Chapter Number

Japan

Japan
Shinya Tago

Manabu Eiguchi

Iwata Godo

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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 of Private
Monopolisation and the Maintenance of Fair Trade (Act No.
54 of 14 April 1947, as amended) (AMA). It is an independentadministrative commission. Its General Secretariat consistsof the Secretariat, the Investigation Bureau and the Economic
Affairs Bureau (including the Trade Practices Department).
The Investigation Bureau is in charge of investigations andthe issuance of orders. Criminal sanctions are imposed by acriminal court based on prosecution by the Public Prosecutor’s
Office, but the latter cannot prosecute antitrust violations andseek 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 thesematerials 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 takethe above steps (except for interviewing suspects and witnesses
and requesting 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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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 reportsuspected violations to the JFTC under Article 45 of the AMA.
The JFTC must consider the allegations and if the report issufficiently 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 can decideto 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 canpresent 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 measuresnecessary to put an end to such conduct. The JFTC typicallyorders enterprises to cease and desist the conduct (or make sureit has been discontinued), not to engage in this conduct in the
future and to take measures to restore competition in the relevantmarket and prevent the recurrence of violations. The JFTC has
the authority to order other necessary measures to eliminate theconduct and its anti-competitive effects. Administrative andcriminal fines can be imposed under the AMA (see question 1.5).

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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 repeatedviolation within 10 years, 3% of sales. A rate of 1% anda different calculation method apply to abuses of superiorbargaining position (ASBP) for which a payment order canbe imposed for the first violation.
Fines. Criminal sanctions are also available for privatemonopolisation 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 introduced in
the AMA, and the JFTC has adopted commitment procedure
rules before publishing related guidelines in 2018. Under thisprocedure, 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 orindividual accused of AMA violations can enter into anagreement with the prosecutor under which the accused agrees
to cooperate through the provision of evidence or testimonies
that can help convict a third party (an enterprise or individual)
and in exchange the prosecutor agrees to drop or reduce thecriminal 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 these cases
concerned trading on restrictive terms (parity/most-favoured
nation clauses (MFNs)), one related to interference with acompetitor’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 acommitment plan under the commitment procedure.

In fiscal year 2023 (1 April 2023 to 31 March 2024),
commitment plans were accepted with five companies inrelation to alleged practices involving trading on exclusive terms
or restrictive terms and ASBP. 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 dispatchedworkers and for forcibly returning products to their supplierdue to the COVID-19 pandemic without any prior agreement
on return conditions or compensating the suppliers for theirlosses. In January 2024, the JFTC approved a commitment plansubmitted by a furniture and interior products retailer for thefollowing conduct over six years: at the time of opening newstores or refurbishing existing ones, forcing suppliers to dispatch
employees to the stores to perform work, including in relation to
goods other than those delivered by them. The retailer had nodispatch agreement with those suppliers and did not bear related
expenses. At the time of opening a new store, suppliers had to
pay a “store opening contribution”, without advance disclosureof the calculation basis, the use of the money, etc. Following
earthquakes, the suppliers had to compensate the retailer for its
own losses due to discounts or the disposal of the goods deliveredby them that would have been damaged by the earthquakes.
Investigations by the Task Force Against ASBP, etc. have led tothe issuance of warnings and cautions to enterprises, including
retailers and accommodation operators, whose practices may
violate the law or lead to violations of the law (one warning andthree cautions were issued during the period 1 April 2023 to 31
March 2024). In contrast, no cease-and-desist order was issued
for private monopolisation during the same period. A caution
was issued in April 2023 to an investment banking and securities
firm for suspicion of ASBP, as the initial public offering leadmanager, towards its clients to be listed, which restricted theirability to switch the lead manager; a warning and a caution
were issued in May 2023 to several petroleum products retailers
operating gas stations for unjust low prices, which were likely tocause difficulties to the business activities of other petroleum
products retailers in surrounding areas; and a caution was issued
in December 2023 to a software manufacturer and distributor
suspected of interference with a competitor’s transactions.
In 2023, an investigation was suspended against a large-scaleretailer who had put an end to its suspected ASBP (the retailer
was requesting suppliers to bear the price difference between
its original price and the discounted price corresponding to its
competitors’ pricing in price negotiations with suppliers in caseof price alignment).
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 discretion in
the order, and the court may refuse to entertain such a claim.

