entrepreneur
rather than from its competitors.
■
Rebate progressivity.  If rebate levels are set progressively
to reflect trading volumes, etc. in a specified period, rebates
function more effectively to induce trading partners to buy
from a single entrepreneur.
■
Retroactive nature of the rebates.   If rebates are given
for the entire amount of trade made thus far in case the

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amount of trade has exceeded a certain threshold, therebates function more effectively to cause trading partners
to purchase products from the entrepreneur to the detriment of its competitors.
2.21 How do enforcers and courts examine multiproduct or “bundled” discount claims?

Bundled loyalty discounts provide price breaks on one or moreproducts to buyers that remain sufficiently loyal to a supplier andcan often have pro-competitive effects. Nonetheless, the practice could also have anti-competitive effects. The JFTC reportsthat tying and bundled discounting practiced by a firm can be
examined under AMA provisions dealing with private monopolisation and unfair trade practices. Of these provisions, theprovisions concerning unfair trade practices apply to firms that
do not have a dominant position or significant market power.
Bundled discounting can raise competitive concerns in several
ways. By discounting two or more products that comprise abundle, bundled discounting may constitute predatory conduct.
Also, to the extent that bundling may raise the cost of non-bundling rivals, it may become more difficult to compete in themarket for standalone products, leading to possible exclusion ofcompetitors, as with tying. The exclusionary effect of bundlingcan arise when competitors of a bundling firm are unable tooffer the bundler’s additional products, making it more difficult
for non-bundling firms to compete. With respect to predation,a bundling firm could cut prices to a bundle below cost in orderto drive competitors out, and if barriers to entry are present,
recoup losses by raising the price of the product. The practice
can be considered exclusionary, having foreclosure effects froma predatory pricing perspective under the AMA (“[w]ithout
justifiable grounds, supplying goods or services continuously fora consideration which is excessively below the cost incurred in
the said supply, thereby tending to cause difficulties to the business activities of other entrepreneurs”).
2.22 What other types of vertical restraints areprohibited by the applicable laws?

Unfair trade practices also include, without limitation, predatory pricing, refusal to deal, discriminatory treatment, dealing
on exclusive or restrictive terms and ASBP.  An ASBP (Article2(9)(v) of the AMA and Guidelines Concerning Abuse of Superior Bargaining Position under the Antimonopoly Act of 2010)is a type of conduct regulated as an unfair trade practice that
does not require dominance or market power but focuses, interalia, on the degree of dependence of the parties, market positionof a party, and changeability of the transactional partner fromthe other party’s perspective.  An ASBP exists when a party in a
relative superior bargaining position engages in abusive conductthat runs the risk of being an impediment to competition.
2.23 How are MFNs treated under the law?

MFN clauses per se do not present an issue under the AMA asthey can have pro-competitive effects.  According to the Distribution Guidelines, one needs to take into account network effects inconsidering the market position of the company imposing a vertical
restraint. Amazon Japan had been suspected of unduly restricting
the activities of Amazon Marketplace sellers by including priceparity clauses and product line-up requirements in its agreementswith sellers; however, the JFTC eventually closed its investigationin mid-2017, as Amazon had voluntarily implemented corrective

measures, including the removal of its MFN clauses.  In the wakeof the Amazon case, the JFTC made public its concerns regarding
MFN clauses imposed on sellers by operators of online shopping
malls.  It considers that MFN clauses may have negative effects
on competition as they can restrict sellers’ business activities bylimiting price reductions and expansions of line-ups of goods thatthe sellers sell via other sales channels, distort competition among
online shopping mall operators by allowing online shopping mall
operators imposing price and selection parity clauses to easily
secure the lowest price and the broadest line-up of goods, andhinder new entrants, as the reduction of fees charged to sellers byan online shopping mall operator does not result in these sellers’
reduction of prices and expansion of line-ups.

32

Dominant Firms

3.1 At a high level, what is the level of concern over,and scrutiny given to, unilateral conduct (e.g., abuse of
dominance)?

Monopolies and abuses of dominance are regulated as privatemonopolisation. Generally, the prohibition only applies to entities with dominant market power in the relevant market. The
JFTC has only issued a few cease-and-desist orders as, in orderto establish private monopolisation, it must prove both dominant market power in the relevant market and the substantial
restraint of competition caused in this market by the exclusionary or controlling activity. Although there are a few landmark cases, the JFTC prefers to rely on the legal ground of unfair
trade practice for the issuance of cease-and-desist orders, andavoid the burden of proof requirement. Unfair trade practices(concerted boycotts, discriminatory pricing, unjust low-pricesales, RPM, ASBP and other anti-competitive practices designated by the JFTC) necessitate an impediment to fair competition, which can be established more easily than what is requiredfor private monopolisation and does not require the JFTC to
precisely determine the relevant market.
3.2

What are the laws governing dominant firms?

