Silviase/jgov_v1.4_full_ann huggingface dataset:
## restraints

As mentioned in Section 2 above, vertical restraints have various effects on competition. If a vertical restraint tends to impede fair competition, such restraint is prohibited as unfair trade practices. Whether a particular vertical restraint imposed in a commercial transaction tends to impede fair competition or not should be examined by assessing the scope influenced by such transaction depending on factors such as objects, regions and manners of the conduct and transaction and then considering the following factors comprehensively.

In this examination, due consideration should be given to not only anticompetitive effects (such as reduction or elimination of inter-brand or intra-brand competition) but also pro-competitive effects (refer to Sub-Section (3) below) that result from the vertical restraint. Anti-competitive and pro-competitive effects to be so examined should include effects on potential competitors in each and every transaction level.

The factors to be considered are:

(i) actual conditions of inter-brand competition (such as market concentration, characteristics of products in question, the degree of product differentiation, distribution channels, difficulty of new market entry, etc.);

(ii) actual conditions of intra-brand competition (such as the degree of dispersion in prices, and business types of distributors, etc. dealing in products in question, etc.);

(iii) position in the market of an enterprise that imposes the vertical restraint (in terms of a market share, ranking, brand value, etc.);

(iv) impact of the vertical restriction on business activities carried out by the affected trading partners (such as the degree and manners of the restraint, etc.); and

(v) the number of trading partners affected by the restraint, and their positions in the market.

The importance of individual factors is different on a case-by-case basis, and therefore each of these factors should be considered depending upon a nature of business carried out by an enterprise which imposes a vertical restraint. For example, assessment of effects on competition arising from a vertical restraint imposed by a platformer should take into account actual conditions of competition among the platformer and its competitors and position in the market of the platformer based on a reflection of network effects (Note 3).
## (Note 3)

Network effects may be direct or indirect. Network effects are direct if, for example, benefits to users arising from a particular platform and usefulness of the platform to its users are improved by increase of the number of users in the same group. On the other hand, network effects are indirect if, for example, two groups of users of a particular platform transact with each other via the platform and benefits to users in one of those groups arising from transactions via the platform and usefulness of such transactions to those users are improved by increase of the number of users in the other group.

(2) “Tend to impede fair competition”

There are 2 types of vertical restraints: resale price maintenance practices (See Chapter 1 below for details.) and vertical non-price restraints. Vertical non-price restraints consist of an enterprise's restraints on handling products, sales territory, customers, etc. of the enterprise's trading partners.

Resale price maintenance practices reduce or eliminate price competition among distributors. Therefore, those practices usually have significant anti-competitive effects and, as a general rule, they tend to impede fair competition.

On the other hand, effects of vertical non-price restraints on competition in markets differ depending upon the types of restraints and specifics of each case. Vertical non-price restraints include the following two categories: (i) those which should not be considered illegal merely based on types of the restraints, but should be determined on a case-by-case basis whether or not tend to impede fair competition (i.e., whether or not they have foreclosure effects or price maintenance effects) taking into account, among others, a position in the market of an enterprise which imposes the restraint; and (ii) those each of which usually tends to impede price competition and is considered in principle to tend to impede fair competition, regardless of a position in market of an enterprise which imposes the restraint.

If an enterprise simultaneously imposes a vertical non-price restraint and another vertical non-price restraint or resale price maintenance, assessment as to whether or not the first-mentioned vertical non-price restraint tends to impede fair competition may take into account effects of the other vertical non-price restraint or the resale price maintenance simultaneously imposed by the
enterprise.

### a. Cases where vertical non-price restraints have foreclosure effects

“Cases where vertical non-price restraints have foreclosure effects” refer to cases where a vertical non-price restraint tends to cause situation that new entrants to the relevant market and the enterprise’s existing competitors are excluded and/or opportunities available to them are reduced (for example, a situation where such restraint makes difficult for them to easily acquire alternative trading partners, and causes increase of their expenses for conduct of business and/or their discouragement from entering the market or developing new products).

