Summary of Annual Report of the Japan Fair Trade Commission
(April 2022-March 2023)
In order to enhance vitality of businesses, increase consumer welfare and stimulate innovation, through fair and free competition, the Japan Fair Trade Commission (JFTC) has actively worked on the implementation of competition policy in FY2022 with enforcement and advocacy as two wheels of a cart, in other words, by eliminating violations and restoring competition through strict and appropriate enforcement of the laws and regulations under its jurisdiction and by proposing improvements in business practices and revisions of regulations and systems to develop the competitive environment, focusing on the following measures.
1.1 Revision of the Antimonopoly Act
On March 7, 2023, a bill to partially amend the Basic Act on the Formation of Digital Society to Promote Regulatory Reforms for the Formation of a Digital Society was submitted to the 211th ordinary Diet session, including an amendment to the Antimonopoly Act to allow service of public notice to be viewed via the Internet.
1.2 Submission to the Diet of the Bill for the Act on the Improvement of Transactions Pertaining to Specified Entrusted Business Operators.
Based on the "Grand Design and Action Plan for a New Form of Capitalism" (approved by the Cabinet on June 7, 2022), which stated that a legal system for fair transactions with freelance workers should be studied and submitted to the Diet as soon as possible, and in light of the diversification of work styles in Japan, and in order to create an environment in which individuals can stably engage in business entrusted to them as business operators, a "Bill on the Act on the Improvement of Transactions Pertaining to Specified Entrusted Business Operators" was submitted to the 211th Diet session on February 24, 2023, with the content that it would take measures such as requiring business operators who entrust business to specified entrusted business operators to clearly indicate the contents of proceeds and other matters.
1.3 Revision of other laws and regulations under its jurisdiction
The JFTC enacted the "Regulations Concerning Dispositions under Article 40 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade" (Fair Trade Commission Rule No. 2 of 2022, promulgated on August 12, 2022, and became effective on the same day) to specify documents to be served under the investigative authority prescribed in Article 40 of the Antimonopoly Act.
In addition, in order to strengthen the organizational structure for enforcement for proper small and medium-sized subcontracting transactions based on the "Comprehensive Economic Measures to Overcome High Prices and Achieve Economic Revival" (Cabinet decision on October 28, 2022), etc., the JFTC amended the Organization Order of the General Secretariat (Cabinet Order No. 373 of 1952, the amendment promulgated and became effective on December 9, 2022), etc.
In addition, in order to improve the convenience of applicants, etc. and the efficiency of administrative work for procedures based on the Antimonopoly Act, etc., and with the enhancement of the online receipt function of applications in conjunction with the renewal of the JFTC's website system, the "Ordinance for Enforcement of the Act on the Promotion of Administration through Information and Communications Technology with regard to Laws and Regulations under the Jurisdiction of the Japan Fair Trade Commission" (Fair Trade Commission Rule No. 1 of 2003) was amended (Fair Trade Commission Rule No. 2 of 2023, promulgated on March 31, 2023 and became effective on April 1 of the same year).
2 Strict and Accurate Law Enforcement
2.1 Active Elimination of the AMA Violations
2.1.1 Under the fundamental policy of conducting prompt and effective case investigations, the JFTC takes strict and active measures against diverse cases that accurately respond to social needs, including price-fixing cartels and bid rigging cases that have significant impacts on the public, abuse of superior bargaining position that unjustly disadvantages SMEs and unjust low price sales (predatory pricing).
2.1.2 In FY2022, the JFTC opened investigations against 116 cases of suspected AMA violations and of these, completed 99 cases.
2.1.3 During the same period of time, the JFTC took eleven legal measures, including eight cease and desist orders and three commitment plan approvals. In terms of conduct types, the legal measures were taken against one price-fixing cartel, three other type of cartels, four bid rigging cases and three unfair trade practice cases (See Figure 1). The JFTC also ordered payment of surcharge (administrative fine) totalling JPY 101.99 billion (approximately USD 731.76 million) to a total of 21 enterprises (See the table below).
Under the leniency program to motivate enterprises to self-report their violations, the JFTC received a total of 22 applications in FY2022.