The AMA, which prohibits private monopolisation, is the main
statute. See question 2.3.
3.3 What is the analytical framework for defining amarket in dominant firm cases?

Monopolies and abuses of market power are regulated as privatemonopolisation. Generally, the prohibition only applies to entities with dominant market power in the relevant market.
The JFTC has only issued a few cease-and-desist orders,
because to establish private monopolisation, it must prove both
dominant market power in the relevant market and the substantial restraint of competition caused in this market by the exclusionary or controlling activity. Although there are a few landmark cases, the JFTC prefers to rely on the legal ground of unfair
trade practice for the issuance of cease-and-desist orders, andavoid the burden of proof requirement. Unfair trade practices(concerted boycotts, discriminatory pricing, unjust low-pricesales, resale price restriction, ASBP and other anti-competitive
practices designated by the JFTC) necessitate an impediment tofair competition, which can be established more easily than what
is required for unreasonable restraint of trade or private monopolisation and does not require the JFTC to precisely determine
the relevant market.
Vertical Agreements and Dominant Firms 2023

Iwata Godo

The AMA provides for administrative and criminal sanctions for private monopolisation, but in practice, at the time ofwriting, the criminal provisions for private monopolisation havenever been applied.
3.4 What is the market share threshold for enforcers ora court to consider a firm as dominant or a monopolist?

The AMA’s main focus in this monopolisation context is toprohibit business activities that exclude or control the businessactivities of other entrepreneurs that cause a substantial restraintof competition in any particular field of trade.  Dominance andmarket power are not cardinal AMA concepts.  An enterprise is
not required to have a dominant position or market power in therelevant market to infringe the AMA through private monopolisation or unfair trade practices. In contrast, market definition plays amore fundamental role in assessing whether a certain conduct has
anti-competitive effects as a substantial restraint of competition in
the relevant market is an essential feature of monopolisation.
The EPM Guidelines and the Distribution Guidelines
provide some guidance but do not provide a market definition
as extensive as that entrenched in the merger control guidelines.
The EPM Guidelines indicate that when deciding to investigate
a case as exclusionary private monopolisation, the JFTC willprioritise cases where the share of the product supplied by theentrepreneur exceeds approximately 50% after the commencement of the conduct and where the conduct is deemed to have aserious impact on people’s lives, considering relevant factors as awhole, such as market size, the scope of the business activities ofthe entrepreneur and characteristics of the product.
To commit abuses of superior bargaining position (see question 2.22), an enterprise does not need to have a dominantmarket position or an absolutely dominant bargaining position,
it only needs a relatively superior bargaining position comparedwith the other contracting party.
3.5 In general, what are the consequences of being
adjudged “dominant” or a “monopolist”? Is dominance ormonopoly illegal per se (or subject to regulation), or are
there specific types of conduct that are prohibited?

Becoming a monopolist or being dominant in a given market is
not prohibited or illegal per se.  In a judgment dated 17 December
2010 (NTT East Japan, 64-8 Minshu 2067), the Supreme Court
held that there should be “artificiality” in the conduct of thedominant enterprise, with the effect of deviating from the scopeof normal competitive actions and hampering the market entry
of competitors, for private monopolisation to be found. The
AMA does not specify the types of conduct prohibited as privatemonopolisation.
Article 9 of the AMA on merger control prohibits companies
from establishing what would cause an excessive concentrationof economic power due to a shareholding in other companies
in Japan or from becoming a company that causes an excessive concentration of economic power in Japan by acquiring
shares in other companies in Japan.  “Excessive concentrationof economic power” means that the overall business scale of acompany, its subsidiaries, and other domestic companies whosebusiness activities it controls through shareholding, is extremely
large across a considerable number of business fields, can exercise a great deal of influence over other firms through financial transactions, or occupy influential positions in a significant number of interrelated fields of business, and any of thesefactors have a large effect on the national economy and hamper
fair and free competition. The JFTC’s Guidelines Concerning
Vertical Agreements and Dominant Firms 2023

Companies Which Constitute an Excessive Concentration of
Economic Power of 12 November 2002 provide further guidance on when a company has excessive economic power.
3.6 What is the role of economic analysis in assessing
market dominance?