Whether or not a particular vertical non-price restraint has foreclosure effects should be determined in accordance with the guidance on the criteria for judging legality or illegality as set forth in Sub-Section (1) above. For example, if an enterprise which imposes a vertical non-price restraint holds a stronger position in a market, the restraint is more likely to have foreclosure effects. Such determination should be made also taking other enterprises' actions into consideration. For example, if two or more enterprises impose vertical non-price restraints respectively and parallel, those restraints are more likely to have foreclosure effects on the market as a whole than in the case where a single enterprise imposes a vertical non-price restraint.

When determining whether or not a particular vertical non-price restraint has foreclosure effects, the restraint is not required to cause any tangible said situation.

### b. Cases where vertical non-price restraints have price maintenance effects

“Cases where vertical non-price restraints have price maintenance effects” refer to cases where a vertical non-price restraint tends to impede competition among a counterparty to the restraint and its competitors and enable the counterparty to reasonably freely control its prices in its own discretion and thus maintain or raise its prices for a product or products in question.

Whether or not a particular vertical non-price restraint has price maintenance effects should be determined in accordance with the guidance on the criteria for judging legality or illegality as set forth in Sub-Section (1) above. For example, if a strict territorial restriction (refer to Sub-Section 3 (3) of Chapter 2 below) is imposed by an influential enterprise in the market under
circumstances where inter-brand competition does not work well due to oligopolistic structure of the market and/or due to brand differentiation, then price competition for products included in the enterprise's brand may be impeded, and the restriction may have price maintenance effects. Such determination should be made also taking other enterprises' actions into consideration. For example, if two or more enterprises impose vertical non-price restraints respectively and parallel, those restraints are more likely to have price maintenance effects on the market as a whole than in the case where a single enterprise imposes a vertical non-price restraint.

When determining whether or not a particular vertical non-price restraint has price maintenance effects, the restraint is not required to cause any tangible said situation.

(3) Pro-competitive effects which may result from vertical restraints

In the case where vertical restraints actually promote sales of new products, ease new entrants, improve quality and services and so on, pro-competitive effects can be recognized. The followings are typical and non-exhaustive examples:

a. Distributors may sell any enterprises' product without their own promotional activities if other distributors have already implemented promotional activities for the product as pre-sales efforts, which thus have actually boosted demand for the product. In such a case, distributors may refrain from actively implementing voluntary promotional activities on their own expenses, resulting in a situation where consumers who would otherwise have purchased the product do not purchase it. This type of situation is called the "free-rider" problem. One situation in which the free-rider problem is likely to occur is when consumers have limited information on the products. For example, in case of relatively new or technically complex products for consumers, consumers tend to have insufficient information so distributors may have to provide enough information or implement through promotional activities. In addition, consumers must have a sufficient cost-saving effect on purchasing products when purchasing the products from a distributor that does not implement such promotional activities instead of purchasing from one which actually does so. Generally, consumers will have a profound effect when the price of products is relatively high. When these conditions are met and therefore the
free-rider problem occurs, making it highly likely that distributors will not provide consumers with sufficient information on a product of the enterprise and that consequently the product will not be sufficiently supplied, then the enterprise's allocation of one sales area to one distributor may be an efficient restriction to avoid such free-riding. However, pro-competitive effects are recognized, for one thing, only if such promotional activities can benefit many new customers who do not yet have enough information and therefore increase of amount of purchase can be expected and so on. Also, such promotional activities may be unique for the product, and the cost of the promotional activities cannot be recouped (so-called "sunk-cost").

b. In some cases, in order to build a reputation for high quality of its new product, it may be vital in an enterprise’s marketing strategy to supply the new product to retailers which have established reputation for sale of high-quality products. In such a case, it may be helpful for the enterprise’s building-up of reputation for high quality of the new product if the enterprise permits its distributors to sell the enterprise’s products only to those retailers.

c. In order to release a new product, an enterprise may request its distributors to make special investments such as installation of special equipment. In such a case, the distributors may not recoup these investments if other distributors are permitted to sell the same product without making such investments. As a result, all distributors may refrain from making such investments. Under said circumstances, the enterprise’s allocation of one distribution territory to one distributor may be helpful for the enterprise’s encouragement of its distributors to make special investments.

d. In the event that a parts manufacturer has to make special investments (such as installation of special machinery and/or equipment) in order to manufacture parts that satisfy specific requirements of a finished product manufacturer, it may be helpful to inducement for the special investment by the parts manufacturer if the parts manufacturer obligates the finished product manufacturer to purchase the specified quantity of the parts from the parts manufacturer, etc.

e. An enterprise may try to create uniform sales services and/or standardize
the quality of sales services in order to build a reputation among its customers (so-called “brand image”) for its products. In such a case, it will be helpful for the enterprise’s building-up of reputation among its customers for the products if the enterprise permits its distributors to sell the products only to those retailers who can meet certain criteria or if the enterprise restricts retailers’ sales methods.