＜Cases involving cease and desist orders in FY2022＞
• Cease and Desist Order and Surcharge Payment Orders to the Manufactures of Steel Butt-Welding Pipe Fittings
• Cease and Desist Orders and Surcharge Payment Orders against the Former General Electricity Utilities, etc. (Three cases)
• Cease and desist orders and surcharge payment orders against participants in bidding for personal computers and managed local area network servers for schools ordered by Hiroshima Prefecture and City of Hiroshima (Two cases)
＜Cases involving approvals of the commitment plans in FY2022＞
|Resale Price Maintenance
• Approval of the Commitment Plan submitted by ICHIRAN Inc.
|Trading on Restrictive Terms
• Approval of the Commitment Plan submitted by Expedia Lodging Partner Services Sàrl
|Interference with a Competitor’s Transactions
• Approval of the Commitment Plan submitted by SCINEX CORPORATION and SMARTVALUE Co., Ltd.
2.1.4 In FY2022, the JFTC also closed one investigation in light of voluntary measures taken by the suspected enterprise, which was made public.
＜Cases closed in accordance with voluntary measures of enterprises, etc. in FY2022＞
• Report from SEVEN-ELEVEN JAPAN ceasing Product Guide Production Fee in PB manufacturing contract
(Refer to figure 2 for numbers of the cases mentioned above)
Figure 1: Number of Cases Involving Legal Measures (Note1)
(Note 1) "Legal measures" refer to cease and desist orders, surcharge payment orders and approvals of the commitment plans. The case in which both a cease and desist order and a surcharge payment order are issued is counted as one legal measure.
(Note 2) The cases which fall into both private monopolization and unfair trade practice are categorised as “Private monopolization.”
(Note 3) Other cartels" are cartels involving quantity, sales channels, prohibitions on customer movement, facility restrictions, etc.
Figure 2: Number of Cease and Desist Orders, Approval of the Commitment Plan, Warning,etc.
(Note) Only cases which were made public.
Table: Amount of Surcharge (Administrative Fine)
(Note) Surcharges have been rounded down to the nearest ten million yen.
2.1.5 In addition, JFTC’s efforts for appropriate and prompt law enforcements include 275 cautions (including 192 cautions for promptly dealing with unjustly low price sales cases) on practices likely to lead to the AMA violations.
2.1.6 The JFTC requests business associations, etc. to take the necessary measure in light of competition policy, when it finds in the course of the investigation on the AMA that such a measure should be taken in terms of competition policy.
In FY2022, the JFTC made such a request to the Federation of Electric Power Companies of Japan.
2.1.7 The JFTC has actively pursued criminal prosecution for malicious and serious cases that are considered to have a broad impact on people's lives.
In FY2022, the JFTC, having investigated into a bid-rigging case concerning the “outsourcing contracts of planning test events, etc.” regarding the Olympic and Paralympic Games Tokyo 2020 ordered by the Tokyo Organizing Committee of the Olympic and Paralympic Games, believed a criminal violation of the AMA and filed, on February 28, 2023, a criminal accusation with the Prosecutor General against 6 companies, 6 individuals of the 6 companies who were engaged in work related to winning the outsourcing contracts of planning test events, etc., and 1 individual in charge of work related to ordering the outsourcing contracts of planning test events, etc. as an operations executive at the Tokyo Organizing Committee.
2.2 Promotion of Fair Trade Practices
2.2.1 Efforts against Abuse of Superior Bargaining Position
The JFTC has conducted surveillance to prevent abuse of superior bargaining position that constitutes unfair trade practice under the AMA and has tackled the violations. In addition, a Task Force on Abuse of Superior Bargaining Position Cases has been established to conduct investigations into acts of abuse of a superior bargaining position in an efficient and effective manner and to take necessary corrective measures.
In FY2022, the JFTC issued 55 cautions against suspected abuses of superior bargaining position that are likely to lead of AMA violations.