Economic analysis can be used to define a relevant market, evaluate the impact of anti-competitive conduct or the contents ofa commitment plan but has so far not often been used in relation to private monopolisation. In 2021, the JFTC expressed theview that the role of economic analysis is becoming more important than ever for conducting in-depth antitrust investigations
and proper assessments, especially at a time when the digitalisation of the economy is progressing rapidly. According to the
JFTC, there are many areas or cases for which economic analysis
can be utilised, including abuse cases.
3.7 What is the role of market share in assessing
market dominance?

See questions 3.2 and 3.4.
3.8 What defences are available to allegations that afirm is abusing its dominance or market power?

Arguing there is no substantial restraint of competition is apossible defence as it is a prerequisite to private monopolisation.  The EPM Guidelines provide guidance on how to assess
the impact of any particular conduct on competition. Case law
interprets a substantial restraint of competition as “establishing,
maintaining, or strengthening the state in which a certain entrepreneur or group of entrepreneurs can control the market at willby being, to some extent, free to influence prices, quality, quantity, and various other terms and conditions after competition has
decreased”. The JFTC comprehensively considers the following
factors on a case-by-case basis to assess whether competition issubstantially restrained: position of the entrepreneur and situation of its competitors (including market share, ranking of theentrepreneur); potential competitive pressure (institutional andpractical entry barriers, degree of substitutability between the
products of an entrant and those of the entrepreneur); users’countervailing bargaining power; and efficiencies.
3.9 What is the role of efficiencies in analysing
dominant firm behaviour?

Under the EPM Guidelines, if an entrepreneur is expected
to take pro-competitive action owing to the improvement of
productivity, technological innovation, and the improvementof business efficacy through economies of scale, integrationof production facilities, reduction of transportation costs, andimproved R&D that are incidental to an exclusionary conduct,such circumstances may be taken into account to determine
whether competition is substantially restrained.   Efficiencies
will be considered under certain circumstances, if they cannot
be achieved by other less anti-competitive means and users canderive some benefits (such as cheaper, new or better products).
3.10 Do the governing laws apply to “collective”
dominance?

Private monopolisation includes behaviour that is carried out

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collectively. Such collective behaviour (for instance, bid-rigging
or cartels) may alternatively be treated as unreasonable restraintsof trade instead of private monopolisation.  The EPM Guidelines discuss various types of conduct of an enterprise, in concert
with its competitors, customers or suppliers, or of a trade association (concerted refusals to deal (boycotts)), preventing new
entrants from entering a market or excluding existing enterprises from the market, which are, in principle, illegal.
3.11 How do the laws in your jurisdiction apply todominant purchasers?

In theory, the AMA could apply to dominant purchasers but,in practice, no dominant purchaser has been found guilty ofprivate monopolisation.
3.12 What counts as abuse of dominance or
exclusionary or anticompetitive conduct?

Private monopolisation covers exclusionary conduct andcontrolling conduct.  Exclusionary private monopolisation includes various types of conduct. The four classic types of exclusionary conduct are below-cost pricing, exclusive dealing, tying,
and refusal to supply and discriminatory treatment by reference to past cases.  Exclusionary conduct that constitutes exclusionary private monopolisation is not limited thereto. Setting a
price exclusively either in the sales territory where an entrepreneur
competes with others or for customers, for whom an entrepreneur
competes with others, or interfering with the business activitiesof other entrepreneurs may be regarded as exclusionary conduct
in certain cases. Furthermore, multiple acts may be collectively
regarded as a series of integrated exclusionary conduct.
3.13 What is the role of intellectual property in analysing
dominant firm behaviour?

See question 2.11. The JFTC considers restrictions pertaining
to the use of technology from the viewpoint of private monopolisation, i.e., if they “exclude or control the business activitiesof other entrepreneurs”. This is judged specifically by examining the intent behind the individual conduct and its effects.
The Guidelines for the Use of Intellectual Property categorise
restrictions into inhibiting the use of technology, limiting thescope of use of technology and imposing conditions for the useof technology.
3.14 Do enforcers and/or legal tribunals consider “direct
effects” evidence of market power?

The JFTC and the courts can consider “direct effects” evidenceof the substantial restraint of trade.
3.15 How is “platform dominance” assessed in yourjurisdiction?

See questions 1.15 and 1.16.
3.16 Are the competition agencies in your jurisdiction
doing anything special to try to regulate big techplatforms?