## (4) An influential enterprise in a market

Some vertical non-price restraints may be illegal as unfair trade practices if such restraints are imposed by “an influential enterprise in a market.” Examples of such restraints are described in Section 2 (Restriction on Dealings with Competitors, etc.), Sub-Section 3(3) (Strict territorial restriction) and Section 7 (Tie-in Sales) of Chapter 2 below.

Whether or not “an enterprise is influential in a market” is in the first instance judged by a market share of the manufacturer, that is, whether or not it has a share exceeding 20% in the market. (meaning a product market which consists of a group of products with the same or similar functions and utility as the product covered by the conduct, and competing with each other judging from geographical conditions, transactional relations and other factors, and which is determined, in principle, in terms of substitutability for users and also, when necessary, substitutability for suppliers). Nevertheless, even if an enterprise falls under this criterion, a restriction by the enterprise is not always illegal. Such restriction is illegal if it has “foreclosure effects” or “price maintenance effects.”

In cases an enterprise which has a market share of 20% or less or a new entrant commits any said action, it does not usually tend to impede fair competition and therefore is not illegal.
### Chapter 1. Resale Price Maintenance

### 1. Viewpoint

(1) It is one of the most basic matters in an enterprise’s business activities that it independently determines its own sales price, in keeping with conditions in a market, and moreover this secures competition among enterprises and consumer choice.

In cases where, as one aspect of marketing activities or upon a distributor's request, an enterprise restricts sales price of distributors, it is in principle illegal as unfair trade practices, because it reduces or eliminates price competition among distributors.

(2) In cases where an enterprise’s suggested retail price or quotation is indicated to distributors as a reference price, such conduct itself is not problematic. However, in cases where the enterprise goes beyond notifying a price merely as a reference one and seeks to restrict resale prices of its distributors by, for example, causing them to keep the price indicated by the enterprise, such conduct falls under the conduct described in Sub-Section (1) above, and is in principle illegal (Note 4).

(Note 4) In cases where an enterprise sets a suggested retail price, such conduct is not usually problematic unless it does not constitute restriction of resale prices. (Whether or not a particular price setting constitutes restriction of resale prices should be determined based upon the guidance given in Section 2 below.)

From a viewpoint of prevention of violation of the Antimonopoly Act, it is desirable that, if an enterprise notifies a suggested retail price of its product to its distributors, the enterprise should refrain from using the expression “True Price” (Seika), “Set Price” (Teika) or merely indicating the value of the price and should use non-binding expressions such as “Reference Price” (Sanko Kakaku) or “manufacturer’s suggested retail price” and that the enterprise should clearly state in a written notice that the suggested retail price is given solely for reference purposes and that each distributor is free to set its resale price independently.
### 2. Restriction of Resale Prices

(1) Any enterprise’s restrictions of sales prices of its distributors (i.e., resale prices) are in principle illegal as unfair trade practices (Article 2, Paragraph (9), Item (iv) (Resale Price Restriction) of the Antimonopoly Act) (Note 5). That is to say, since resale price maintenance (RPM) reduces or eliminates price competition among distributors, generally RPM has serious anti-competitive effects and so tends to impede fair competition in principle. Therefore, the Antimonopoly Act stipulates that any RPM imposed by an enterprise on distributors without “justifiable grounds” is illegal as unfair trade practices. In other words, RPM is not illegal on an exceptional basis on the condition that it has “justifiable grounds.”

(Note 5) Any enterprise’s restriction of prices of its distributors for any service falls under Paragraph 12 (Trading on Restrictive Terms) of the General Designation. Basic approach is the same as that which applies to cases which fall under Article 2, Paragraph (9), Item (iv) of the Antimonopoly Act.