2.2.2 Efforts against Unjust Low-Price Sales (Predatory Pricing)
The JFTC takes a prompt action against unjust low-price sales in the retail industry. When unjust low-price sales by retailers are repeated, or conducted by large-scale retailers, and they are considered to significantly affect other competing retailers operating in neighbouring areas, the JFTC investigates the impact of their conduct on respective competing retailers. If the JFTC finds it anticompetitive, it takes stern actions including legal measures.
In FY2022, the JFTC issued cautions in 192 cases in the retail sector, including liquor, petroleum products, on the grounds of practices likely to lead to unjust low price sales (37 cases for liquor, 151 for petroleum products and four for products in other categories).
In addition, in light of changes in the business environment surrounding the gasoline distribution industry, and in order to further ensure transparency in the application of the law and increase predictability for business operators, on November 11, 2022, the JFTC released the revision of "Measures against Unjustifiable Underestimation and Discriminatory Pricing in the Distribution of Gasoline, etc."
2.2.3 Proactive Elimination of Violations of the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors
126.96.36.199 In light of the reality of subcontracting transactions, where it is difficult to expect voluntary provision of information from subcontractors, the JFTC, in cooperation with the Small and Medium Enterprise Agency, has been making efforts to detect violations of the Act by conducting regular surveys of main subcontracting enterprises and subcontractors who do business with them. In addition, in order to ensure that the independent business activities of small and medium-sized business operators are not hampered by the still severe business environment surrounding them, the JFTC is striving to ensure fairness in subcontracting transactions and to protect the interests of subcontractors through prompt and effective implementation of the Subcontract Act.
In FY2022, periodic surveys were conducted on 70,000 main subcontracting enterprises and 300,000 subcontractors doing business with them. As a result of the periodic surveys, 6 recommendations were issued and 8,665 cases of guidance were given based on the Subcontract Act (see Figure 3).
• A case of reduction of subcontract proceeds in the wholesale of food and beverage products
Figure3: Number of the Subcontract Act cases
(Note) Refer to 188.8.131.52 below about voluntarily reported cases.
184.108.40.206 In FY2022, a total of 1,134.65 million yen worth of restitution was made to 6,294 subcontractors by 180 main subcontracting enterprises for disadvantages suffered by the subcontractors, including restitution of reduced subcontract proceeds (see Figure 4). Main items included in this amount were as follows: (1) in a case involving a reduction of subcontract proceeds, the main subcontracting enterprise returned a total of 855.61 million yen to the subcontractors; (2) in a case involving a delay in payment of subcontract proceeds, the main subcontracting enterprise paid a total of 140.64 million yen as interest for the delay; and (3) in a case involving return of goods, the main subcontracting enterprise withdrew goods worth 115.12 million yen in total from the subcontractors. (iv) in a case involving an unjust request for the provision of economic benefits, the main subcontracting enterprise returned to the subcontractor a total of 18.65 million yen as benefits provided.
Figure4: Amount of restitution
220.127.116.11 In light of the fact that voluntary improvement measures by the main subcontracting enterprises contribute to the early recovery of the disadvantages suffered by the subcontractors, the JFTC, in cases where it finds reasons such as a voluntary offer of violation and voluntary improvement measures being taken before the JFTC initiates an investigation, encourages compliance with laws and regulations by the main subcontracting enterprises. From the viewpoint of encouraging compliance by the main subcontracting enterprises, the JFTC has decided to treat such cases as not requiring a recommendation to take necessary measures to protect the interests of the subcontractor, and has made a public announcement to this effect (December 17, 2008).
In FY2022, there were 23 cases of aforementioned voluntary reporting of violations by the main subcontracting enterprises. There were 20 cases of voluntary submissions processed in the same fiscal year, one of which was a case in which the content of the violations was such that the disadvantage to the subcontractor was so great that it warranted a recommendation.
