Private Antitrust Actions in Japan

Posted by D. Daniel Sokol

Mitsuo Matsushita (Nagashima Ohno & Tsunematsu) & Kazunori Furuya (Furuya Law Office) discuss Private Antitrust Actions in Japan

ABSTRACT: The Japanese Antimonopoly Law (hereafter referred to as “JAML”) was enacted in 1947 as part of the Economic Democratization Policy introduced into Japan by the Occupation Forces. Originally it was based on U.S. antitrust laws but, after more than 60 years of enforcement, JAML has acquired features unique to Japan such as the control of dominant position designed to protect small enterprises such as subcontractors and small dealers vis-a-vis large producers and dealers which tend to abuse their superior bargaining positions to the disadvantage of the smaller entities. The major pillars of JAML are the prohibition of: (a) of monopolization, (b) cartels and (c) unfair business practices and, in addition, (d) the control of mergers and acquisitions.

Private monopolization is roughly similar to monopolization under Section 2 of the Sherman Act in the United States and abuse of dominant positions in the European Union. Cartels are generally prohibited in Japan just like in the United States, European Union, and elsewhere. The control of mergers and acquisitions is similar to the counterparts in other major jurisdictions.

Unfair business practices (or unfair trade practices) are a category unique to JAML. It is provided for in Article 2:9 of JAML. According to this article, unfair business practices are those conducts which tend to impede fair competition and include: (1) boycott (collective refusals to supply which include primary and secondary refusals); (2) price discrimination (unreasonable discrimination in supplying commodities and services); (3) below-cost selling (predatory pricing); (4) resale price maintenance; (5) abuse of dominant positions; and (6) other conducts which are designated by JFTC: unreasonable discrimination, transaction with unreasonable prices, unreasonable inducement or coercion of competitors’ customers, transactions with unreasonable restrictions, unreasonable use of one’s advantageous positions in transactions and unreasonable interference into transactions between competitors and their customers, and inducement of corporate executives and employees of competitors to cause disadvantages to their companies. Categories (1)-(5) are subject to administrative surcharges of differing amounts according to the category in question as well as cease-and-desist orders imposed the Japan Fair Trade Commission (“JFTC”), the enforcement agency. Category (6) is subject to cease-and-desist orders of JFTC but not subject to administrative surcharge.

One of the constituent elements of unfair business practices is that a conduct tends to impede fair competition and is “without good cause” or “unreasonable” as the case may be. “Without good cause” is used with Categories (1), (3), and (4) and is interpreted to mean unlawful in principle, e.g., a conduct amounting to this category is presumed to be unlawful when the existence of the conduct is established and this presumption can be overturned if the defendant successfully rebuts this presumption.

“Unreasonable” is used with all other categories. This concept is similar to “rule of reason” in U.S. antitrust laws and it is up to JFTC or a private plaintiff to adduce evidence and argument proving the illegality of the conduct.

As mentioned earlier, one of the constituent elements of unfair business practice is that a conduct “tends to impede fair competition” as contrasted with the constituent elements of private monopolization or unreasonable restraint of trade. In cases of private monopolization and unreasonable restraint of trade, it is necessary that a conduct in question “substantially restrains competition” which means making a heavier impact on the market than a mere “tending to impede fair competition.” The prohibition of unfair business practices is a precautionary measure in relation to the prohibition of private monopolization and unfair business practices.