(2) “Justifiable grounds” might be granted only within a reasonable scope and only for a reasonable period, in the case where RPM by an enterprise with respect to its product results in actual pro-competitive effects, promotes inter-brand competition, and increases demand for the product thus benefiting consumers, and these pro-competitive effects would not have resulted from less restrictive alternatives other than the RPM.

For example, when an enterprise engages in RPM with respect to a product, such RPM is deemed to have “justifiable grounds” if the RPM actually has pro-competitive effects through avoiding the “free-rider” problem mentioned in Sub-Section 3(3)a of Part 1 above, promotes inter-brand competition, and increases demand of the product, thus benefiting consumers, and pro-competitive effects would not have resulted from less restrictive alternatives other than the RPM.

(3) Whether or not resale prices are restricted by an enterprise is to be determined with reference to whether or not the enterprise has taken artificial means to secure the effectiveness in attaining its distributors' sales at a price
indicated by the enterprise.

In the following cases, it should be determined that the effectiveness in attaining distributors' sales at a price indicated by the enterprise is secured:

(i) In case where a written or oral agreement between an enterprise and its distributor causes the distributor to sell the enterprise’s product at a price indicated by the enterprise, including the cases where:

(a) a written or oral contact between an enterprise and its distributor provides that the distributor should sell the enterprise’s product at a price indicated by the enterprise;

(b) a distributor is required to pledge in writing to sell at a price indicted by an enterprise;

(c) an enterprise proposes to a distributor the condition that the distributor should sell the enterprise’s product at a price indicated by the enterprise, and the enterprise starts dealing with the distributor only if it accepts such condition; or

(d) an enterprise deals with a distributor on the condition that the distributor should sell the enterprise’s product at a price indicated by the enterprise and that unsold units of the product should not be sold at any discounted price but repurchased by the enterprise.

## (Example)

Company X has established the following sales regulation (hereinafter referred to as the "Sales Regulation") applicable to retailers' sale of Company X's camping equipment products in the next season:

• retailers’ sales prices for each of those products should be equal to or higher than the minimum price set by Company X; and

- each retailer will be permitted to sell those products at discounted prices only if the retailer does the discount sale covering all products including other brands or if the retailer does the discount sale for the purpose of selling out its inventory at its brick-and-mortar stores, without issuing advertisement leaflets, and not earlier than the day designated by Company X.

Company X caused retailers to sell its camping equipment products in compliance with the Sales Regulations as follows: Company X by itself or through wholesalers:
- in negotiations for transactions to be done in the next season with each retailer that is Company X's current trading partner, requests the retailer to sell those products in compliance with the Sales Regulations in such a way as to present a quotation in which the minimum price set by Company X is written; and

- at commencement of transactions between Company X and each retailer that is Company X’s new trading partner, requests the retailer to sell those products in compliance with the Sales Regulation,

and under the condition that Company X should cause other retailers to sell those products in compliance with the Sales Regulation, obtained from each retailer an agreement to sell those products in compliance with the Sales Regulation.

This action done by Company X was found to fall under Article 2, Paragraph (9), Items (iv) (a) and (iv) (b) of the Antimonopoly Act and therefore to breach the provision of Article 19 of the Act. (Cease and Desist Order of June 15, 2016; JFTC Disposition No. 7 of 2016.)

(ii) In case where an enterprise, through any artificial means (such as an enterprise’s imposing or suggesting to impose economic disadvantage on its distributors if the distributors do not sell the enterprise’s product at a price indicated by the enterprise), causes the distributors to sell at the indicated price, including the cases where:

(a) curtailment of shipments or any other economic disadvantage (including reduction of quantities shipped, raising of a shipment price, reduction of rebates, and refusal to supply other products: hereinafter the same) is imposed by an enterprise on its distributor if the distributor does not sell the enterprise’s product at a price indicated by the enterprise, or an enterprise’s intention to do so is notified or suggested by the enterprise to its distributor;

(b) rebates or other economic rewards (including lowering of a shipment price and supply of other products; hereinafter the same) are provided by an enterprise to its distributor if the distributor sells the enterprise's product at a price indicated by the enterprise, or an enterprise's intention to do so is notified or suggested by the enterprise to its distributor;

(c) an enterprise compels its distributor to sell the enterprise’s product at a price indicated by the enterprise, by collecting sales price reports,