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Enforcement activities of suspected violation of the Antimonopoly Act by motor coach (express bus) operators

May 14/2003
Japan Fair Trade Commission

The Fair Trade Commission of Japan (JFTC), having investigated into three motor coach operator companies ("the three companies") that jointly operate(Note 1) express bus(Note 2) routes in the Tohoku region based on the provisions of the Antimonopoly Act, today brought to the three companies' attention as shown in Notes 1 and 2 described below the fact their conduct is in danger of leading to violations of Section 3 (Prohibition of Private Monopolization) and Section 19 (corresponding to Fair Trade Commission Notification No. 15 Unfair Trade Practices Article 15 (Interference with a Competitor's Transaction) of the Act.

In addition, the commission requested that the Nippon Bus Association notify its member entities of this enforcement activity, and pointed out to managers of bus boarding/deboarding zones ("bus pools") set up in front of railway stations problems in the procedures for permission to use the zones and requested a review.
The commission also pointed out to the Ministry of Land, Infrastructure and Transport several points the ministry should note in examinations for motor coach operator permits, from the standpoint of proactive prevention of violations of the Antimonopoly Act.

(Note 1) "Jointly operate" means two or more motor coach operators that have a business base only at either the starting point or terminal point on a route that cooperate to operate the route concerned by means such as fare pooling, etc.
"Fare pooling" means allocating fare revenues according to some means such as operating frequency after the fare revenues of each company have been added together.
(Note 2)"Express bus" means a motor coach bus that operates over an express system linking urban areas with a limited number of bus stops for boarding and deboarding and roughly operating over a system of 50 kilometers or longer.

 1. Summary of the suspected cases

(1) The three companies were cooperating by using fare pooling on express bus routes in the Tohoku region, and on routes where new entrants had applied for a business permit, express bus operators other than the three companies did not exist and the routes had become routes without competition among the three companies.
(2) The three companies cooperated when a new entrant applied for a business permit on the express bus routes concerned and reduced their fares to a level equal with the fare for which the new entrant had applied for approval.
(3) Because it is considered necessary to finalize negotiations when coordination among concerned parties such as related businesses is required when using bus stops, for applications for a motor coach business permit in the Tohoku region, new entrants would not obtain consent promptly when they submitted applications for use to managers of the bus pools even though they requested the consent of the three companies because applications were submitted subject to obtaining the consent of the three companies, and furthermore, because confirmation of the facts in question were also requested from the transportation bureau, they set up their own bus stops and began operations to avoid delays in the start of business.

2. Summary of points requiring attention

(1) Although the commission did not determine the conduct of the three companies in paragraph 1(2) above directly violated the provisions of the Antimonopoly Act, on routes where express bus operators other than the three companies do not exist, the commission pointed out that, when conduct by the three companies acting together under the form of joint operations in response to a new entrant serves to eliminate the new entrant's business activities, such conduct exceeds the scope of normal competition among entrepreneurs, and may lead to violations of the Antimonopoly Act as a private monopolization (Antimonopoly Act Section 3) performed by conspiracy among the three companies, and alerted them to be careful to not commit such acts.
(2)Although the commission did not determine with regard to paragraph 1(3)above the three companies had refused the request for consultations from new entrants, the commission pointed out that, when the three companies respectively do not consent to the use of the bus pools, even though they do not have any justifiable reasons, this may lead to violations of the Antimonopoly Act as interference with a competitor's transaction (Antimonopoly Act Section 19 (corresponding to Fair Trade Commission Notification No. 15 Unfair Trade Practices Article 15), and alerted them to be careful to not commit such acts.
(3) With regard to the three companies' joint operations, the commission took into account factors such as the business capabilities of each company, and requested entrepreneurs capable of operating independently to not participate in joint operations that involve fare pooling, or to improve the form of their joint operations by measures such as moving to an alliance operation that does not involve fare pooling.

3. Request to managers of bus pools

In the case reviewed, the managers of the bus pools assumed receipt of the consent of existing entrepreneurs as a requisite when approving the use of the bus pools. Because this type of requirement may lead to interference with a new entrant's operations when existing entrepreneurs do not consent to the use of the bus pools by a new entrant, the commission requested the managers to review this requirement.

4. Familiarizing motor coach operators with certain matters

The commission requested the Nippon Bus Association through the Ministry of Land, Infrastructure and Transport to familiarize its member entrepreneurs with the following matters:

(1) On routes where express bus entrepreneurs other than the entrepreneurs that operate jointly do not exist, conduct by the entrepreneurs participating in joint operations to form a single entity to respond to a new entrant will become a problem under the Antimonopoly Act as a private monopolization when such conduct serves to interfere with the new entrant's business activities.
(2) Not consenting to the use of bus pools by a new entrant without justifiable cause will become a problem under the Antimonopoly Act as interference with a competitor's transaction.
(3) For joint operations in which nearly all competing entrepreneurs participate, operating fare pooling that involves fare restrictions will become a problem under the Antimonopoly Act as unreasonable restraint of trade.

5. Request to the Ministry of Land, Infrastructure and Transport

For examinations for motor coach bus operation permits, the commission requested the ministry to review the best way to administer procedures with regard to requiring coordination among the related parties such as existing entrepreneurs be completed as a condition of the permits, when such coordination is necessary for the use of bus stops, in order that such examinations do not lead to conduct that violates the Antimonopoly Act, such as existing entrepreneurs not consenting to the use by new entrants without justifiable reasons.

6. Future response of the Fair Trade Commission

(1) For joint operations, coordination among entrepreneurs concerning fares and charges, operating frequency and operating systems will become a problem under the Antimonopoly Act corresponding to unreasonable restraint of trade (cartels) (Antimonopoly Act Section 3)when competition in the marketplace is substantially restricted.
When the scope of cartels excluded from application based on the Road Transport Act was reduced in 1997, the Commission described its approach based on the systems and actual conditions at that time concerning joint bus operations concluded without receipt of approval of the arrangements of Article 19 paragraph 1 of the Road Transport Act. Under this approach, even though the Commission as a rule will continue to regard the limiting fares for joint operations as a problem under the Antimonopoly Act, in cases where it is difficult for entrepreneurs to enter a market independently because of factors such as the difficulty in bearing separately the expenses required for initial investments related to operations such as business facilities (for example, motor coach buses operating over an express system linking urban areas with a limited number of bus stops for boarding and deboarding and roughly operating over a system of 50 kilometers or longer will correspond to this situation), as a rule the Commission will not regard agreements entered into to establish new routes,excluding agreements concluded to divide routes and divide markets, as being a problem under the Antimonopoly Act.
Because substantial changes are occurring in the competitive situation, such as cases seen in which new entrants have appeared after routes are established as a result of deregulation following the amendment of the Road Transport Act that went into force in February 2002, however, the Commission has made it a point to conduct a review of its 1997 approach.

(2) Based on this case, when problems arise under the Antimonopoly Act concerning joint operation of express buses, in the future the Commission will handle such cases strictly and will aggressively respond to consultations from entrepreneurs and other parties,according to the spirit of regulatory reform, to ensure new entrants can smoothly operate on existing express bus routes and to contribute to the promotion of fair and free competition in the express bus business of its 1997 approach.

*Every announcement is tentative translation. Please refer to the original text written in Japanese.



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