See question 1.5. The Guidelines on the Application of the

Antimonopoly Act Concerning the Review of Business Combinations (2004) and the Policies Concerning Review Procedures for
Business Combinations (2011) were amended in 2019 to allow the
JFTC to review business combinations in the digital market. On
17 December 2019, the JFTC published Guidelines Concerning
Abuses of Superior Bargaining Position in Transactions between
Digital Platform Operators and Consumers that Provide Personal
Information. As a result of the surveys mentioned below, a numberof laws have been introduced to regulate the digital economy
including the Act on Improving Transparency and Fairness ofDigital Platforms and the Act for the Protection of Consumers
On Digital Platforms, which came into force in 2021.  Under theformer, major digital platform operators (overseas and domestic
specified digital platform operators as defined by law based on
financial thresholds) must disclose terms and conditions andother information, secure fairness in operating digital platforms,
submit annual reports on the current situation of business operation, and conduct self-assessments. The latter seeks to ensure thecooperation of digital platform providers in optimising transactions and promoting dispute resolution relating to mail order sales(as defined in the Act on Specified Commercial Transactions (ActNo. 57 of 1976) conducted using digital platforms and thereby toprotect consumers using digital platforms by providing for measures intended to promote consumer protection.
The JFTC has conducted several fact-finding surveys on thedigital market to identify issues under the AMA and competition policies. In 2019, the JFTC published its final report
regarding trade practices on digital platforms (B2B transactions on online retail platforms and app stores). On 17 February
2021, the JFTC published its final report on digital advertising.
On 31 March 2021, the Study Group on Competition Policyin the Digital Markets released its Report on Algorithms/AI
and Competition Policy.  In June 2022, the JFTC published its
market survey report on cloud services in which it emphasised
its concern about the anti-competitive effects of market concentration and limited switching from major cloud services operators (who have significantly increased their market shares) toother players. In a June 2022 statement, the JFTC released astatement on its active promotion of competition policy. It seeks
to strengthen its response to fast-changing markets, including
the digital market, by focusing on advocacy and enforcement.
3.17 Under what circumstances are refusals to dealconsidered anticompetitive?

In principle, an enterprise has full discretion to select its business partners and on what terms it is willing to trade and supply
goods. Accordingly, if an enterprise independently selects a party
to whom the product is supplied and determines the supply conditions, including as to price, in consideration of the details andresults of supply transactions with its trading customers, this practice does not fall under exclusionary conduct and does not constitute an unfair trade practice in general. However, if an enterprise engages in discriminatory treatment beyond a reasonable
degree (refuses to supply, imposes restrictions on the quantity orcontents, or applies discriminatory treatment to the conditions orimplementation of supply in the upstream market) with respect
to certain customers concerning a product necessary for the said
customers to carry out their downstream market business activities, such refusals to supply and discriminatory treatment may
constitute exclusionary private monopolisation or an unfair tradepractice because such conduct may cause difficulties in the downstream market activities of the trading customers who are unable
to easily find an alternative supplier in the upstream market, andmay undermine competition in the downstream market.
Vertical Agreements and Dominant Firms 2023

Iwata GodoIf an entrepreneur engaged in wholesale or retail businessin the downstream market has distribution channels, such as asales network, indispensable to sell products downstream, andthe entrepreneur refuses to buy from a manufacturer or discriminates against a manufacturer beyond a reasonable degree inthe upstream market, the manufacturer may have difficulties
in establishing a new distribution channel in the downstream
market. In such cases, the entrepreneur’s conduct in the downstream market might fall under exclusionary conduct and this isassessed from the viewpoint of refusals to supply and discriminatory treatment.

42

Miscellaneous

4.1 Please describe and comment on anything uniqueto your jurisdiction (or not covered above) with regard tovertical agreements and dominant firms.

Although not uniquely or distinctively Japanese, there are two
features that are important to note. ASBP (see question 2.22):
the rules and sanctions have been controversial as they regulate

Vertical Agreements and Dominant Firms 2023

the conduct of powerful firms without the need to establish
monopoly power or dominance or to show anti-competitiveeffects. What must be shown is that the conduct is unfair andoppressive under some fairly vague standard. With inequality of
bargaining power being frequent, the concept often sits uncomfortably with large companies dealing with weaker players(retailers, dealers, etc.). The Subcontract Act (see question
2.3), which aims to ensure the fairness of subcontracting transactions and protect the interests of subcontractors by regulating
certain practices, is a regular source of dispute.