2.2.4 Efforts regarding the "Action Plan for the Promotion of Fair Trade by Small and Medium-sized Businesses, etc." based on the "Package of Measures to Facilitate Transfers for Value Creation through Partnership
On March 30, 2022, the JFTC formulated the "Action Plan for Promotion of Fair Trade by Small and Medium Sized Businesses in 2022" based on the "Package of Measures to Facilitate Transfers for Value Creation through Partnership" compiled by the relevant ministries and agencies including the JFTC on December 27, 2021. Based on this plan, the JFTC made unprecedented efforts to realize appropriate price pass-through, in which it conducted an emergency survey of 110,000 undertakings in 22 industries regarding "abuse of a superior bargaining position" under the Antimonopoly Act, and issued a letter of warning to 4,030 enterprises whose conduct was found to have the potential to lead to problems, as well as published the names of 13 enterprises who were found to be deferring review of transaction prices without consultation with numerous suppliers. In addition, on March 1, 2023, the JFTC formulated a new "Action Plan for the Promotion of Fair Trade by Small and Medium Sized Businesses in 2023" and compiled policies for further action to realize appropriate price pass-thorough such as sending a written request to approximately 1,600 related business associations for smooth price pass-through.
2.2.5 Efforts for smooth pass-on of consumption tax
The JFTC actively conducted on-site inspections and other investigations based on information obtained through various information-gathering activities, including consultations and provision of information to consultation desks set up at the JFTC headquarters and regional offices nationwide, and through the use of questionnaire surveys under the Subcontract Act, and provided guidance in 161 cases under the Act on Special Measures for Pass-On of Consumption Tax. In addition, a total of 414.97 million yen was restored to its original state.
The Act on Special Measures for Pass-On of Consumption Tax expired on March 31, 2021. However, in accordance with Article 2, Paragraph 2 of the Supplementary Provisions of the Act, the provisions for investigations, guidance, and recommendations for violations committed prior to the expiration of the Act shall remain in effect even after the Act expires. Therefore, the JFTC will continue to promptly and appropriately deal with acts of refusal to transfer that were committed prior to the expiration of the provisions.
2.3 Improvement in Merger Review
The AMA prohibits an acquisition of shares, shareholding, merger and other transactions (hereinafter collectively referred to as "merger(s)") that would substantially restrain competition in a particular field of trade. The JFTC operates merger regulations in a prompt and appropriate way in order to ensure competitive market structure in Japan. The JFTC also actively utilizes economic analysis in merger review if necessary.
In FY2022, based on Articles 9 to 16 of the AMA, the JFTC approved 21 cases of acquiring and holding of voting rights of non-financial companies by banks or insurance companies; and it also received 116 reports from holding companies on their business and 306 prior notifications of mergers, and conducted necessary review on these cases. In addition, the JFTC conducted necessary review based on the "Policies Concerning Procedures of Review of Business Combination" (Fair Trade Commission, published on June 14, 2011 and amended on December 17, 2019), which stipulate that the JFTC reviews merger cases of which the total consideration for the acquisition is large and which are expected to affect domestic consumers, even if they do not meet the notification thresholds in the AMA. In addition, on June 22, 2022, the JFTC published "JFTC’s Practice on Submission of Internal Documents in Review of Business Combinations" to contribute to smooth communication between the parties and the JFTC regarding the submission of internal documents.
3 Improvement of Competitive Environment (Advocacy)
3.1 Toward the active promotion of competition policy in response to digitization and other socioeconomic changes
In the midst of rapid changes in the social economy, such as the advancement of digitalization, it has become important to create a competitive environment that encourages innovation and corporate growth. To this end, the JFTC has been working to eliminate violations of the Antimonopoly Act through strict and appropriate enforcement, and improving the competitive environment through advocacy to improve business practices in various fields and to propose revisions of regulations and systems. On June 16, 2022, the JFTC released a statement entitled "Towards the Active Promotion of Competition Policy in response to Socioeconomic Changes as represented by Digitalization - Coordination and Strengthening of Advocacy and Enforcement –” The statement expressed the JFTC's commitment to strengthen its whole of the organization responses to socioeconomic changes, such as the advancement of digitalization, by working more vigorously to promote enforcement and advocacy as two wheels of a cart.
3.2 Establishment of Guidelines, etc.
The JFTC has established and published Guidelines that identify the actions that may actually be AMA violations in activities of enterprises and trade associations, in order to prevent enterprises and trade associations from violating the AMA and to help them promote proper business activities.
＜Establishment of Major Guidelines, etc. in FY2022＞
• Revision of the "Guidelines for Promotion of Competition in the Telecommunications Business Field"
3.3 Fact-Finding Survey
The JFTC has conducted fact-finding surveys in a variety of fields actively and, based on their results, pointed out problems and issues from a viewpoint of the AMA and competition policy to encourage enterprises and trade associations to improve the trade practices by themselves, and recommended that regulatory authorities should review regulations and systems, thereby promoting competitive environment.
＜Major fact-finding surveys in FY2022＞
• Survey on Credit Card Market
3.4 Study Group on Innovation and Competition Policy
Ensuring a market environment conducive to innovation is an important and new policy issue in competition policy, and it is important to properly assess possible future innovation as having long-term effects on the competitive environment. Based on this recognition, the JFTC has been holding the "Study Group on Innovation and Competition Policy" since March 2023 for the purpose of theoretically and systematically studying the mechanisms by which corporate behaviours affect innovation, based on economic and other knowledge in order to gain a deeper understanding and knowledge on these matters.
3.5 Participation in the Digital Market Competition Council
Under the Headquarters for Digital Market Competition established within the Cabinet, the Digital Market Competition Council has been held to examine and discuss the important matters concerning digital markets. The Council is chaired by Chief Cabinet Secretary, and includes the Minister of State for Special Missions of the Cabinet Office, who is in charge of administrative affairs related to the JFTC, and the Chair of the JFTC as its members.
The 6th conference of the Council were held on April 26th, 2022, and the Minister of State for Special Missions of the Cabinet Office and the Chair of the JFTC participated in them.
3.6 Implementation of Competition Assessment
All of the government ministries and agencies have been in principle mandated to conduct an Ex-ante Regulatory Impact Assessment (“RIA”), which includes an analysis of the impacts of the regulations on competition (competition assessment), when establishing, revising or abolishing regulations. The Ex-ante RIA requires the relevant ministries and agencies to fill out the “competition assessment checklist” and then submit the completed checklist together with an Ex-ante RIA report to the Ministry of Internal Affairs and the Communications (“MIC”), which is supposed to forward the checklists to the JFTC.
In FY2022, the JFTC received 227 competition assessment checklists from the MIC and examined them. In addition, the JFTC held two meetings in which the experts with knowledge or insights about economics or policy evaluation of regulation discussed competition assessment, in order to improve an approach of competition assessment, for the purpose of appropriate implementation of RIA.
3.7 Efforts to Prevent Bid Rigging
Since procurement officers’ efforts are extremely important for the thorough elimination of bid rigging, the JFTC has been holding training seminars on the AMA and the Act for the Prevention of Collusive Bidding at the Initiative of Government Officials for procurement officers at local governments, providing them with practical knowledge about competition law and policy. The JFTC has also been cooperating with other government ministries and agencies, local governments and publicly owned companies by dispatching its officials as resource persons or providing materials to the related seminars organized by those ministries and agencies.
In FY2022 the JFTC held 36 training seminars and dispatched resource persons to 225 training seminars hosted by government ministries and agencies, local governments and publicly owned companies.
3.8 Consultation Services
The JFTC answers questions about the AMA and related laws from enterprises, trade associations, general consumers, etc. in writing or orally.
Reinforcement of Foundations for Operation of Competition Policy
4.1 Development of Theoretical and Empirical Foundations for Competition Policy
Since its establishment in the JFTC in June 2003, the Competition Policy Research Center (“CPRC”) has been strengthening theoretical and empirical foundations for the enforcement of the AMA, and for planning, policy making and evaluation of the JFTC’s competition policy. In FY2022, the CPRC held two symposiums and one “Open Seminar”.
In FY2022, the CPRC held two symposiums and one “Open Seminar”.
4.2 Utilization of Economic Analysis in Competition Policy and Law Enforcement
Based on the "Follow-up to the Growth Strategy" (Cabinet decision on June 18, 2021), the JFTC established the "Office of Economic Analysis" on April 1, 2022 to strengthen the system for conducting high-quality economic analysis that can serve as a basis for enforcing the AMA and formulating competition policies. In addition, on May 31, 2022, the JFTC published "Points to Consider When Submitting An Economic Analysis Report and Data". It also published the results of economic analysis that was used in the investigation of cases involving alleged violations of the AMA, merger review, and various fact-finding surveys published in FY2022.
4.3 Response to the Globalization of the Economy
4.3.1 Reinforcement of Cooperation with Other Competition Authorities
Based on bilateral and multilateral competition agreements, the JFTC closely cooperates with foreign competition authorities through the ways such as notifying competition authorities of the related jurisdictions of enforcement actions. The JFTC holds bilateral meetings with competition authorities in countries or areas with particularly active economic relations with Japan.
4.3.2 Efforts Related to Economic Partnership Agreements, etc.
The JFTC considers competition policy as an important element in Economic Partnership Agreements (EPAs) and participates in negotiations with an intention to incorporate the competition chapter including articles related to a cooperation framework on competition in EPAs. In FY2022, the JFTC participated in the negotiations for the conclusion of the Indo-Pacific Economic Framework (IPEF).
4.3.3 Participation in the Multilateral Conferences
The JFTC's chair has been a member of the ICN Steering Group since its establishment, and the JFTC has been a co-chair of the Unilateral Conduct Working Group since May 2020.
In March 2023, the JFTC hosted a workshop in Tokyo on "Developments and Challenges in Competition Policy and Enforcement in the Current Unilateral Conduct Area ".
The JFTC’s commissioner and other staff participate in meetings of the Competition Committee of the Organization for Economic Cooperation and Development (OECD).
Moreover, on October 12, 2022, the Chairman of the JFTC attended the "Enforcers and Policy Makers Summit" held in Berlin, attended by top officials from competition authorities and policy makers of the G7 countries.
The JFTC actively participates in multilateral meetings such as the Asia-Pacific Economic Cooperation (APEC), the United Nations Conference on Trade and Development (UNCTAD), and the East Asia Top Level Officials’ Meeting on Competition Policy (EATOP).
4.3.4 Technical Assistance
The JFTC has been providing technical assistance regarding competition policy to competition authorities of the developing countries such as dispatching its officials or providing training courses.
In FY2022, the JFTC carried out technical assistance projects in Vietnam, Mongolia, Malaysia, and Thailand in cooperation with the Japan International Cooperation Agency (JICA), and also provided training courses on competition law and policy for officials from jurisdictions where competition laws had been newly introduced or strengthened.
4.4 Raising Public Awareness of Competition Policy
The JFTC solicited opinions, requests and suggestions from members of the “Antimonopoly Policy Cooperation Committee” for the purpose of utilizing them in implementing competition policy, and of promoting better understanding of it.
In order to ensure a timely response to socioeconomic changes and advance competition policy in an effective and appropriate manner, the JFTC organizes the “Council on Antimonopoly Policy” to promote broad opinion exchanges with experts and greater public understanding of competition policy. In FY2022, three council meetings were organized.
The JFTC commissioners and senior officials had meetings with locally based experts in eight cities in FY2022. The JFTC also arranged meetings with business and consumer groups, meetings between directors of the JFTC's regional offices and locally based experts, members of bar associations in various districts and the nation-wide federation of bar associations in FY2022.
Moreover, the JFTC hosted “Consumer Seminars” to introduce an overview of the AMA and the JFTC’s activities to general consumers in cities without its headquarter or regional offices, in order to increase people’s awareness of the AMA and the related laws.
The JFTC’s efforts also included activities for raising awareness of competition policy through school education. The JFTC dispatches its officials to junior high schools, high schools and universities (including graduate schools) and they introduce the roles of competition in economic activities to the students. The effort is called “Antimonopoly Act Class” or “Delivery Lecture.”
＜Main Initiatives in FY2022＞（Note）
• Hearing opinions from Members of Antimonopoly Policy Cooperation Committee (150 cases)
(Note) In addition to face-to-face meetings, the meetings were held using web conferencing formats.