Vertical Agreements and Dominant Firms 2024

Iwata Godo

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 privatemonopolisation, unreasonable restraint of trade or unfair tradepractices are liable to indemnify those they have injured (Article
25 of 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
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 forthe defendant to rebut it. Claimants in an Article 25 action stillneed 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 aprovisional or permanent injunction against certain unfair tradepractices (e.g., RPM, predatory pricing). Article 24 actions mustbe 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
product covered by a particular conduct, and competing witheach other based on certain criteria, and which is defined, inprinciple, in terms of substitutability). Even if an enterprisemeets 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.
Vertical Agreements and Dominant Firms 2024

A substantial restraint of competition is a prerequisite to privatemonopolisation 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 oncompetition. In case law, a “substantial restraint of competition”
means “establishing, maintaining, or strengthening the state inwhich a certain entrepreneur or group of entrepreneurs cancontrol the market at will by being, to some extent, free toinfluence prices, quality, quantity, and various other terms andconditions after competition has decreased”. The JFTC, when
deciding whether to investigate a case as exclusionary privatemonopolisation prioritises cases where the share of the productsupplied 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 these criteria are notmet, a case may still be subject to investigation depending on
the type of conduct, market conditions, position of 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 anticompetitive effect than that required for private monopolisation.
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 andmusical works between competitors is exempt (Article 23-4 of
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 orbusinesses, 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 preservation of competition is problematic or will become
more problematic in the near future. Currently, the focus ofits enforcement activities is on the IT and digital sectors, as
illustrated by the latest JFTC guidelines, case investigations andstudy group reports (e.g., B2C e-commerce, digital platforms
and marketplaces, and consumer 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, depending on the
purpose of the regulation, a special law may supersede the AMA
in case of conflict, or an alleged violation of the AMA may bejustified.
1.14 Describe how your jurisdiction’s politicalenvironment may or may not affect antitrust
enforcement.

The JFTC is an independent agency that is enforcing the AMA
more vigorously than ever before and, in principle, it should not

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be affected by the political environment. The JFTC and otherministries and agencies it is cooperating with often share thesame concerns (e.g., big data, digital platforms, and consumer
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, especiallywhere 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 of thedigital 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
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 thatwere 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 small- and medium-sized enterprises (SMEs)
and companies in a superior bargaining position. The JFTC
sent warning letters to several thousand companies involvedin problematic conduct and published a list of key companies
involved in conduct that may be deemed an ASBP in December
2022. In October 2023, the JFTC announced it had launcheda probe into suspected AMA violations by Google LLC(exclusionary practices and trading on restrictive terms) anddecided to seek information from third parties. This was thefirst time the JFTC was seeking information from third parties
in the early stages of the investigation, following the policy
statement “Towards the Active Promotion of Competition
Policy in response to Socioeconomic Changes as represented byDigitalization – Coordination and Strengthening of Advocacy
and Enforcement” published in June 2022.
Japan aims to achieve carbon neutrality by 2050. In thiscontext, the market for electric vehicle (EV) charging services
is expected to grow rapidly, and the market environment is also
expected to change significantly in the near future. Accordingly,
to promote fair competition in the development of charging
infrastructure and to promote the realisation of a green society
from the viewpoint of competition policy by stimulating new
entrants and promoting innovation, the JFTC has conducteda market study on EV charging services on expressways(published in July 2023).
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.

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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 tradepractices. 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
to comply 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 andprovides, in its Article 3, that “an enterprise must not engage
in private monopolisation or unreasonable restraint of trade”.
Restraints of trade (mainly cartels and bid-rigging) are caught
by Articles 2 to 6 of the AMA, which prohibit anti-competitive
agreements and concerted practices, and are typically horizontal
in nature. Restrictive agreements and practices that are verticalin nature are generally classified as unfair trade practices referred
to in Articles 19 and 2(9) of the AMA and described 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 businessactivities 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
Vertical Agreements and Dominant Firms 2024

Iwata Godolaws and regulations relevant to distribution have been adopted
or revamped, including data protection and privacy laws andthe 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.
On 31 March 2023, the JFTC published Guidelines
Concerning the Activities of Enterprises, etc. toward theRealization of a Green Society under the Antimonopoly Act (theGreen Guidelines) to harness the efforts of enterprises and tradeassociations seeking to achieve carbon neutrality. Following
its compilation of the Green Guidelines, the JFTC has been
consulted about the contents of the Green Guidelines, including
on concrete efforts. As a result, the JFTC is currently revising
the Green Guidelines to further clarify the application of the
AMA to joint activities, joint procurement, etc.
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 toprohibited 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 withcompetitors, 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.
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).

Vertical Agreements and Dominant Firms 2024

2.6 What is the analytical framework for defining amarket in vertical agreement cases?

The market definition is not drastically different from thatused for horizontal restraints. A market has a product and ageographic dimension. The definition used in the Distribution
Guidelines refers to a product market that consists of a groupof products with the same or similar functions and utility as the
product covered by a particular conduct, and competing witheach other based on certain criteria, and which is defined, inprinciple, 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 cancontribute 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 of dual
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 of a commitment plan.
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).

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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 coverjoint R&D arrangements and their implementation. Even if
the joint undertaking of R&D itself presents no problem underthe AMA, arrangements accompanying the implementation of a
joint R&D project may still affect competition in the market andcreate problems under the AMA. If an arrangement unjustly
restricts the business activities of a participant and may thereby
impede fair competition, the arrangement will constitutean unfair trade practice. Furthermore, in implementing a
joint R&D project between competitors in a product market,
if business activities are mutually restricted as to price andvolume, 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 faircompetition in relation to unfair trade practices, and a“substantial restraint of competition” in a particular field oftrade is required for exclusionary private monopolisation.
In case law, a “substantial restraint of competition” means“establishing, maintaining, or strengthening the state in whicha certain entrepreneur or group of entrepreneurs can control
the market at will by being, to some extent, free to influence
prices, quality, quantity, and various other terms and conditions
after competition has decreased”. With respect to unfair tradepractices and the “likeliness of impeding fair competition”, thecourts and the JFTC assess such likeliness according to thecircumstances of the case, but this test is typically subject to alower 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,transactions between the parent company and its wholly owned
subsidiary are, in substance, deemed to be equivalent to intracompany transactions and they are, in principle, not subject tothe 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 have anticompetitive effects and this is the case with RPM. Basically, asupplier is only permitted to impose fixed resale prices on an
agent and not on a distributor. Under the AMA (Article 2(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 “justifiablegrounds”. Justifiable grounds exist only within a reasonable
scope and for a reasonable period, in cases where RPM has actual
pro-competitive effects, which could not have been achieved
through less restrictive means, promotes inter-brand competition,
increases product demand, therefore benefitting consumers, andhas 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); andthe price alone. 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 to require
its sole distributor to buy the products covered by the contract
exclusively from the supplier or from the parties it designates.
However, there must be no abuse, and the Designation of Unfair
Trade Practices defines “trading on exclusive terms” (that is,unjustly trading with another party on condition that the party
Vertical Agreements and Dominant Firms 2024

Iwata Godoshall not trade with a competitor, thereby reducing trading
opportunities for the competitor) as an unfair trade practice.
Exclusive Distribution. Distribution agreements are notspecifically regulated by the Civil Code or any other statute. Thereis, 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, anenterprise 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 and could
consequently be illegal as unfair trade practices. This may be thecase with restrictions on sales territories. Enterprises may impose
restrictions on distributors with respect to their sales territories aspart of their marketing activities and strategy, and an agreement
may validly assign a specific area to a distributor if it does notpreclude the distributors from selling to customers outside sucharea on request (in other words, passive sales, as opposed to active
sales, remain permissible), except as explained below. Businessmodels typically include the following arrangements: an enterpriseassigns 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 last two business models described
below (the area-of-responsibility system); an enterprise limits areas
where a distributor may establish outlets or determines the locationof the outlets, without imposing the restrictions associated withthe last two business models (the location system); an enterpriseassigns a specific area to each distributor and restricts the
distributor’s sales of the 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 ofthe enterprise’s products to customers outside this area to passive
sales (restrictions on passive sales to outside customers). Because
these systems do not usually have price maintenance effects, it is notillegal for an enterprise to adopt an area-of-responsibility system ora location system to develop efficient outlets or offer better aftersales 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 haveprice maintenance effects, the restrictions are illegal as unfair tradepractices. If an enterprise imposes restrictions on a distributor’s
passive sales to outside customers and such restrictions have pricemaintenance effects, the restrictions are illegal as unfair tradepractices. In the latter case, anti-competitive effects are typicallystronger, as restricting intra-brand competition more than strict
territorial restrictions.
2.18 How do enforcers and courts examine tying/supplementary obligation claims?

The JFTC acknowledges in its Distribution Guidelinesthat adding 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

Vertical Agreements and Dominant Firms 2024

an enterprise compels its trading partners, in connection withthe 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 are different;
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.

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Japan

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 withcompetitors, 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 notin 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 theentrepreneur or the proportion of the volume of purchases fromthe entrepreneur to the total amount of their purchases reaches aparticular threshold during a specified period, such conduct may
affect the trading 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 the following factors to assess whether offering rebates
can restrain dealings in the competing products of rival suppliersin the same manner 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 thanfrom 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 theamount of trade has exceeded a certain threshold, therebates function more effectively to cause trading partners
to purchase products from the entrepreneur to thedetriment 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 supplierand can often have pro-competitive effects. Nonetheless, thepractice could also have anti-competitive effects. The JFTC
reports that tying and bundled discounting practiced by a firm
can be examined under AMA provisions dealing with privatemonopolisation and unfair trade practices. Of these provisions,the provisions concerning unfair trade practices apply to firmsthat 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 comprisea bundle, bundled discounting may constitute predatory
conduct. Also, to the extent that bundling may raise the cost ofnon-bundling rivals, it may become more difficult to compete
in the market for standalone products, leading to possible
exclusion of competitors, as with tying. The exclusionary effectof bundling can arise when competitors of a bundling firm areunable to offer 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 order to 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 from a predatory pricing perspective under the AMA(“[w]ithout justifiable grounds, supplying goods or services
continuously for a 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 (Article 2(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, inter alia,
on the degree of dependence of the parties, market position ofa party, and changeability of the transactional partner from theother 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 as they
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

Vertical Agreements and Dominant Firms 2024

Iwata Godo

including price parity clauses and product line-up requirements
in its agreements with sellers; however, the JFTC eventuallyclosed its investigation in mid-2017, as Amazon had voluntarily
implemented corrective measures, including the removal of its
MFN clauses. In the wake of the Amazon case, the JFTC madepublic 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 by limiting price reductions
and expansions of line-ups of goods that the sellers sell via othersales 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 priceand the broadest line-up of goods, and hinder new entrants, as
the reduction of fees charged to sellers by an 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 toentities with dominant market power in the relevant market.
The JFTC has only issued a few cease-and-desist orders as,
in order to establish private monopolisation, it must prove
both dominant market power in the relevant market and thesubstantial restraint of competition caused in this market by theexclusionary or controlling activity. Although there are a few
landmark cases, the JFTC prefers to rely on the legal groundof unfair trade practice for the issuance of cease-and-desist
orders and avoid the burden of proof requirement. Unfair
trade practices (concerted boycotts, discriminatory pricing,unjust low-price sales, RPM, 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 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 toentities 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 thesubstantial restraint of competition caused in this market by theexclusionary or controlling activity. Although there are a few
landmark cases, the JFTC prefers to rely on the legal groundof unfair trade practice for the issuance of cease-and-desist
orders, and avoid the burden of proof requirement. Unfair tradepractices (concerted boycotts, discriminatory pricing, unjust
low-price sales, resale price restriction, ASBP and other anticompetitive practices designated by the JFTC) necessitate an
Vertical Agreements and Dominant Firms 2024

impediment to fair competition, which can be established moreeasily than what is required for unreasonable restraint of tradeor private monopolisation and does not require the JFTC to
precisely determine the relevant market.
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 enterpriseis not required to have a dominant position or market powerin the relevant market to infringe the AMA through privatemonopolisation or unfair trade practices. In contrast, market
definition plays a more fundamental role in assessing whethera 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
will prioritise cases where the share of the product suppliedby the entrepreneur exceeds approximately 50% after thecommencement of the conduct and where the conduct is deemed
to have a serious impact on people’s lives, considering relevant
factors as a whole, such as market size, the scope of the businessactivities of the entrepreneur and characteristics of the product.
To commit abuses of superior bargaining position (seequestion 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 sharesin other companies in Japan. “Excessive concentration of
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

9

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Japan

a great deal of influence over other firms through financialtransactions, 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
Companies Which Constitute an Excessive Concentrationof 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
of a commitment plan but has so far not often been used inrelation to private monopolisation. In 2021, the JFTC expressedthe view 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 a possible
defence as it is a prerequisite to private monopolisation. The
EPM Guidelines provide guidance on how to assess the impactof 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 groupof entrepreneurs can control the market at will by being, to someextent, free to influence prices, quality, quantity, and various otherterms and conditions after competition has decreased”. The JFTC
comprehensively considers the following factors on a case-by-casebasis to assess whether competition is substantially restrained:
position of the entrepreneur and situation of its competitors(including market share, ranking of the entrepreneur); potential
competitive pressure (institutional and practical 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
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 fromthe 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, andrefusal to supply and discriminatory treatment by reference to pastcases. Exclusionary conduct that constitutes exclusionary privatemonopolisation is not limited thereto. Setting a price exclusively
either in the sales territory where an entrepreneur competes withothers or for customers, for whom an entrepreneur competes
with others, or interfering with the business activities of otherentrepreneurs may be regarded as exclusionary conduct in certain
cases. Furthermore, multiple acts may be collectively regarded as aseries 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 theuse of technology from the viewpoint of private monopolisation,i.e., if they “exclude or control the business activities of otherentrepreneurs”. 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 the scope of use oftechnology and imposing conditions for the use of 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.

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Iwata Godo

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 andConsumers that Provide Personal Information. As a result of thesurveys mentioned below, a number of laws have been introduced
to regulate the digital economy including the Act on Improving
Transparency and Fairness of Digital Platforms and the Act for
the Protection of Consumers On Digital Platforms, which cameinto force in 2021. Under the former, major digital platform
operators (overseas and domestic specified digital platform
operators as defined by law based on financial thresholds) must
disclose terms and conditions and other information, secure
fairness in operating digital platforms, submit annual reportson the current situation of business operation, and conduct
self-assessments. The latter seeks to ensure the cooperationof digital platform providers in optimising transactions andpromoting dispute resolution relating to mail order sales (asdefined in the Act on Specified Commercial Transactions (ActNo. 57 of 1976) conducted using digital platforms and thereby
to protect consumers using digital platforms by providing formeasures 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 Policy in the DigitalMarkets 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 andlimited switching from major cloud services operators (who havesignificantly increased their market shares) to other players. In a
June 2022 statement, the JFTC released a statement 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 andVertical Agreements and Dominant Firms 2024

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 and results of supply transactions with its trading
customers, this practice does not fall under exclusionary
conduct and does not constitute an unfair trade practice ingeneral. However, if an enterprise engages in discriminatory
treatment beyond a reasonable degree (refuses to supply, imposes
restrictions on the quantity or contents, or applies discriminatory
treatment to the conditions or implementation of supply in the
upstream market) with respect to certain customers concerninga product necessary for the said customers to carry out theirdownstream market business activities, such refusals to supply
and discriminatory treatment may constitute exclusionary privatemonopolisation or an unfair trade practice 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, and may undermine competitionin the downstream market.
If an entrepreneur engaged in wholesale or retail business inthe downstream market has distribution channels, such as a sales
network, indispensable to sell products downstream, and theentrepreneur refuses to buy from a manufacturer or discriminates
against a manufacturer beyond a reasonable degree in the upstream
market, the manufacturer may have difficulties in establishing a
new distribution channel in the downstream market. In suchcases, the entrepreneur’s conduct in the downstream market
might fall under exclusionary conduct and this is assessed fromthe 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
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 inequalityof 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:
LinkedIn:+81 3 3214 6205
stago@iwatagodo.com
www.linkedin.com/in/shinya-tago-764b16197

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 a Chiba University Law School associate professor.
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). 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 andantitrust spanning numerous industries. He advises a wide variety of clients 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

Tel:
Email:
LinkedIn:+81 3 3214 6205
lguesdon@iwatagodo@com
www.linkedin.com/in/landry-guesdon-67b071104

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 matters such as
cross-border cartel investigations, dawn raids and leniency applications,and domestic bid-rigging (dango) cases. The antitrust practice provides
advice to clients with respect to their daytoday business practices,
antimonopoly law violations (unfair trade practices, including ASBP) andviolations 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, 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 2024