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Japan

Shinya Tago is a Japanese attorney-at-law, admitted to the New York State Bar Association, and is the Managing Partner of Iwata Godo. His
practice focuses on general corporate and commercial litigation, arbitration (domestic and international), conciliation and mediation, andincludes antitrust litigation for domestic and international industry players. He advises a wide variety of clients on horizontal and verticalmatters, private monopolisation, and consumer protection issues. Shinya Tago has an LL.B. from Hitotsubashi University and an LL.M. from
Cornell Law School. He is also a professor at Hitotsubashi University School of Law.
Iwata Godo
Marunouchi Bldg., 15th Floor
2-4-1 Marunouchi, Chiyoda-ku
Tokyo 100-6315
Japan

Tel:
Email:
URL:+81 3 3214 6205
stago@iwatagodo.com
www.iwatagodo.com

Manabu Eiguchi is a Japanese attorney-at-law and partner of Iwata Godo. His practice focuses on: antitrust, risk management and corporate
litigation; whistleblower cases; internal corporate investigations; independent review committee cases; antitrust-related government investigations and disputes (cartels, bid-rigging, unfair trade practices), which includes leniency applications; and Subcontract Act-related disputes.
He advises a wide variety of clients on horizontal and vertical matters, monopolisation, and consumer protection issues.
Manabu Eiguchi has an LL.M. from Tokyo University. He is also an associate professor at Chiba University of Law.
Iwata Godo
Marunouchi Bldg., 15th Floor
2-4-1 Marunouchi, Chiyoda-ku
Tokyo 100-6315
Japan

Tel:
Email:
URL:+81 3 3214 6244
meiguchi@iwatagodo.com
www.iwatagodo.com

Landry Guesdon is a Registered Foreign Attorney (Tokyo Bar) and Avocat (Paris Bar) and a member of the International Practice Committeeof Iwata Godo. With more than 20 years’ service in a Magic Circle firm, Landry Guesdon has extensive experience in mergers & acquisitions,joint ventures and general corporate and commercial matters and antitrust spanning numerous industries. He advises a wide variety ofclients on merger control and horizontal and vertical matters. Landry Guesdon has a B.A. in Law from the University of Kent in Canterbury
and an LL.M. from the University of Paris.
Iwata Godo
Marunouchi Bldg., 15th Floor
2-4-1 Marunouchi, Chiyoda-ku
Tokyo 100-6315
Japan

Iwata Godo was established in 1902 and is one of Japan’s premier law
firms. The firm has a strong antitrust practice with specialists (including
a former JFTC officer) with hands-on experience and expertise on matterssuch as cross-border cartel investigations, dawn raids and leniency applications, and domestic bid-rigging (dango) cases. The antitrust practiceprovides advice to clients with respect to their day‑to‑day business practices, antimonopoly law violations (unfair trade practices, including ASBP)
and violations of the regulations governing payments to subcontractors.
The firm regularly advises companies in a variety of industries, including
healthcare, the automotive industry, consumer products, technology, media,

Tel:
Email:
URL:+81 3 3214 6205
lguesdon@iwatagodo@com
www.iwatagodo.com

telecommunications, transportation, manufacturing and financial services.
It also counsels industrial clients on antitrust law and JFTC guidelines applicable to intellectual property transfers and licences.
www.iwatagodo.com

Vertical Agreements and Dominant Firms 2023

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Gambling

Aviation Finance & Leasing

Insurance & Reinsurance

Aviation Law

International Arbitration

Business Crime

Investor-State Arbitration

Cartels & Leniency

Lending & Secured FinanceClass & Group Actions

Litigation & Dispute Resolution

Competition Litigation

Merger Control

Construction & Engineering Law

Mergers & Acquisitions

Consumer Protection

Mining Law

Copyright

Oil & Gas Regulation

Corporate Governance

Patents

Corporate Immigration

Pharmaceutical Advertising

Corporate Investigations

Private Client

Corporate Tax

Private Equity

Cybersecurity

Product Liability

Data Protection

Project FinanceDerivatives

Public Investment Funds

Designs

Public Procurement

Digital Business

Real Estate

Digital HealthRenewable Energy

Drug & Medical Device Litigation

Restructuring & Insolvency

Employment & Labour Law

Sanctions

Enforcement of Foreign Judgments

Securitisation

Environment & Climate Change Law

Shipping Law

Environmental, Social & Governance Law

Technology Sourcing

Family Law

Telecoms, Media & Internet

FintechTrade Marks

Foreign Direct Investment Regimes

Vertical Agreements and Dominant Firms

The International Comparative Legal Guides are published by: